Sometimes an executor or trustee is also a director of a company in which the estate or trust has an interest. We have written before about how acting as both a trustee and company director may create a conflict of interest, as each role includes inherent fiduciary duties that may conflict. Another issue that may arise once an individual has decided to act in both roles is whether a trustee may collect director’s fees in addition to the compensation received from the estate or trust for acting as executor or trustee.
The general rule is that a trustee may not put him or herself in a position in which his or her interest and duty conflict. The position of trustee must not be used to obtain a benefit: the trustee that obtains a benefit by virtue of his or her position of trustee will be required to account for the profit.
As explained in chapter 23 of Probate Practice, the heart of the issue is whether the trustee became director as a result of the trusteeship. If the trustee accepted the position of director by virtue of acting as trustee, he or she is not entitled to receive a salary in addition to remuneration received as trustee. If, on the other hand, the trustee’s position with the company is clearly independent from the position of trustee, he or she will likely not be required to account for any directors’ fees obtained.
A trustee/director need not expect to be under-compensated. Pursuant to section 67 of the Trustee Act, a testator or settlor may provide in the will or trust document that the executors or trustees may hold salaried positions in companies controlled by the estate or trust without being required to account.
Each case, of course, will turn on the particular facts. In certain instances, the Court may award a special fee when the duties of director are not otherwise appropriately compensated by the corporation (see: Bellomo Estate, Re, 36 ETR 123 (Ont Dist Ct)).
If the will or trust document does not include a provision as referenced above, the skill and time required to administer a trust that also requires the trustee to act as director of a company may be considered to increase the quantum of compensation the trustee receives. Section 61(1) of the Trustee Act provides that a trustee or executor “is entitled to such fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the estate.”
We have written before about how the courts determine what is “fair and reasonable.” Generally speaking, the skill and responsibility required by the trustee is directly commensurate with the quantum of compensation.
Thank you for reading.