Tag: Trustee Act
Under section 61 of the Ontario Trustee Act, an estate trustee is normally entitled to compensation in an amount that is “fair and reasonable”. There is a sound body of case law regarding the proper quantum of compensation, but it generally applies only where the will is silent as to compensation. Usually, it’s clear whether a will addresses compensation or not, but sometimes it can be a little bit tricky if the will also includes a gift to the estate trustee.
At law, where the will also leaves a legacy to an estate trustee, there is a presumption that the legacy is intended to be in lieu of compensation. However, this generally arises only when the gift is made to the estate trustee in his or her capacity as estate trustee. Additionally, this presumption will give way to even a slight indication that it was not intended to be in lieu of compensation.
For example, in the B.C. case of Canada Permanent Trust Co. v. Guinn, the will appointed a trust company and Ms. Guinn to be the executors. The will also left a bequest of $40,000 to Ms. Guinn. The trust company took the position that she was entitled to her $40,000 and nothing further in terms of compensation. Looking first to the will, the Court determined from the wording of the clause appointing the executors that Ms. Guinn’s role was meant to be nominal and that the primary responsibility for administering the estate was intended to fall to the trust company. Paired with that, the bequest to Ms. Guinn was thought to be disproportionately large for her limited role and was also disproportionate in that the legacy to her was double that left to any blood relative of the deceased. These facts were sufficient to convince the Court that the legacy to Ms. Guinn was not to be in lieu of compensation.
Interestingly, the Court noted that extrinsic evidence of the surrounding circumstances would be admissible for the purpose of determining this question.
This issue does not arise very often, but when it does, it touches upon some interesting questions about the interpretation of wills and the origins of an estate trustee’s entitlement to compensation. Before the enactment of statutory provisions entitling an executor or administrator to remuneration, he or she would not have been entitled to any compensation at all unless the will or trust provided for it or unless the beneficiaries agreed to it. While compensation has been the norm in Ontario for a very long time, there are other jurisdictions that still adhere to the traditional rule that compensation can only be claimed where allowed under the will or by the beneficiaries.
I’ve always been a fan of the “beer bet”. Whenever an interesting point of trivia should come up, and there should be two differing points of view, more often than not the matter will be settled through a “beer bet”, where the loser must buy the victor a beer the next time that they are out. While I have had some good winning streaks of “beer bets” (at one point one co-worker lost about 13 in a row), I have to give credit where credit is due, as I have never reached the sort of levels which the National Post reported on earlier this week.
In a beer bet to end all beer bets, the National Post advised of a 24,576 bottle “beer debt” that had recently been cleared by the Edmonton Eskimos’ recent victory over the Calgary Stampeders. In a math lesson which teaches you how fast “double or nothing” can get out of hand, after a repeated string of Edmonton losses to Calgary dating back to June 15, 2012, and a corresponding “double or nothing” bet that was placed on each game, one brother owed the other 24,576 bottles of beer.
While at first blush this story may have nothing to do with estate litigation, when I sent the story around to some of my co-workers who are also fans of a good “beer bet”, something near the bottom of the article caught one of their attention, as one brother referenced the fact that this bet would go on. The comment back was something to the effect of “imagine trying to collect that debt from an estate”. Well imagine no further.
Being ever one to believe that a beer bet is an unbreakable oath and debt, if you should find yourself in the unfortunate situation of having someone die before re-paying a beer bet, you may be required to turn to their estate to collect on the debt. In such situations, the first question that you must ask yourself is whether you want to demand payment of your beer bet in the form of the beer itself, or if you were willing to take a cash payment in lieu of beer. If it’s the latter, at an average price per beer of $2.50 (no true beer bet can be settled by buck a bottle beer), at 24,576 bottles this would work out to $61,440.00.
If you should find yourself needing to collect on a beer bet from an estate, make sure to keep in mind section 38(3) of the Trustee Act, which provides that no action may be brought against the estate after two years from the death of the deceased. It would be a shame to rack up a 24,576 bottle beer debt, only to have the claim thrown out as a result of the expiry of any limitation period.
Have a great weekend.
Debt owing by an individual does not terminate upon death. The estate trustee is therefore obliged to satisfy any outstanding debts owing from the assets of the estate even after an individual has passed away. I recently came across a new service which assists estate trustees in locating any such debts in order to satisfy them.
Generally speaking, an estate trustee is not personally liable for debts owed by the deceased. However, if debts remain and the estate trustee distributes the assets of the estate, they may be personally liable to satisfy them. In order to avoid personal liability, estate trustees advertise for creditors in accordance with section 53 of the Trustees Act, often referred to as Notice to Creditors. According to this section, an estate trustee will not be personally liable for claims by creditors should they place a ‘notice’ specifying a period of time in which claims by creditors must be made. It is important to note that a Notice to Creditors does not prevent creditors from tracing distributable assets to beneficiaries.
The Trustee Act does not specifically provide how such a ‘notice’ must be posted. However, it has become common practice to advertise multiple times in a local newspaper where the deceased domiciled, and wait at least 30 days before taking steps to administer the estate.
A new service, NoticeConnect, publishes these notices to creditors online. According to the creators of the site, “…publishing notices with NoticeConnect is superior to print advertising because the notice will be found by any creditor conducting a basic Google search and because the ad is promoted across multiple internet platforms with larger potential audiences than print newspapers”.
Furthermore, proceeding online “…is an economical option for the many solicitors and estate trustees who are not publishing Notice to Creditors because of prohibitively high costs, exposing themselves to potential liability”.
Full details of the service provided by NoticeConnect can be found on their website.
Today’s blog is part II in my series this week regarding the protection that may be available to a trustee against potential liability.
Apart from the provisions of the trust document itself, a trustee’s potential liability may be protected, limited or exonerated in a number of ways by statute. Some examples are sections 18(1), 20(3), 28 and 29 of the Trustee Act (“Act”).
Section 28 of the Act provides that a trustee is not liable for a loss to the trust arising from the investment of trust property if the conduct of the trustee that led to the loss 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. Section 29 of the Act provides that if a trustee is liable for a loss to the trust arising from the investment of trust property, a court assessing the damages payable by the trustee may take into account the overall performance of the investments.
The application of the Limitations Act should also be considered.
Also, in considering a trustee’s potential liability in respect of his or her administration of the trust, a trustee ought to consider his or her conduct and whether that conduct may be exonerated, if necessary, by the Court under section 35 of the Act. As a way of balancing the rights of beneficiaries with the interest to not overburden trustees, s.35 of the Act holds that when a breach occurs, the Court has the discretion to relieve the trustee of liability in cases where it believes that the trustee acted honestly and reasonably and ought fairly to be excused.
With some exception, the Court therefore has a statutory discretion to grant trustees relief from liability if they have acted honestly and reasonably, and ought fairly to be excused.
Thanks for reading,
The Trustee Act can be a responding solicitor’s best friend. Consider section 35, which excuses trustees for technical breaches of trust where the elements are met:
"35. (1) If in any proceeding affecting a trustee or trust property it appears to the court that a trustee, or that any person who may be held to be fiduciarily responsible as a trustee, is or may be personally liable for any breach of trust whenever the transaction alleged or found to be a breach of trust occurred, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust, and for omitting to obtain the directions of the court in the matter in which the trustee committed the breach, the court may relieve the trustee either wholly or partly from personal liability for the same."
This helpful section can eliminate Gotcha! claims and provides a ready response to frivolous accusations that often arise in the course of litigation. By eliminating nuisance claims for minor breaches, section 35 gives solicitors acting for trustees a very quick answer to the minor types of claims that add little substance to already complex litigation.
However, this provision does not apply to liability for a loss to the trust arising from the investment of trust property (Trustee Act, s.35(2)).
Have a great week, and remember, it’s really Wednesday.
Cases for Increasing and Decreasing Compensation – Hull on Estates and Succession Planning podcast #122
Listen to Cases for Increasing and Decreasing Compensation.
This week on Hull on Estates and Succession Planning, Ian and Suzana discuss cases for increasing and decreasing 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.
While it is often said that an attorney can do anything on behalf of the grantor except make a Will, this isn’t really so. For instance, while a grantor can delegate decision-making authority to his or her attorney, an attorney generally can not sub-delegate such authority to someone else unless it is in respect of administrative tasks.
This issue was the subject of a paper recently presented by Anne Werker, one of our firm’s Associate Counsel, at the Six-Minute Estates Lawyer 2007. In particular, she focuses on the difficulty an attorney faces when dealing with investment decisions, the main type of decision that in many cases ought to be made by a specialist. Anne notes that historically, both attorneys and estate trustees were prohibited from delegating such decisions to others. However, since 2001* trustees have been allowed to have investment counsel make investment decisions for them (subject to certain conditions). No like legislative or common-law permission has been granted to attorneys.
So, what is an attorney to do when faced with the obligation to manage an investment portfolio, particularly a sophisticated one? Anne notes that one way to cope is for a grantor to include in the power of attorney a clause expressly granting the power to delegate investment authority. She also offers some helpful precedents for the content of such a provision in her paper.
However, even if that measure is taken, the question of whether such sub-delegation is valid has not yet been answered. Rather, questions remain about what formalities, if any, are necessary to validate sub-delegation, about whether third parties will refuse to contract with an attorney’s agent, and about whether they would face liability for dealing with a sub-delegate acting under an invalid power of attorney.
I expect that the answers will vary on a case-by-case basis, and that it may take a while before any uniformity develops in this area in the absence of legislative change.
Have a nice day.
* further to amendments made to the Trustee Act, as a result of Haslam v. Haslam (1994), 114 D.L.R. (4th) 562.
I am excited to be “back on”, so to speak, with another opportunity to shed some thoughts on estate matters. In particular, I have the pleasure this week of posting snippets of a wonderful article prepared by Rodney Hull, Q.C., who himself has been swept up by the whole concept of social media. Rodney has graciously allowed me to share with you the following …
RECOGNIZING SOME COMMONLY ENCOUNTERED INTERPRETATION PROBLEMS
Each problem faced by practitioners in determining the meaning of words used in a Will can be dealt with by:
(1) Identifying the problem by its name or subject;
(2) Giving an example of wording that raises the problem;
(3) Stating the facts or circumstances pertinent to the problem;
(4) Stating the questions raised; and
(5) Pointing out where the problem has been treated in a general way, i.e. where to start research of the problem.
In many cases, one cannot achieve certainty as to the meaning of words used in a Will and, in those circumstances, one is well advised to bring an Application for interpretation before the Court under Rule 14 of the Rules of Civil Procedure in order to indemnify the personal representative by acting on the Court’s interpretation (as provided in section 63 of the Trustee Act).
If such an Application to the Court is not economically viable and the personal representative is prepared to act on counsel’s opinion, counsel giving the opinion should point out the provisions of section 63 of the Trustee Act to the personal representative. He or she should consider including a clause in his or her opinion along the following lines, “While my opinion as to the meaning of the words of the Will is based upon legal principles and proper research, the matter is not without some doubt and, as I have advised you, the personal representative can only act with certainty of indemnification by seeking the Court’s advice and direction as provided in section 63 of the Trustee Act”.
Tomorrow, we’ll get into some actual interpretation problems …
All the best – Suzana.