As an avid Seinfeld fan, I recently watched the episode where Elaine Benes kept on eating submarine sandwiches just so she could collect enough points to earn a free sub. Spoiler alert: Elaine lost the loyalty card before redeeming the free sub. Unfortunately, many estates fail to take advantage of these rewards and end up just like Elaine.
It is estimated that in the US alone, three trillion frequent flyer miles are given annually. Notwithstanding this dizzying number of points, in Ontario there is no law addressing if, and how, points can be transferred upon death. Airlines are left to create their own procedure and standards.
There is a helpful resource, here, which sets out the policies of the major US frequent flyer programs in plain english. The CBC offers similar information for Canadian frequent flyer programs here. While some airlines permit the transfer of points, many discount their value. Some even refuse to allow there to be a transfer altogether.
As discussed in my previous blog, Anthony Bourdain included his frequent flyer miles in his will. Given the suspected value of these points, this estate planning decision makes sense.
In considering an estate plan, a testator should, first, decide whether to choose airlines based on the ability to transfer points. Second, if a testator has amassed significant points, and they are transferrable, make sure to include them in a will.
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If someone asks you to act as their Estate Trustee, or you learn to your surprise that you are named as an Estate Trustee after the person’s passing, there are a number of things that you should consider before accepting such a responsibility. Given the significant duties involved in such a role, it is important to be aware of the potential for personal liability.
An Estate Trustee’s Legal Duties
An Estate Trustee is a fiduciary and, as such, s/he owes a duty to exercise the care, diligence and skill that a person of ordinary prudence would exercise in dealing with the property of the Deceased.
Furthermore, an Estate Trustee owes a “duty of loyalty”, which has been described as the duty to act honestly and in good faith, and to use powers solely for the purposes for which they were granted (see Oosterhoff on Trusts: Text, Commentary and Materials, 8th ed.). The “duty of loyalty” means that:
(a) An Estate Trustee must exercise powers and perform duties solely in the interest of the Estate.
(b) An Estate Trustee must not knowingly permit a situation to arise where:
(i) The Estate Trustee’s personal interest conflicts in any way with the exercise of powers or performance of duties; or
(ii) The Estate Trustee derives a personal benefit or a benefit to a third party, except as far as the law or the Will expressly permit.
Additional legal duties of an Estate Trustee are:
- The “prudent investor” rule which ensures that the Estate Trustee properly invests the Estate assets;
- The “even-hand” rule which ensures that the Estate Trustee acts impartially among all the beneficiaries;
- The “duty of transparency” which ensures that the Estate Trustee provides information to the beneficiaries; and
- The “duty to account”.
Some Practical Considerations
From a practical stand point it is also prudent to consider the overall complexity of the Estate and what type and quantity of work will be expected from you in your role as an Estate Trustee. Certainly, some Estate Trustees can be compensated for the work they perform; however, there is a limit to what one may claim and it largely depends on the circumstances.
There are certain tasks that an Estate Trustee may want to delegate to third parties; however, there is a limit as to what type of work may be delegated and what is considered reasonable.
You should consider whether the Will properly sets out the powers as well as the responsibilities of the Estate Trustee which will aid you in the future, should any of your decisions be challenged. Another useful consideration is whether there are any third parties, or specifically, any beneficiaries who may be difficult to deal with in your role as an Estate Trustee, or may want to challenge your authority in the future.
In making the decision whether or not to act as an Estate Trustee, it may also be a good idea to speak to a lawyer regarding whether taking on this role may present an unacceptable legal risk for you in the future.
Thanks for reading.
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We hear a lot about fiduciary duty in the practice of wills and estates. But what is it exactly? According to this definition in Irwin law’s online dictionary, a fiduciary is “a person occupying a position of trust vis-à-vis another person”.
In the recent case of Hooper (Estate) v. Hooper, 2011 ONSC 4140, the court discusses the concept of fiduciary duty. In Hooper, the estate trustee, who did not defend the proceedings against him, placed himself in a fiduciary relationship with respect to not only the deceased, but also in relation to the other named beneficiaries.
The court commented that when a person in such a fiduciary position fails to pass accounts or otherwise account for his or her actions, he or she can be required to repay the amount unaccounted for to the estate. Breach of such a special relationship gives rise to wide array of equitable remedies. Such equitable remedies are always subject to the discretion of the court, and are designed to address not only fairness between the parties, but also the public concern about the maintenance of the integrity of fiduciary relationships.
In exercising its equitable discretion, the court is concerned not only with compensating a wronged plaintiff, but also with upholding the obligations of good faith and loyalty, which are the cornerstone of the concept of fiduciary duty.
The freedom of the fiduciary is limited by the nature of the obligation he or she undertakes, an obligation which “betokens loyalty, good faith and avoidance of a conflict of duty in self interest.” In short, equity is concerned not only to compensate the plaintiff, but to enforce the trust which is at its heart.
Fiduciary duties are clearly those which should never be entered into lightly or on an uninformed basis.
Sharon Davis – Click here for more information on Sharon Davis.