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Coldwater Claim Settlement Trust Coldwater Claim Settlement Trust

Coldwater Claim Settlement Trust - PowerPoint Presentation

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Coldwater Claim Settlement Trust - PPT Presentation

Community Engagement July 9 2011 Kim Alexander Fullerton Barrister amp Solicitor How is a Trust Established It is a legal relationship between Settlor FN pays money into Trust Trustees holds the money for the benefit of FN ID: 223219

amp trust solicitor fullerton trust amp fullerton solicitor barrister kim alexander 000 payment nation annual members land community long

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Slide1

Coldwater Claim Settlement TrustCommunity EngagementJuly 9, 2011

Kim Alexander Fullerton

Barrister & SolicitorSlide2

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 (vote)

Kim Alexander Fullerton Barrister & Solicitor

2Slide3

First Nation TrustsThree 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

3Slide4

Structure of First Nation TrustsFactors that can influence type of Trust Agreement:

Amount of $

Uses of the Trust Property

Decision makingCosts to administer the Trust

Chief and Council believe that the Corporate Trust Model is best for Georgina Island

Kim Alexander Fullerton Barrister & Solicitor

4Slide5

Corporate TrustThe 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

5Slide6

Corporate TrustThe 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

6Slide7

Band Settlement Account

Trust Account

Initial Uses

Capital

Investment

Annual Payment

First Nation Responsibility

Trustee Responsibility

Corporate Trust

Community decides

what to do with funds

Uses & decision making need to be addressed by the First

NationSlide8

Key Questions for Developing a TrustWhat is the Purpose of the Trust?How can the Trust Property be expended?

How should the investment of the funds be handled?

Personal Cash Distributions to Members (PCD)

Impact of InflationHow long should the Trust Last?Demographics – How many Members will you have in 50 or 100 years?

Kim Alexander Fullerton Barrister & Solicitor

8Slide9

How long should the Trust Last?No right or wrong answerMany First Nation Trusts are set up to last for 100 yearsHard to know what the needs of GIFN will be in 100 yearsWhen the Trust ends it can always be rolled into a new TrustPerhaps a shorter period might make sense, say 50 years?

Kim Alexander Fullerton Barrister & Solicitor

9Slide10

Uses of Trust PropertyCorporate Trust

Annual Payment can be structured in different ways

Annual Income

Fluctuates yearly based on rate of returnLong term planning more difficultNeed to address growth of the Trust PropertySmoothing Mechanism

Set minimum amountPercentage of Trust Property - 2% to 4%Makes long term planning easier

Kim Alexander Fullerton Barrister & Solicitor

10Slide11

PlanOne 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

11Slide12

Personal Cash Distribution (PCD)Three Main Questions:

1) How Much?

2) Who Gets It?

3) When?Kim Alexander Fullerton Barrister & Solicitor

12Slide13

How Much?You have about 700 members, so:$1,000 payment will cost $700,000$2,000 payment will cost $1.4 million$5,000 payment will cost $3.5 million$10,000 payment will cost $7 million$20,000 payment will cost $14 million

You need to find the right balance of immediate benefit versus long term benefits

Kim Alexander Fullerton Barrister & Solicitor

13Slide14

Who Gets the PCD?Not as easy as it looksGenerally must be both a member and alive on the day of the vote to get PCDYou have control of your own membership (not Indian Affairs)What about people that have applied for membership and not yet been added?What happens if someone dies after the vote but before the PCD is paid?

Kim Alexander Fullerton Barrister & Solicitor

14Slide15

When?Mainly about minors (members under 18 at time of vote)Can simply pay members when they turn 18Could pick a later age, like 21 or 25Can link it to graduation from high schoolOr both, such as “when turn 21 or graduate from high school, which ever occurs first”

Again, what to do with PCD of a minor who dies before receiving it?

Kim Alexander Fullerton Barrister & Solicitor

15Slide16

Initial Uses of Trust CapitalOften a First Nation will decide to spend some of the capital from the trust right away on important projects to improve the community like schools, daycare, community centres, recreational facilities, transportation, etc, upon recommendation from the membership.Kim Alexander Fullerton Barrister & Solicitor

16Slide17

PurposeThe fundamental purposes for the Trust must be determinedSpecific Claim Settlement Trust, so it must be for the “long term benefit of GIFN”

The Settlement Agreement with Canada will allow Georgina Island to buy land and add it to reserve

GIFN can purchase up to 3,000 acres of land and create up to 3 new reserves in the next 30 years should the First Nation choose to

Kim Alexander Fullerton Barrister & Solicitor

17Slide18

Land PurchaseNeed to have mechanism in place to permit GIFN to access funds from the Trust to buy the landMay be wise to have band owned corporation or an agent acting on behalf of the band to purchase the lands (price might go up otherwise)Need projections of what land in the area costs and some sort of limits should be placed on how much of the Trust capital can be spent on landNeed to have ongoing dialogue with members about where to purchase land

Kim Alexander Fullerton Barrister & Solicitor

18Slide19

InvestingInvestment provisions dictated by the purpose, plan and time horizonHave 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

19Slide20

TaxationA 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

20Slide21

ReportingThe operation of the Trust should be open and transparentRegular reporting requirements

Regular meetings with Council and members

If people know what is going on, they feel more comfortable

Kim Alexander Fullerton Barrister & Solicitor

21Slide22

Annual Operating ExpendituresWhat 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

22Slide23

ACCOUNTING OF THE COMPENSATION (10K)COMPENSATION $ 85,000,000LOAN FUNDING coveredNET PAYMENT $ 85,000,000

 

PERSONAL CASH DISTRIBUTION ($10,000) $ 7,000,000

COMMUNITY DEVELOPMENT $ ?TOTAL $ 7,000,000 NET AMOUNT IN TRUST $ 78,000,000  

MINUMUM ANNUAL INCOME (4%) $ 3,120,000Kim Alexander Fullerton Barrister & Solicitor

23Slide24

ACCOUNTING OF THE COMPENSATION (20K)COMPENSATION $ 85,000,000LOAN FUNDING coveredNET PAYMENT $ 85,000,000

 

PERSONAL CASH DISTRIBUTION ($20,000) $ 14,000,000

COMMUNITY DEVELOPMENT $ ?TOTAL $ 14,000,000 NET AMOUNT IN TRUST $ 71,000,000  

MINUMUM ANNUAL INCOME (4%) $ 2,840,000

Kim Alexander Fullerton Barrister & Solicitor

24Slide25

Next StepsChief and Council will take the information that is being gathered from the membership and prepare a draft Trust Agreement for your consideration

We should have it ready by August or September

Everyone will have the opportunity to review the draft TA and provide input

It will be part of the referendum or vote

Kim Alexander Fullerton Barrister & Solicitor

25Slide26

Questions?Kim Alexander Fullerton Barrister & Solicitor

26