Appointing an Alternate Trustee
When drafting a Will, solicitors and testators should be aware of issues that may arise where the appointed estate trustee refuses or is unable to act. Consideration should be given to appointing alternate trustees.
The issue is illustrated in the recent decision of Simms v. Simms, 2017 ONSC 6624 (CanLII).
There, the deceased died leaving a will which established a Henson Trust for his grandson, K. The value of the trust was $200,000. K’s father M was the residual beneficiary of the estate.
The deceased appointed the Royal Bank of Canada as Special Trustee for the trust fund. However, RBC declined the appointment, as they do not manage trust funds of that size. There was evidence that various other institutional trustees had similar policies.
In order to fill the void, the estate trustees of the estate moved to appoint an estate solicitor and former estate planner as Special Trustee. K’s father M, who was also K’s “trustee” for his personal care and property, also asked to be appointed as Special Trustee.
The court appointed the solicitor as Special Trustee. In doing so, the court took into account a number of factors, including:
- the lawyer’s rates were similar to the fees that would be charged by the bank;
- the deceased could have named M as Special Trustee in the will, but chose not to, and instead chose to appoint an institutional trustee;
- as M was the residual beneficiary of the trust, he would be in a conflict of interest;
- the terms of the trust required that the Special Trustee consult with M. This suggested an arm’s length relationship between the Special Trustee and M;
- the Special Trustee would have to make elections under the Income Tax Act. This suggested that the deceased wanted the Special Trustee to have special expertise.
The court concluded that the deceased wanted the Special Trustee to be separate from M, and that this was a deliberate, considered choice, and not merely and oversight. The court therefore appointed the solicitor over M as Special Trustee.
With respect to costs, the court stated that the problem arose as a result of the deceased’s failure to appoint an alternate Special Trustee. Therefore, no costs were awarded against M, even though he was unsuccessful in opposing the solicitor’s appointment. The court observed that M acted in good faith and in K’s interests in seeking to be appointed as Special Trustee.
As a take-away, testators and solicitors should consider whether the named trustee will want the job. Steps should be taken to confirm that, as in this case, an institutional trustee will take on the role of trustee. Secondly, and in any event, consideration should be given to appointing an alternate trustee.
For other drafting tips, see Eight Drafting Tips for Primary and Secondary Wills.
Have a great weekend,