Land Claim Settlement Trust An Introduction May 19, 2011

1. Land Claim Settlement TrustAn IntroductionMay 19, 2011 Kim Alexander Fullerton Barrister & Solicitor 256 River Side Drive Oakville, ON L6K 3M9 905-849-1700

2. How is a Trust Established? • It is a legal relationship between • Settlor (FN pays money into Trust) • Trustee(s) (holds the money for the benefit of FN) • Beneficiary (FN & its Members) • Members must approve the Trust Agreement as part of the Land Claim Settlement Referendum Kim Alexander Fullerton Barrister & Solicitor

3. Trust Set Up • First Nation must be the Settlor • If First Nation not seen as Settlor it can affect the taxation of the Trust • Beneficiary – First Nation, as represented by its Chief and Council and all members of the First Nation on a collective and undivided basis Kim Alexander Fullerton Barrister & Solicitor

4. First Nation Trusts • Three primary types of First Nation Trusts • 1) Corporate Trust • 2) Community Trust with Member Trustees • 3) Hybrid, some combination of the first two Kim Alexander Fullerton Barrister & Solicitor

5. Structure of First Nation Trusts • Factors that can influence type of Trust Agreement: • Amount of $ • Uses of the Trust Property • Decision making • Costs to administer the Trust Chief and Council believe that the Corporate Trust Model is best for Georgina Island Kim Alexander Fullerton Barrister & Solicitor

6. Corporate Trust • The role of the Trust is to • Receive the $ • Invest the $ • Make an annual payment to the First Nation The Capital is generally not spent (except for clearly stated purposes like purchasing land) • Rather it is invested to generate income which is used to make the annual payment to the FN Kim Alexander Fullerton Barrister & Solicitor

7. Corporate Trust • The Corporate Trustee generally has no role in determining how funds are spent in the community • The decision to determine how to spend the annual payment is left to the community – which will need to be addressed separately Kim Alexander Fullerton Barrister & Solicitor

8. Corporate Trust First Nation Responsibility Trustee Responsibility Band Settlement Account Trust Account Annual Payment Initial Uses Investment • Community decides • what to do with funds • Uses & decision making need to be addressed by the First Nation • Another Trust • S. 83 Expenditure By-law • Financial Policy Capital

9. Key Questions for Developing a Trust • How long should the Trust Last? • What is the Purpose of the Trust? • How can the Trust Property be expended? • Which Trust Company to use? • How should the investment of the funds be handled? • Personal Cash Distributions to Members (PCD) • Impact of Inflation • Demographics – How many Members will you have in 50 or 100 years? Kim Alexander Fullerton Barrister & Solicitor

10. Key Questions for Developing a Trust • What are the Tax Consequences? • What are the accountability and reporting requirements of the Trust? • What conflicts may arise and how will they be addressed? Kim Alexander Fullerton Barrister & Solicitor

11. Key Questions for Building a Trust • No right or wrong answers • No “one size fits all” • Each First Nation is unique – Trust needs to be designed to fit the First Nation’s purpose and the plan • Take the appropriate time, energy and resources to develop the plan and the Trust Agreement Kim Alexander Fullerton Barrister & Solicitor

12. Purpose • The fundamental purposes for the Trust must be determined • Specific Claim Settlement Trust • The Settlement Agreement with Canada will allow Georgina Island to buy land and add it to reserve • Once the purposes for the Trust are established then a plan needs to be put in place Kim Alexander Fullerton Barrister & Solicitor

13. Plan • One of the first questions or decisions that will need to be made is “will the capital be spent and if so how much and on what?” • The more utilized upfront means less will be available to invest and generate income in the long term • The more spent upfront on a PCD provides an immediate benefit to the current generation, but less benefits to future generations • Need to determine what is the appropriate balance for the community Kim Alexander Fullerton Barrister & Solicitor

14. Uses of Trust Property • Obviously must match with the purpose and plan • Corporate Trusts are relatively straightforward– Trustee receives, invests and makes annual payment to FN Kim Alexander Fullerton Barrister & Solicitor

15. Uses of Trust Property • The decisions for a Corporate Trust center around • The amount of the annual payment to FN • Who decides how the annual payment is spent • Can the Trust Property be used as security for loans • Amount of PCD Kim Alexander Fullerton Barrister & Solicitor

16. Uses of Trust PropertyCorporate Trust • Annual Payment can be structured in different ways • Annual Income • Fluctuates yearly based on rate of return • Long term planning more difficult • Need to address growth of the Trust Property • Smoothing Mechanism • Set minimum amount • Percentage of Trust Property - 2% to 5% • Makes long term planning easier Kim Alexander Fullerton Barrister & Solicitor

17. Uses of Trust PropertyCorporate Trust • How the annual payment is used by the First Nation will be addressed • What are the Authorized uses • Who and how are decisions made • what are the rules • How are conflicts to be addressed • Can be set out in a separate document • Section 83 Expenditure By-law • Financial Policy Kim Alexander Fullerton Barrister & Solicitor

18. Investing • Ensure get qualified advice • Investment provisions dictated by the purpose, plan and time horizon • Have specific provisions in the Trust Agreement to address investing the Trust Property which, at a minimum: • Requires the Trustee and the FN to obtain qualified advice • Requires the development of an Investment Policy • Clearly provides for who can be retained to do the investing Kim Alexander Fullerton Barrister & Solicitor

19. Taxation • A FN Trust is neither an Indian nor a First Nation and must pay tax on any retained income in the Trust at the end of every year • Get qualified advice, there are ways to avoid paying tax • While taxation is important, it should not be the overriding factor in determining the plan for the Trust Kim Alexander Fullerton Barrister & Solicitor

20. Reporting • The operation of the Trust should be open and transparent • Regular reporting requirements • Regular meetings with Council and members • If people know what is going on, they feel more comfortable Kim Alexander Fullerton Barrister & Solicitor

21. Annual Operating Expenditures • What is it going to cost to implement the Trust? • Need controls in the Trust Agreement on such expenditures • Budgetary process • Annual Expenditure should not exceed 1% of the value of the trust property Kim Alexander Fullerton Barrister & Solicitor

22. Conclusion • Take the necessary time and thought in developing the plan and Trust Agreement • Be clear on the plan to be followed • Allow ample time for community consultation • Use qualified experts • Have an adequate budget for development of the Trust Kim Alexander Fullerton Barrister & Solicitor

23. Questions? Kim Alexander Fullerton Barrister & Solicitor