According to Wikipedia “the trust is considered to be the most innovative contribution of the English legal system. Today, trusts play a significant role in most common-law systems, and their success has led some civil law jurisdictions to incorporate trusts into their civil codes.”
So, it may come as a surprise to some that our British Columbia government is considering running amok through the venerable law of trusts, a centerpiece of the English common-law system since sometime in the 12th century, in order to close a perceived tax loophole enjoyed by a few foreign investors. Exactly what the Legislature intends to do isn’t clear, but their rectnt rhetoric suggests that they view the use of trusts in real estate transaction as somehow evil and sleazy.
At issue is the fact that our land title office records only the legal, or registered ownership of a property and does not identify “true” or “beneficial” ownership, which may rest with someone else entirely, if trusts, ( or even corporations) are involved. In a trust, one person, the “trustee”holds title to a property for the benefit of another person – the “beneficiary”. Such arrangements are private and unrecorded, so can easily disguise the actual ownership of property by a non-resident.
It is somewhat ironic that the concept of a trust was initially developed precisely to safeguard the rights and property of a group of non-residents – the crusaders, who needed a mechanism to have their estates held and managed for them while they were off in the Holy land chopping off heads, and, equally as importantly, later reliably handed back upon their return.
When BC imposed its 15% foreign buyers tax, I’m guessing it took most lawyers on average less than three minutes to figure out that the judicious use of a trust arrangement could completely avoid the imposition of the tax, and a year or so behind, the government has now belatedly come to the same conclusion, referring to bare trust arrangements as a heinous “loophole.”
I find “loophole” to be a rather pejorative description of one of the foundations of our legal system, There is nothing shady or nefarious about Trusts. They are used daily, often employed for the protection of the young, or the disadvantaged, as well as for wealth preservation, and tax planning. They are a tool, like any other, capable of use by both good guys and bad
I worry that, in attempting to stem the tide of diry money washing into the Province the governmnet may foolishly start tinkering with the law of trusts, rahter than tackling the probelm directly such as by banning the recipt by casinos of hackey gags stuffed ful lof smal ldenomination bank notes.