Listen to The Question of Compensation and Complaints.
This week on Hull on Estates and Succession Planning, Ian and Suzana discuss the question of compensation and complaints regarding compensation.
Listen to The Investment Accounts.
This week on Hull on Estates and Succession Planning, Ian and Suzana conduct a quick lesson on capital encroachment and discuss the role of investment accounts in the passing of accounts.
In yesterday’s blog, I mentioned that the election of the Ontario Bar Association (OBA), Trusts and Estates Section Executive for the year 2008-2009 was confirmed at the Sections’ year end dinner on May 27, 2008.
Kimberly Whaley is the incoming Chair of the Executive with Suzana Popovic-Montag as Vice-Chair. The balance of the slate is as follows:
Past-Chair: Jordan Atin
Secretary: Craig Vander Zee
Members-at-Large: Ann Elise Alexander, Robert Coates, Vincent De Angelis, Shael Eisen, Ed Esposto, Jan Goddard, Eric Hoffstein, Danielle Joel, Sean Lawler, Mitchell Leitman, Helena Likwornik, Jane Martin, Joanna Ringrose, Liza Sheard, Susan Stamm, Dina Stigas, Sender Tator, Mary Wahbi, Laura West and Melanie Yach.
I look forward to again working on the Executive and having a successful year.
Before turning the page on this past year, though, I would like to sincerely thank Jordan Atin for all of his efforts, hard work and counsel as the Chair of the Executive.
Have a nice day.
Listen to Issues in Estate Administration: Tax Filing.
This week on Hull on Estate and Succession Planning, Ian and Suzana discuss tax issues surrounding the administration of an estate.
Listen to Alter Ego Trusts.
This week on Hull on Estates, Natalia and Chris discuss what Alter Ego Trusts are and the pros and cons of using Alter Ego Trusts.
As we all know, it is not uncommon for any investor to occasionally experience a substantial decrease in the value of one of the stocks in his or her portfolio. But what if the investor is a trustee?
In light of the recent amendments to the Trustee Act which appear to embrace the modern portfolio theory, it will be interesting to see how the Court will utilize this theory to assess a trustee’s investment performance. Section 28 of the Trustee Act adopts an approach that is consistent with the modern portfolio theory. Under this section, a trustee is insulated from liability if “the conduct of the trustee, which led to the loss from the trust, conformed to a plan or strategy, for the investment of the trust property, comprising reasonable assessments of risk and return that a prudent investor could adopt under comparable circumstances”.
Under the “statutory legal list” approach, which I described yesterday, a trustee was limited to investing trust assets in authorized investments. However, with the development of the prudent investor rule, trustees are provided with a broader range of investment choices, which will likely increase their responsibility in determining an acceptable standard of care.
Presuming that a trustee is found liable for breaching the standard of care, section 29 of the Trustee Act permits a court to assess “the overall performance of the investments” when it is assessing damages. Based on the language of section 29, it appears that a trustee may be allowed to offset the loss of a bad investment against the gain of a good investment.
The trusts and estates bar will be watching with interest to see how the judicial consideration of the prudent investor rule evolves.
Happy Super Bowl Weekend! Go Patriots!
In my blog yesterday, I introduced the prudent investor rule as the standard of care for trustees when investing assets that are held in a trust. Today, I will address how a trustee’s investment performance may be assessed.
Prior to July 1999, trustees were required to make investments pursuant to the “statutory legal list” provided for in the Trustee Act. This had the effect of holding trustees accountable for each particular investment, rather then the investment portfolio as a whole. The principle was further illuminated by the anti-netting rule, which stated that a trustee, who committed a breach of trust, was not entitled to set off a gain in one transaction against a loss in another. However, through recent amendments to the Trustee Act, the statutory legal list was repealed and replaced with the Prudent Investor Rule.
The Prudent Investor Rule reflects the modern portfolio approach to investments, the emphasis being on the prudence of the portfolio as a whole as opposed to each particular component. This theory is captured in Section 27(5) of the Trustee Act. Section 27(5) requires “a trustee to consider … the role that each investment plays within the overall trust portfolio”. Furthermore, under section 27(6) “a trustee is required to diversify the investments of the trust property. It appears that under the modern portfolio approach, a trustee would not be breaching the standard of care, should he or she invest a substantial amount of trust assets into a single security. As described above, section 27(6) requires that the trustee consider diversifying the portfolio, which is necessary if the Prudent Investor Rule is to be followed. To conclude my topic, tomorrow I will consider the liability of a trustee with respect to the investment of trust assets.
Thanks for reading,
Not all Wills provide for an outright distribution to the beneficiaries. In some cases, the assets of an estate are held in trust over a period of time for the benefit of one or more beneficiaries, sometimes in succession. When a trustee administers a trust, he or she is entrusted to act for the benefit of others. As such, our common law and statutes impose standards that trustees must comply with when dealing with trust property.
With the recent plummet in the stock market, I believe many trustees are considering how the stock market losses have affected the trust investments and what action they should take in the circumstances.
Section 27 of the Trustee Act addresses the standard of care for trustees when investing assets held in a trust. Section 27(1) states, “in investing trust property, a trustee must exercise the care, skill, diligence and judgment that a prudent investor would exercise in making investments”. Section 27(2) states that “a trustee may invest trust property in any form of property in which a prudent investor might invest”.
Section 27(1) and (2) outlines the prudent investor rule. When investing trust assets, a trustee must comply with the prudent investor rule to protect himself or herself from liability. Section 28 of the Trustee Act, emphasizes this point as it states that a Trustee will not be liable for losses arising from investments if the standard of the prudent investor is met. Nevertheless, the issue remains how does a trustee meet the “prudent investor” standard? In keeping with this theme, tomorrow I will address how a trustee’s investment performance may be assessed.
Thanks for reading, and have a great day!
Checklists are wonderful things when it comes to the practice of law (list makers would argue that that is true in life as well). In today’s busy practice, a checklist can ease the troubled legal mind.
I was looking at several estate planning information checklists earlier this week. It is worthwhile to highlight some issues/items that can be easily overlooked but which a thorough solicitor should ensure is on his/her checklist:
· If you are acting for both spouses/partners, advise the clients that you cannot act for one at a later date without the other’s knowledge;
· Is the estate trustee to manage funds for minors and distribute monies to the guardian for care, maintenance and education of minor children. Who is the guardian;
· If they can be transferred, who gets air mile/loyalty points. What about transferable equity in hunting/fishing lodges or sports clubs;
· Joint Assets and the presumption of a resulting trust – is there a clear intention of ownership;
· For foreign property, consider the necessity of executing a separate will or appointment of a local estate trustee;
· Ensure every life interest is coupled with a remainder interest; and
· Ensure any charitable organization named as beneficiary is still in existence and properly described.
Have a great weekend and for all those skiers out there, let it snow, let it snow, let it snow.