Release for Passing Accounts

September 4, 2012 Hull & Hull LLP Executors and Trustees Tags: 0 Comments

As was mentioned in my blog last week on Renunciation, fulfilling the duties as estate trustee may be a time consuming task, and that as a result a certain few may not be up for the endeavour.  However, for those who are appointed as estate trustee, one on-going duty that arises is that of passing ones accounts.  The common law imposes a duty upon estate trustees to maintain proper books of account and to be ready at any time to account for the property for which they are bound to administer.  Nonetheless, in Ontario, there is no requirement for estate trustees to pass their accounts, unless they are obligated to do so.

Despite the lack of such an obligation, it is prudent behaviour for an estate trustee to protect themselves by obtaining approval of their accounting from the beneficiaries.  One way of achieving this is to request that all those with a financial interest sign a release, acknowledging and approving of the estate accounts.  In a sense, this type of document acts similar to a waiver.

In order to rely on a release, there are two factors which the estate trustee must keep in mind.  The first relating to the circumstances under which a beneficiary signs the release, and second relating to the time at which a beneficiary signs a release.

Before a beneficiary signs a release, the estate trustee must ensure that they receive independent legal advice.  In the case of Rooney Estate v. Stewart Estate [2007] O.J. No. 3944, 161 A.C.W.S. (3d) 177 at 36, H.M. Pierce J. stated:

“It is not an answer to say that the beneficiary approved of the accounts and gave a release. One of the obligations of the solicitor acting for the trustee is to ensure that all beneficiaries have competent, independent advice in reviewing the accounts. There is no suggestion by the solicitor that he advised the [beneficiaries] to obtain independent legal advice when reviewing the trustee’s accounts which he had prepared”.

Less straightforward is the timing of when the release must be executed.  In the case of Brighter v. Brighter Estate [1998] O.J. No. 3144, 74 O.T.C. 329, Sheard J., stated:

“The executor has no right to hold any portion of the distributable assets hostage in order to extort from a beneficiary an approval or release of the executor’s performance of duties as trustee, or the executor’s compensation or fee. It is quite proper for an executor (or trustee, to use the current expression) to accompany payment with a release which the beneficiary is requested to execute. But it is quite another matter for the trustee to require execution of the release before making payment; that is manifestly improper”.

However, in the case of Bedont Estate (Re) [2004] O.J. No. 4267, 9 E.T.R. (3d) 59, D.J. Gordon J. stated:

“A release is standard and accepted practice on an interim or final distribution, in lieu of a passing of accounts, and failure to provide such is a valid reason to withhold payment”

Thus, although an estate trustee may be permitted to withhold funds in order to ensure that reasonable estate expenses are paid for, an estate trustee is not entitled to withhold funds for the sole purpose of forcing beneficiaries to sign releases.

Ian M. Hull

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