Category: Executors and Trustees

15 Jun

ACCOUNTING DUTIES OF THE EXECUTOR AND TRUSTEE – THE FORM OF THE ACCOUNTS – PART II

Suzana Popovic-Montag Executors and Trustees, New Media Observations Tags: , , 0 Comments

In Ontario, Rule 74.17 of the Rules of Civil Procedure sets out the specific expectations of this relatively precise art of accounting. It can be seen, therefore, that any accounting by Executors and Trustees has both a broad and a narrow aspect to it.

In the broad sense, it is an obligation whereby the Executor or the Trustee furnishes information to interested parties on an ongoing basis concerning the administration of the Estate or Trust.

In the narrow sense, the Trustee’s accounting relates to the accounts prepared by him or her at the close of his or her administration (or some appropriate intermediate stage) so as to reflect the transactions that have occurred, with a view to discharging the trustee from liability for his or her stewardship.

Usually, a Trustee informs the beneficiaries of the results of his or her administration on an interim basis. This statement usually sets out the income or revenue received, the expenses incurred and the net result of investments, together with a list of assets.

Interim reporting statements vary widely in the manner of their presentation and the detail of the information they contain. To a greater or lesser degree they are designed to demonstrate the performance of the trust and frequently resemble the form of corporate financial statements.

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08 Jun

INDEMNITIES AND RELEASES FOR TRUSTEES – Acknowledgment, Release, Discharge, Receipt, and Indemnity – Part IV

Suzana Popovic-Montag Executors and Trustees Tags: , 0 Comments

Ultimately, where a trustee administers the assets of a trust, the two most effective and important releases that are available to be obtained are (1) a Clearance Certificate from Revenue Canada; and (2) an Order of the Court in a Passing of Accounts.

Having said that, while a Clearance Certificate is of course sought in most circumstances, a formal Passing of Accounts is not always obtained by a trustee.

From a practical standpoint, where all of the beneficiaries of a trust are sui juris, the trustee has the opportunity to obtain a Clearance Certificate and then merely circulate a release to all persons with an interest in the trust. In so doing, some consideration must be given to the question of independent legal advice and whether or not it is necessary to insist that a beneficiary obtain such prior to signing the release.  Without the benefit of independent legal advice, there is the question as to the strength and enforceability of any release.

None the less, in practical terms, many estates and many trusts are wound up on the basis of an execution of the appropriate release by the beneficiaries.

From a practical standpoint, when seeking a final release from a beneficiary, a copy of the accounts should be provided, and these accounts may be in an informal format or in Court format, depending on the circumstances.

A condition contained in a will to execute a release is enforceable and, upon refusal to do so, the legatee may forfeit the gift: see Williams on Wills (7th Ed.) Butterworths 1995 at p. 374. Furthermore, it has been held that, where there is a requirement in a release that it be executed within a stated time, this must be complied with: see Simpson v. Vickers (1807) 14 Ves. 341.

The form of a release or receipt depends on the nature of the gift itself. For example, when a beneficiary receives a specific bequest, he or she should only need to provide the person who presented the gift with an acknowledgement of receipt of the particular bequest received.

On the other hand, a residuary beneficiary has a right to consider pursuing a formal Court audit or should be expected to sign an acknowledgement, release and indemnity.

In conclusion, the substantive issues relating to the whole question of release, indemnity and receipt are important to keep in mind when you are dealing with the form of a receipt, acknowledgement or indemnity.

Best wishes, Suzana and Ian. ——–

07 Jun

INDEMNITIES AND RELEASES FOR TRUSTEES – Rights of Indemnity Against Beneficiaries – Part III

Suzana Popovic-Montag Executors and Trustees Tags: , 0 Comments

A comprehensive review of the principles in respect of determining when trustees have personal rights of indemnity against beneficiaries is set out in the Australian decision of J.W. Broomhead (Vic.) Pty. Ltd. (in liquidation) v. J.W. Broomhead Pty. Ltd. [1985] V.R. 891 (S.C. Vic.); see also Cullity, M.C. "Personal Liability of Trustees and Rights of Indemnification" (1997), 16 E.T.J. 115. In the Broomhead decision, McGarvie J. set out the following propositions:

·the general principle is that a trustee is entitled to an indemnity for liabilities properly incurred in carrying out the trust, and that right extends beyond the trust property and is enforceable in equity against a beneficiary who is sui juris; ·the basis of the principle is that the beneficiary who gets the benefit of the trust should bear its burdens, unless he can show some good reason why the trustee should bear the burdens alone; ·the right of indemnification is not confined to the case where there is only one beneficiary.

It applies to cases of multiple beneficiaries as long as they are all sui juris and entitled to the same interest as absolute owners of the trust property between them; ·the liability to indemnify could apply to trustees of subtrusts that were beneficiaries of the principle trust; and ·prima facie, the beneficiaries share the liability in proportion to the extent of their respective beneficial interests in the trust.

With the incidence of personal liability for trustees, it is nice to see that the caselaw strongly supports, in the right circumstances, the ability of the trustee to come back against and collect, if necessary, from the beneficiary.

All the best, Suzana and Ian. ——–

06 Jun

INDEMNITIES AND RELEASES FOR TRUSTEES – Third Parties – Part II

Suzana Popovic-Montag Executors and Trustees Tags: , 0 Comments

In an effort to carry on with our theme of trying to protect trustees, we wanted to consider the liability of trustees as against third parties. In this context, there is really no limit to the extent of liability that a trustee can incur.

A trustee can, of course, incur liabilities to persons other than beneficiaries. For example, the trustee may contract an environmental clean up company to remove contaminated soil from land that is owned by the estate before it is put on the open market. The trustee will therefore be liable for those costs, payable out of the assets of the estate. As trustees are principals and not agents of the beneficiaries, they will, prima facie, be personally liable on obligations owed to third parties and trustees may incur personal liability as a result.

The trustee may limit the extent of the personal liability to the value of the trust assets or limit it to the extent that the right of indemnity exists only against such assets. Furthermore, where the trustee has the right of indemnity out of the trust assets, creditors will, as a general rule, be entitled to be subrogated to it. See Cullity, M.C.C. "Personal Liability of Trustees and Rights of Indemnification" (1997), 16 E.T.J. 115 at pp. 127-128. As to the question of limiting the liability of a trustee, Falconbridge on Mortgages (4th Ed.), p. 428-429 states:

If the trustee or personal representative covenants to pay, he will be personally liable on his covenant, even thought he covenants as trustee or as personal representative, even though he adds a proviso that he shall not be personally liable, such proviso being repugnant to the covenant to pay and therefore void. He may, however, validly limit his liability without destroying it, as, for example, if the covenant is to pay out of a certain fund, with a proviso that the covenantor shall not be liable after he ceases to be entitled to administer the fund. So, if a trustee covenants "as trustee and not otherwise", or "qua trustee only", or if an executor covenants "as executor, and as executor only", the covenantor is personally liable to pay, but only to pay out of the assets of the estate or to the extent that he has assets.

This strict rule attempting to limit a trustee’s personal liability has been weakened and modified by the courts. For a review of the impact of the ability of a trustee to limit his or her liability, see Cullity, M.C.C. "Personal Liability of Trustees and Rights of Indemnification" (1997), 16 E.T.J. 115 at pp. 129-133 and see Gordon v. Roebuck (1992), 92 D.L.R. (4th) 670, 9 O.R. (3d) 1 at p. 7-10 (C.A.).

It seems that the bottom line is that a trustee must watch out for the personal risk that may be attached to him or her, merely as a result of his or her dealings with third parties.

On our next Blog, there’ll be more to come on this "protection of trustees" theme…

All the best, Suzana and Ian.

05 Jun

INDEMNITIES AND RELEASES FOR TRUSTEES – Personal Liability – Part I

Suzana Popovic-Montag Executors and Trustees Tags: , 0 Comments

Perhaps one of the more frightening aspects of being a trustee is the fact that the risk of personal liability is "an incident of the office of trustee". His Honour Justice Cullity wrote a leading article on this topic, entitled "Personal Liability of Trustees and Rights of Indemnification" (1997), 16 E.T.J. 115. Given the personal consequences attached to the position of trustee, some consideration must be given to the nature and extent of the releases and rights of indemnification that may be available to a trustee.

Usually these issues are considered at the final stage of an estate administration, when the trustee is dealing with the distribution and winding up of the assets of the estate or trust. In this Blog series on this topic, we will attempt to briefly review some of the substantive and practical issues relating to the whole question of rights of indemnity and releases for trustees.

In order to properly determine just what a trustee should receive in the form of a release, acknowledgement or indemnity, some consideration must be given to specifically the nature and extent of the obligations and liabilities that are expected of the trustee when he or she takes on the role. In short, a trustee is a fiduciary and, as such, his or her fiduciary obligations are owed to beneficiaries, and in some circumstances, to third parties as well.

Given this, the whole question of what a trustee can expect in the form of an acknowledgement, release or indemnity, is a difficult one. Presumably, the trustee’s rights of indemnification out of the trust property arise as a result of the fact that the trustee merely holds the legal title to the property and does not hold the beneficial interest in the property.

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10 Apr

Hull on Estate and Succession Planning Podcast #3 – More on Wills

Hull & Hull LLP Executors and Trustees, Hull on Estate and Succession Planning, Hull on Estate and Succession Planning Tags: , 0 Comments

LISTEN HERE

READ THE TRANSCRIBED PODCAST HERE

During our podcast, we discussed the following legal issues:

(i) role of an Executor;

(ii) children and the Corvette effect;

(iii) guardianship (iv)what happens when you die without a will;

(v)the difference between a holograph and typewritten will; and

(vi)considerations when amending a will. ——–

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