25 Est.Tr. & Pensions J 329 (2005-2006)
The Percentage Trust: Uniting the Objectives of the Life Tenant and Remainderperson in Total Return Investing by Trustees

handle is hein.journals/espjrl25 and id is 357 raw text is: THE PERCENTAGE TRUST: UNITING THE
OBJECTIVES OF THE LIFE TENANT AND
REMAINDERPERSON IN TOTAL RETURN
INVESTING BY TRUSTEES
Anne Werker
Percentage trusts are not new. The Ontario Law Reform
Commission discussed the percentage trust in their Report on the Law
of Trusts published in 1984.' Upon reading the Stillman case,' the
writer of this article wondered why percentage trusts are not used more
often today, not only when property is held for charitable purposes in
perpetuity, but for personal trusts.
The Stillnan case, the reader may recall, was an application for
approval of a scheme for the administration of a charitable trust. The
applicant charities wished the court to authorize the adoption a 'total
return- investment and distribution policy. The problem was that the
Trustees could not meet the disbursement quota applicable to private
charitable foundations under the Income Tax Act due to the investment
restrictions in the will. As a result, the Stillman Trust faced deregistra-
tion as a charity and liability for the consequent taxes. Although the
court could have merely allowed for an encroachment on capital to
solve the problem. relying on the court's cv pros jurisdiction, Cullity J.
ordered a fundamental change to how the charities' entitlements were
to be calculated on an ongoing basis: Instead of making payments of
net income (and not capital), distributions were to be made without
regard to whether their source was income or capital. according to an
appropriate distribution rate. The Stillman Trust was converted into a
percentage trust.
There are a number of articles about percentage trusts in the U.S.
journals. Percentage trusts have been studied by man) law reform
*   Of Smith & Werker and Hull & Hull LLP.
1. Ontario Law Reform Commission, Report on the Law of Trusts (1984). Volume
1, pp. 301-4.
2. Toronto Aged Men's And Women's Homes v. Loyal True Blue and Orange Home
(2003). 68 O.R. (3d) 777. 5 E.T.R. (3d) 260 sub norn. Stillman Estate (Re) (S.C.J.).
concerning a charitable trust created under the will of Mary Elsworth Stillman.

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