The recent decision of the Ontario Superior Court of Justice in Karrow v. Boghosian, 2026 ONSC 2425, addresses the limits of trustee discretion where a will confers broad—or even “absolute”—authority. The case arose in the context of a contested passing of accounts and offers significant guidance on the on the scope of fiduciary duties, particularly the obligation to act with an even hand, in the administration of discretionary trusts.
The Structure of the Will and the Disputed Trust
The deceased died leaving a will that divided the residue of her estate into four equal shares, each held in trust for one branch of her grandchildren. Each of those trusts was designed to vest when the youngest grandchild in that branch reached the age of thirty. In the meantime, the will permitted limited encroachments on two of the four trusts.
The trust at issue was created for the ultimate benefit of two grandchildren. Before the vesting date, payments to the grandchildren were permitted only in cases of illness or disability. Payments to their parent were permitted only where the trustees considered such payments to be necessary to maintain the parent’s standard of living. The structure of the will made clear that the grandchildren—not the parent—were intended to be the primary beneficiaries of this share of the estate.
Encroachments on Trust Capital
Despite these limitations, the trustees approved two significant capital payments to the parent. The first payment of $50,000 was used to retire a line of credit. The second payment of $95,000 was used to fund a lump‑sum settlement of family law obligations, legal fees, and other personal debts.
Together, these payments depleted nearly forty percent of the trust capital earmarked for the two grandchildren. When the trustees later applied to pass their accounts, one of the grandchildren objected. She argued that the trustees had failed to act even‑handedly, failed to make appropriate inquiries before approving the payments, and authorized encroachments that were neither necessary nor consistent with the testator’s intentions.
Trustee Discretion and the Even‑Hand Principle
The court began its analysis with a review of established principles of trust law. Trustees are fiduciaries who must administer a trust in accordance with the testator’s intentions, as determined from the language and overall structure of the will and the surrounding circumstances at the time it was made. Where there are multiple beneficiaries, trustees are required to act impartially unless the will clearly and expressly provides otherwise.
The court emphasized that even where a will grants trustees “absolute” or “unfettered” discretion, that discretion remains subject to fiduciary obligations. Broad discretionary language may permit unequal outcomes, but it does not, without more, authorize trustees to ignore the interests of some beneficiaries altogether. If a testator intends to relieve trustees of the duty to act even‑handedly, that intention must be stated clearly and explicitly in the will.
Did the Will Override the Even‑Hand Rule?
The trustees argued that the will’s language permitted them to make payments to one beneficiary “to the exclusion of” others and that this displaced the even‑hand rule. The court rejected this position. While the wording permitted uneven treatment in appropriate circumstances, it did not excuse trustees from considering how their decisions affected all beneficiaries.
The court found that the overall structure of the will reinforced this conclusion. The deceased had largely bypassed her own children and structured her estate so that her grandchildren would receive the primary benefit. Any encroachments for the parent were intended to be limited and exceptional, not routine or substantial.
Failure to Act Even‑Handedly
On the evidence, the court concluded that the trustees failed to act with an even hand. There was no persuasive evidence that they meaningfully considered the interests of the two grandchildren when approving the payments. Communications suggested that the trustees focused almost exclusively on the parent’s circumstances, with little attention to the long‑term effect on the beneficiaries whose inheritance was being eroded.
The magnitude of the encroachments was also significant. Approving payments that depleted close to forty percent of trust capital far exceeded what could reasonably be justified as necessary to maintain the parent’s standard of living. Prior cases had criticized much smaller encroachments where trustees failed to balance competing interests, and the court found the scale of the payments in this case particularly troubling.
Improper Purpose and Use of Funds
The court was also concerned with how the funds were used. A substantial portion of the second payment was applied toward spousal and child support obligations. Those obligations existed, at least in part, for the benefit of the same grandchildren whose trust interests were being depleted. The trustees were effectively permitting trust funds held for the grandchildren to be used to satisfy the parent’s legal obligations to them.
The court held that no even‑handed consideration of competing interests could justify such an outcome. Trust capital intended to benefit the grandchildren should not have been used in this manner, particularly without careful scrutiny and justification.
Lack of Due Diligence
Beyond the failure to act impartially, the court identified serious deficiencies in the trustees’ decision‑making process. The trustees made minimal inquiries before authorizing the payments and relied heavily on the parent’s representations without adequate verification. They did not obtain or review sufficient documentation, did not meaningfully assess whether smaller amounts would have been sufficient, and in one instance approved a payment before knowing the actual amount required.
Although the trustees repeatedly asserted that they relied on legal advice, they maintained solicitor‑client privilege over that advice. The court noted that while privilege may be properly asserted, it limits the evidentiary value of claims that the trustees acted on counsel’s guidance, particularly where that advice is relied upon to demonstrate good faith and reasonableness.
The Court’s Decision
In light of these findings, the court dismissed the application to pass accounts. It ordered that the full amount of $145,000 be repaid to the trust with interest and held all three trustees jointly and severally liable for that repayment. The court emphasized that trustees must be able to demonstrate that their decisions are reasonable, proportionate, and faithful to the purposes of the trust.
Key Takeaways
This decision underscores that trustee discretion, however broadly framed, is not unlimited. Trustees must remain attentive to the structure and purpose of the trust, must actively consider the interests of all beneficiaries, and must be prepared to justify their decisions with evidence of thoughtful inquiry and balanced reasoning. Trust property is not a general fund available for one beneficiary’s convenience. Where trustees lose sight of that principle, courts will intervene.
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