Each year the Ontario Bar Association (OBA), Trusts and Estates Section, considers candidates for its Award of Excellence. Last year, the Section paid tribute to Brian Schnurr as the recipient.
The Award for Excellence was created to recognize exceptional contributions and achievements by members of the OBA to the area of trusts and estates.
Any Trusts and Estates Section member of the OBA in good standing, as well as former members of the section who have retired or been appointed to the bench, but not including current officers of the Executive of the Trusts and Estates Section or the Executive of the OBA, are eligible to be nominated.
Listen to Executor Obligations
This week on Hull on Estate and Succession Planning, Ian and Suzana discuss what to anticipate as an executor and how to ensure that you are well prepared for your duties.
You know a trust has the potential to run off the rails when the beneficiary refers to the trustees as "The Three Musketeers".
After his untimely death in 2003, Dr. Robert Atkins’ widow sold his business netting proceeds of some $420 million. In his will, the famous diet guru set up two trusts: (i) a spousal trust that would benefit his wife, holding 90% of his assets, and (ii) a research foundation which would get the remaining 10%.
Cue the sword clanging of the three musketeers: a self-described entrepreneur, an accountant, and a lawyer, who befriended Ms. Atkins and became the widow’s closest advisors as well as trustees for the spousal trust (replacing the two trustees who had been appointed by Dr. Atkins). It is reported that Ms. Atkins subsequently agreed to pay each of them $1.2 million per year (excluding bonuses), signed them to 10-yr contracts, and allowed each of them to take out a $5 million life insurance policy on her life, naming themselves as beneficiaries.
Fast forward to a Wall Street Journal online report that a lawsuit had been filed by the Musketeers accusing Ms. Atkins of improperly firing them. Ms. Atkins and her new spouse asked for the trio to be removed as her trustees and further sought reimbursement of some of their fees. The relationship between the Musketeers and Ms. Atkins began to disintegrate in 2006 when Ms. Atkins met her new spouse to be, who himself then became increasingly involved in her finances. When the Musketeers balked at her new spouse’s demands to encroach for an additional $100 million for Ms. Atkins (above and beyond her $15 million annual income), he started making noise about having them removed as trustees.
That’s a lot of bread.
Have a great weekend,
With the end of the week comes my final blog in my series this week on considerations to take into account when changing trustees.
Negotiated structures dealing with the retirement, removal and replacement of a trustee may include, or be a combination of, a deed, court order, preparation of accounts, a passing of accounts application, a release, indemnification, Judgment on the passing and Minutes of Settlement (Agreement) dealing with the resolution of the disputes arising therefrom.
A situation where a trustee wishes to retire and the administration of the trust has been simple, straightforward and has been substantially completed by the trustees to the satisfaction of all beneficiaries, who are sui juris, and there are no outstanding liabilities of the trust, will be completely different than one where beneficiaries are seeking to remove and replace a trustee for misconduct and/or in the context of a very complex administration.
Today’s blog is the third in my series this week dealing with considerations to take into account when changing trustees.
Whether a trustee or co-trustees have properly administered a trust is obviously a crucial factor in negotiating the removal and replacement of a trustee, and will effect the manner in which a new trustee may be appointed.
In yesterday’s blog regarding considerations to take into account when considering the change of a trustee of a trust, I noted that today’s blog would deal with who (or what parties) should be involved in that decision.
Whether the trustee is to be removed (and replaced) by way of deed or by way of Court order, any co-trustee and anyone having a financial interest in the trust should be notified of the change and provided with the deed (if the removal can be done by way of deed: see sections 2-6 of the Trustee Act) and any other materials that may be necessary to remove the trustee by way of deed, or served with the application materials if the removal (and replacement) is to proceed by way of Court order. As such, the make-up of these parties should be considered prior to proceeding with the change, as one or more of these parties may, amongst other things, object to or challenge the removal (and replacement) of the trustee, have claims in respect of the administration of the trust and/or dispute the trustee’s compensation.
It may be that a litigation guardian may need to be appointed for a minor(s) and/or for an incapable party. In such a case, the Office of the Children’s Lawyer or the Office of the Public Guardian and Trustee may need to be served with the application materials so that they may have the opportunity to respond or become involved, as appropriate.
Rule 9 of the Rules of Civil Procedure addresses proceedings by or against a trustee while Rule 7 regulates the bringing of proceedings by or against parties under disability. It may also be that a representation order, pursuant to Rule 10, is required as the proceeding impacts on persons who are not before the Court and who cannot be brought into the litigation because they are unborn or unascertained, or because they cannot be readily found or served.
Thanks for reading. Craig
There are a variety of reasons for the removal and replacement of a trustee, some voluntary on the part of the departing trustee, others involuntary. A trustee might decide to retire or resign from his or her position. On the other hand, a trustee may need to be changed as a result of, amongst other reasons, the trustee’s death, incapacity, bankruptcy, the conduct of the trustee or the relationship of the trustee and the beneficiaries of the trust. Depending on the circumstances, the removal and replacement of the trustee may be done by way of deed or by way of court order.
In this episode, Craig Vander Zee and Paul Trudelle discuss various issues relating to the removal of trustees, including the considerations when negotiating the removal of trustees and their replacement. They discuss Craig’s recent presentation at an Ontario Bar Association continuing legal education program.
Read the transcribed version of "The Trustee’s Power to Encroach on Capital"
During Hull on Estates Episode #51, Ian Hull and Suzana Popovic-Montag discuss the circumstances surrounding a trustee’s power to encroach on capital.
Ian and Suzana cover various principles which affect the power to encroach including the Armchair rule of construction, the Evenhand approach and the concept of malafides.
They also touch on various cases including the U.K. case of Gisbourne v. Gisbourne, and Fox v. Fox Estate (1994), 5 E.T.R. (2d) 174 (Ont. Ct. (Gen. Div.))
For more information on the power to encroach, see Ian’s article in Estates, Trusts & Pensions Journal, "Discretion to Encroach: Do the Beneficiary’s Personal Resources Matter?"