The Difference Between Powers and Duties of an Estate Trustee
A “power” is an authority to act, whereas a “duty” is an obligation. A duty of an estate trustee compels her to act, or prohibits her from acting in certain situations. A power, on the other hand, allows her to act in a certain way, subject to her discretion.
An estate trustee faces potential personal liability from unauthorized actions in the administration of an estate. Although, generally a will prescribes specific powers and duties for an estate trustee when it comes to the administration of the estate, there may also be a situation which the will simply does not contemplate.
As an estate trustee, or even as a beneficiary under such a will, how does one assess what an estate trustee can and cannot do?
The Trustee Act, RSO 1990, c. T23, as amended, is helpful in determining what an estate trustee’s powers and duties are, in the absence of a clear direction from a will.
It is not unusual for an estate trustee to be given discretion with respect to the exercise of administrative powers conferred to manage the estate. However, she may also be given the authority to allocate estate property to the beneficiaries. That kind of power is referred to as dispositive power or discretion and may require an estate trustee to do such things as, divide income and/or capital between beneficiaries at a time of her choosing.
Generally, the powers of an estate trustee will depend on the specific nature of the estate. For example, if the estate consists of property that is to be administered as an investment, the estate trustee will likely be allowed a power of sale, a power to mortgage, and a power to lease. The estate trustee must have the power to keep the property intact as well as meet all financial claims of third parties. An estate trustee will also generally have the power to insure any real property, against loss or damage.
With respect to expenses related to the estate, the estate trustee who believes that an expense is properly incurred, may either pay for it directly from the estate property or pay for the expense personally and later recover the corresponding amount. It is important to note, however, that a court may later disallow an expense if it concludes that it was not properly incurred.
In exercising each power that the estate trustee might have, she must keep in mind that there are certain duties that limit her powers.
- If a power of sale is to be exercised, she cannot delegate it to a third party and later escape responsibility in the event that there is an issue, on the ground that she did not choose the purchaser.
- An estate trustee cannot sell a property to herself, a beneficiary, or a third party with the agreement that she will then re-purchase the said property.
- If the estate trustee sells the trust property, not only must she be honest, but also show a reasonable level of care and skill in her conduct, throughout the transaction. For example, she should not convey title until payment is received, and if she does do so and there is a resulting loss to the estate, there may be personal liability.
An estate trustee with significant discretion in administering the estate can certainly be put in a difficult position with respect to how such discretion is to be exercised. Unfortunately, there are few guidelines available on that end, short of exercising one’s own good sense.
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