Trust conditions and undertakings are what lawyers use to ensure that certain events take place when these events affect their client’s settlement.  For example, if a separating couple agrees to transfer a home from one spouse to the other spouse in exchange for a settlement payment, trust conditions and undertakings are used to ensure that the spouse who receives the home makes the settlement payment to the other spouse.  The trust conditions and undertakings can prevent the home from being transferred without the settlement payment being made.

Trust conditions and undertakings are part of a lawyer’s Code of Professional Conduct.  In B.C., paragraph 6.02(11) deals with trust conditions and undertakings; in Alberta, the paragraph is 6.02(13).  Both of these codes are available on the Law Society webpage for both Provinces.

In BC:

“6.02 (11) A lawyer must:

(a) not give an undertaking that cannot be fulfilled;

(b) fulfill every undertaking given; and

(c) honour every trust condition once accepted.”

What this means is that trust conditions and undertakings are binding on lawyers, and lawyers become personally responsible for the subject of the agreed upon trust conditions and undertakings given by the lawyer.

This will affect your separation in the following circumstances, if in your separation agreement:

  • There is a transfer of real estate,
  • There is a settlement payment to be made,
  • There is an RRSP rollover,
  • There is a refinancing of a mortgage,
  • The signing of the agreement is time sensitive, such as a new home being purchased or the filing of income tax returns, and
  • Many other situations.

A sample set of trust conditions for the example above, the transfer of a home in exchange for a settlement payment, may look like this:

“The enclosed documents are provided to you under the following trust conditions:

  1. …
  2. That you use the transfer documents concurrently with Mr. X’s mortgage financing, so as to payout the jointly held mortgage secured against Property Y and in obtaining the settlement funds $Z,
  3. That you provide confirmation of the payout of the jointly held mortgage, the transfer of title, and payment of the settlement funds within 30 days of the date of this letter, and
  4. If you are unable to accept these trust conditions, you are to make no use or copy of the enclosed documents, and you are to return them to me at my request.”

The above trust conditions are simple, not comprehensive, and should not be copied or used as a precedent by anyone trying to complete their separation agreement.  They are an example only.

Trust conditions and undertakings are normal, and part of most transactions.  They are used to ensure that all steps required by your separation agreement take place in a timely fashion and in the right sequence.  Without the trust conditions, there is a risk of a property being transferred without a payment being made, an unnecessary delay in completing the signing of documents, and potentially other harmful events that are not contemplated by your agreement.

You can instruct your lawyer not to use trust conditions, and rely upon the strength of the wording of your separation agreement.  However, if something goes wrong, you will need to go to Court to enforce your separation agreement.  This can be avoided with properly worded trust conditions.

Discuss them with your lawyer, and make sure you are protected to the extent you need.

Let me know if I can help.