Tag: Trust Company

03 Jun

Disclosure Requirements of a Corporate Estate Trustee

Laura Betts Estate Planning, Executors and Trustees, Litigation, Trustees Tags: , , , , 0 Comments

A testator may decide to appoint a corporate estate trustee were:

  • an estate is complex and he or she feels a trustee with special expertise or competence in financial matters is required to administer the estate;
  • he or she is concerned there might be conflicts or disputes between the beneficiaries of his or her estate; or
  • he or she simply does not want to burden family members with the responsibility of having to administer his or her estate.

A corporate trustee may also be appointed by the court to act as an Estate Trustee During Litigation where there is a dispute or litigation between the appointed Estate Trustees, or between the appointed Estate Trustees and other interested parties, such as the beneficiaries of an estate.

A recent decision of the Supreme Court of Nova Scotia, Re Creighton Estate, 2016 NSSC 136, highlights the obligation of a corporate trustee to provide co-trustees with copies of their internal notes, emails and working papers.

In this case, the deceased died leaving a Last Will and Testament (the “Will”) appointing three Estate Trustees, namely, two of the deceased’s children (the “Creightons”), and a private trust company (the “Trust Company”).

The terms of the Will stated that the Trust Company was to “assume the burden of the administration” of the Estate. However, following the deceased’s death, the Creightons advised the Trust Company that they wanted to participate in the administration of the Estate.

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During the course of its administration of the Estate, the Trust Company sought a legal opinion from the Estate’s solicitor. The Creightons were not allowed input as to the facts that would form the basis of the opinion nor were they provided a copy of the opinion once obtained. The Creightons subsequently requested document disclosure, namely production of the Trust Company’s complete file.

While the Trust Company produced some documents, it claimed that its notes, working papers, internal emails, both in paper form or created electronically, which had been created in the furtherance of decision making of the Trust Company, were not subject to disclosure to the Creightons as co-trustees.

Justice Arnold disagreed, and held that the Corporate Trustee was required to provide the Creightons with copies of its notes, working papers and internal emails.  At paragraphs 15 and 16 of his decision Justice Arnold states:

“It would be impossible for the Creightons to fulfill their obligations as co trustees without being fully informed by the Trust Company. Clearly, in relation to all aspects of the administration of the estate, the Creightons have a right to know how and why the Trust Company did what it did.  Only full and complete disclosure by the Trust Company would allow this to occur.  Co-executors … have a duty to oversee and correct each other’s conduct. This duty cannot be abdicated by a natural trustee in favour of a professional corporate trust company. Therefore, it is necessary for co-trustees to have all information that relates to the administration of the estate. This may include internal correspondence and memoranda, emails and other electronically stored information.”

Thank you for reading.

Laura Betts

 

13 Jan

Structuring Trustee Arrangements

Suzana Popovic-Montag Estate & Trust, Trustees Tags: , , , , , , , , , 0 Comments

One of the articles included in the Toronto Lawyers Association’s Newsstand this week discusses the concepts of Private Trust Companies (PTCs) and Private Trust Foundations (PTFs) in the British Crown dependency of Guernsey. While there are significant differences between these types of structures and trust companies in Canada, it is interesting to consider ways in which trustee arrangements are structured in other jurisdictions.

PTCs, similar to corporate trustees in Canada, are often used by high net worth families to consolidate various family interests into a private structure that is customized to fit their particular needs. PTCs can offer many benefits, including in-house specialized knowledge and expertise, continuity, and flexibility. In Guernsey, PTCs are structured in a two-layered manner. The PTC itself is a limited company established for the sole purpose of acting as a trustee. The shares of the PTC must then be “orphaned”, by having a non-charitable purpose trust hold the shares of the PTC.

PTFs, on the other hand, are differently structured. A foundation can be established for the sole purpose of acting as a trustee. As a legal entity the foundation can then act and exercise all the powers and obligations of a trustee in the same way as any corporate trustee, such as a PTC. However, since the foundation has no members or shareholders, it is already “orphaned” and there is no need to set up a holding vehicle, as is required for the PTC. A crucial difference between PTCs and PTFs is that, the law in Guernsey which applies to fiduciaries, does not necessarily apply to PTFs, as long as the PTF is not paid for its services. Of course, if the PTF is paid for its services, it will be deemed to be carrying on business and will fall under the Fiduciaries Law. In Guernsey, PTFs may be seen as a simpler alternative to PTCs.

In Canada, trust companies are similar in concept to PTCs, but are structured differently, as the “orphan” layer of the PTC is not necessary. Trust companies are regulated federally by the Trust and Loan Companies Act, SC 1991, c 24 and in Ontario by the Loan and Trust Corporations Act, RSO 1990, c L.25. Many of the large banks have a subsidiary trust company through which they operate in the capacity of a corporate trustee. Trust companies in Canada are fiduciaries and are paid for their services as trustees. This is an important element of trust companies, and the non-fiduciary nature of PTFs would likely be incompatible with trustee obligations in Canada.

As with PTCs and PTFs, Canadian trust companies are often used in place of an individual trustee where a trust or estate is particularly complex. For example, corporate trustees may be useful where a trust, whether inter vivos or testamentary, is intended to exist over the course of many generations. Trust companies can provide continuity of administration, and avoid issues restricted to the lifetime of an individual trustee.

Furthermore, given the increase in non-traditional family structures, such as second marriages and blended families, estates can be very complex and can involve many beneficiaries. It may be overwhelming for an individual to manage the complex structures that may be created to account for the different interests in a family. It may also be difficult for an estate trustee to remain neutral and objective if there are conflicts or issues that arise with respect to the family structure and distribution of assets.

Thanks for reading.

Suzana Popovic-Montag

09 Feb

The Trustee’s Duty of Disclosure to Beneficiaries

Hull & Hull LLP Executors and Trustees Tags: , , , 0 Comments

Last week the Globe and Mail reported on a $1.5 billion lawsuit launched against Barry Sherman, the founder of Apotex, and a trust company. The case offers an opportunity to question the duties of disclosure to beneficiaries.

The claimants are the beneficiaries of their deceased father’s estate. Their father died in 1965 and his estate was administered by the trust company. In 1999, the claimants learned that the trust company had sold one of their father’s corporations to Mr. Sherman in the late 1960s. The claimants later learned that the sale included terms that they were to be given an opportunity to work at the company upon turning 21 and the option of purchasing 5% of the company after 2 years of employment. These terms were subject to some important conditions, including that the company remain under control by Mr. Sherman.

However, Mr. Sherman sold the company in 1972 for a sizable profit.

The claimants now allege that Mr. Sherman and the trust company are liable for not advising them of the terms of the agreement, among other things.

An interesting catch is that the trust company passed its accounts in 1993 and no objections were raised at that time.

At issue in this case will be the trust company’s obligations to disclose all details about its dealings with estate assets, even when the information has not been requested, either at the time or when the accounts are passed.

Thanks for reading.

Jason Allan

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