The responsibilities of an estate trustee can be burdensome. The purpose of this article is to assist you, the trustee, in understanding some of the duties, as well as some of the financial and legal implications that accompany the position.
To start, it makes sense to ask whether consultations with a solicitor in your role as trustee are confidentially protected via solicitor/client privilege. Trustees, executors and beneficiaries are generally regarded as having a community of interest, which may entitle them to solicitor/client privilege. Under the common law, however, there is no need to protect communications between solicitors and clients from disclosure to persons who are claiming under the estate where the executor (or trustee) and beneficiary have a joint interest in the advice. A joint interest essentially refers to situations where separate parties are carrying out a mutual objective, like the execution of a will.
But there are instances where a beneficiary is not entitled to the production of communications between legal counsel and an executor. Where the relationship between a trustee and beneficiary is adversarial in nature, there is no joint interest that would compel disclosure of communications protected by solicitor/client privilege.
Now that you know what type of communication with a solicitor is and is not protected, the next issue is your potential compensation for your work. Since trustees are often friends or relatives of the testator, the testator may wish to both protect such trustees from liability and ensure compensation for their time and effort.
Usually, trustee compensation is based on 2.5 per cent of receipts and disbursements, subject to the court's exercise of discretion. But testators may wish to include provisions in the will that provide certainty and protection for their trustees. They can do so by fixing compensation or making a legacy in lieu of compensation.
In order to fix trustee compensation, testators can insert provisions which determine the exact compensation a trustee will receive. However, such provisions must be carefully drafted. Any ambiguity in the provision and trustee compensation will be subject to the court's discretion. Testators can also fix compensation by properly incorporating a previously executed compensation agreement into the will.
That being said, there is a concern that estate trustees will "double-dip" by claiming both compensation and a bequest in the will, or as it's legally labelled, a legacy. Testators can prevent this while still compensating the trustee by making a legacy to the trustee and specifying that the trustee is not to receive further compensation. There is, however, no guarantee that a legacy that is made apparently independent of compensation will survive scrutiny from CRA and elude the applicable taxation.
The final issue addressed in this article is that of job security. As a trustee, how should you protect yourself and avoid being ousted from your appointed position?
Any individual with a financial interest in an estate may take steps to have an executor removed. The principles for the removal of an executor have been summarized as follows
The court will not lightly interfere with the testator's choice of estate trustee;
Clear evidence of necessity for removal is required;
The court's main consideration is the welfare of the beneficiaries; and
The estate trustee's acts or omissions must be of such a nature as to endanger the administration of the estate/trust.
A recent B.C. decision upheld the removal of an estate trustee of an estate on the basis that she did not comply with the notice provisions of the Wills, Estates and Succession Act. The deceased died without a will and the appellant applied for and was granted the position of estate trustee. It was ruled that the estate trustee did not exercise reasonable diligence in providing notice to the other beneficiaries of her intention to apply for the position and that she failed to disclose relevant information to the beneficiaries.
Had this case taken place in Ontario, it is likely that the Ontario courts would have come to the same conclusion in applying the principles referred to above. The court would not have been interfering with the testator's choice of estate trustee since he died without a will. The trustee's dishonesty and lack of consideration for the welfare of the beneficiaries warranted her removal.
When acting as an estate trustee, it is important to know your rights and obligations. Speaking with a lawyer can help you understand what exactly the role entails.
Follow HuffPost Canada Blogs on FacebookSuggest a correction