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Estate trustee Introduction

One of the most popular Brandon’s Blog article is:

WHAT HAPPENS TO DEBT WHEN YOU DIE CANADA: ARE YOU FREE OF DEBT

That led me to start looking more deeply into deceased estate matters, past the insolvency issues. So a few months ago I wrote a series of blogs on estate trustee matters. The series of blogs are:

In one blog I wrote how the duties and responsibilities of an estate trustee (formerly called either an executor or executrix) are very similar to the fiduciary duties and activities are undertaken all the time by a licensed insolvency trustee. In another, I wrote about the Court’s ability to remove and replace the estate trustee. In a third blog, I wrote about how all children are not fit to be an estate trustee.

A recent Court decision

I recently became aware of an Ontario Court decision about the removal and replacement of an estate trustee. The decision was handed down a couple of weeks after I wrote my blogs.

The recent decision is a very interesting case. Many of the issues I wrote about are all there. So, I thought it would be interesting to provide the information to you as it is a real-life example that actually took place, of many of the things I previously wrote about that could take place.

The case citation is Lanari V. Kay, 2019 ONSC 1506. It was heard in the Ontario Superior Court of Justice. The deceased was Patricia Anne Kay. She had eight children. Tragically, one daughter predeceased her. Of the seven remaining, in her will, three were appointed trustees. Along with the remaining four children, Ms. Kay’s granddaughter, the child of her dead daughter, was asserting that she was entitled to be a beneficiary.

The Applicant

The applicant insists ﬁve reasons to get rid of the estate trustees: (1) conﬂict of interest; (2) misbehaviour, violation of trust fund as well as violation of fiduciary responsibility; (3) animosity between the trustees; (4) conflicts between the trustees and the beneficiaries; and (5) delay and wastage of the assets.

The respondents

The trustees insist that:

Any kind of conﬂict of interest can be relieved by guaranteeing the trustee with a conﬂict will not take part in any decision making in connection with the matter or thing where there is that conflict.
There is no displeasure between the trustees, and there never was.
Any bitterness between trustees and beneficiaries is not a sufficient ground to get rid of trustees.
There has been no significant hold-up in the management of the estate and they have properly provided the necessary disclosure.
From a functional viewpoint, the elimination of current trustees will increase expenses in this modest estate.

The Trustee Act

As I discussed in my earlier blogs, under the Trustee Act, R.S.O. 1990, c. T. 23 (the Act), the court can remove trustees and select brand-new trustees.

The basic concept adhered to in an estate and trust matter by the Court for removal applications like this one is that a Court will not easily remove an estate executor, executrix or trustee picked by the testator. Nevertheless, where there is a clear instance of conﬂict of interest, elimination is a suitable course of action. The well-being of the beneficiaries has to be an important factor to consider. Also, conduct by the trustee that jeopardizes the estate property or that reveals a lack of honesty or absence of proper ability to carry out the trustee’s duties and obligations are a basis for removal.

The Judge and his ruling

Therefore, the Judge kept in mind that the estate trustees have actually insisted in written documents that the estate might lack sufficient property to disperse if estate litigation continues. He found that the trustees’ activities have actually resulted in unnecessary litigation. The significant legal costs which have actually been sustained are partly due to the unreasonable positions taken by the trustees. This was a major variable to think about.

The Judge stated that:

Bitterness between a beneficiary and a trustee might not be sufficient to cut a trustee.
When that displeasure influences the management of the estate, it is a significant problem.
If the animosity has actually been created by the failure to supply disclosure, it increased the time spent by the respective lawyers on behalf of the trustees and the beneficiaries.
The additional time spent as a result of the lack of disclosure is matched by a matching boost in legal costs which might be the obligation of the estate.

The Judge felt that the problems in this situation have and remains to raise the costs associated with the estate management. He additionally stated that bitterness between the trustees might also exist.

Ultimately, the Judge determined that he was satisfied that the estate trustees have to be removed and he ordered that. The Judge assigned an independent person as the alternative estate trustee and approved a specific hourly rate to be billed by the brand-new trustee. Trustee compensation, just like that of a licensed insolvency trustee acting in Court matters, is subject to taxation by the Court.

Finally, the Judge referred to the various other disputes between the parties back to the Judge seized with this estate litigation.

Our role in estate matters

As I mentioned in one of the earlier blogs, my Firm had successfully completed a mandate as Court-appointed Estate Asset Manager. In that file we had to find common ground between two beneficiaries who could not agree on anything. We were able to do that. So, on consent, our plan to prepare for sale and then sell the assets and distribute the cash to the beneficiaries, on consent, was done. Our fee and that of our lawyer was also approved by the Court without any objection from the beneficiaries.

We were recently appointed by the Court in another estate matter. We will be receiving funds from a party purchasing the only real asset in the estate and attempting to find a missing beneficiary. Based on the results of our hunting, we will then prepare a distribution plan for the Court to approve.

As I have previously written and state above, a licensed insolvency trustee is an officer of the Court. We have the necessary skill set to act as either an estate trustee or perform many potential roles in estate matters. This is in addition to our normal work in the insolvency field.

If you are involved in a messy estate matter, call the Ira Smith Team today. We work cooperatively with lawyers and other professionals.

As a licensed insolvency trustee, we are natural problem solvers. We will be able to create a plan unique to your circumstances so that we can end the pain, stress and anxiety that you are feeling. This will allow you to reduce your overall costs and return to living a stress-free life.

Call the Ira Smith Team today for your free consultation. We will reduce your overall costs and end your pain points, Starting over Starting Now.

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Brandon’s Blog, please scroll to the bottom for the podcast.

Trustee of parents estate: Introduction

I want to talk about an issue which is all too common. I am also going to give you two real-life examples. The issue is that of children being named as the estate trustee of parents estate.

I caution that I and my firm are not lawyers, and I am by no means providing in this and upcoming Brandon’s Blogs advice on wills or estate planning matters. For that, you must consult your lawyer.

Why the children?

Many times in drafting a will, parents want their children to know that the parents trust and love them. So, they not only have their children as beneficiaries of their estate, they also make them the estate trustees (formerly known as executor or executrix). This is natural, but may not be the best choice.

The reason I say this is because the role of the estate trustee is a demanding one that requires a specific skill set. Children don’t always have the necessary skills. What if one or more of the children have great financial skills and have sound judgment, but others don’t. This can lead to differences of opinion and major arguments. In the most extreme case, it can lead to costly and lengthy litigation to dissipate estate assets. Executors must act in the best interests of all beneficiaries. If personal agendas get in the way, then everyone’s best interests can’t be met.

Adult children are probably married. Now you have daughters-in-law and sons-in-law involved in the background. This can lead to a whole host of issues that has nothing to do with the efficient administration of the parents’ estate and being even-handed with all beneficiaries.

What if some of the children have personal financial issues. There will be a temptation for self-dealing or self-enrichment. Again this can lead to major problems.

What if you have an even number of children? Two or four estate trustees can lead to many problems. With two, the estate trustees will always be deadlocked if they don’t see eye to eye. With four, not only can you have a deadlock, but too many cooks may spoil the broth!

Splitting the tasks

Sometimes parents split the tasks. One child will be the estate trustee because she has great financial acumen. The other child will be made responsible for health and living decisions if the parents first become incapacitated. Sounds great in theory. However, the way the health decider child wishes the parents to live may be at odds with the financial person seeing the estate shrinking away. Or, the health decider may make decisions for the parents to live in a way that does not shrink away from the estate, but is demeaning to the parents and does not give them a good quality of life in their final days.

So, as you can see, what started out as the parents wanting to “do right” by their children, can lead to many problems.

What an estate trustee should not do

In my last blog, TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS, I spoke about some basic elements of the role of an estate trustee. I described the process of becoming an estate trustee, and what the responsibilities are.

Now, I want to touch on some practical matters of what an estate trustee should not do.

The first is communicating with some beneficiaries and not others. As I have previously described, one of the roles and responsibilities of an estate trustee is to deal with all beneficiaries even-handedly. The estate trustee cannot tell certain details to some beneficiaries, and not others. So, all communications should be with all beneficiaries at the same time; either in writing or orally. Everyone should get the same information at the same time. The estate trustee does not wish to be accused of favouring some beneficiaries over others.

The second thing not to do is to rush to distribute smaller personal possessions of the deceased. The estate trustee may be pressured by family members to distribute certain items quickly. Possibly because the family member is the proper beneficiary of those small items and wants them as quickly as possible. Alternatively, perhaps they are not the rightful beneficiary of all the items they are claiming. However, they want to get their hands on certain items to stop other family members from getting them. Or perhaps there is a home involved that must be sold, so family members will pressure the estate trustee to clean out the home immediately so that the home can be put up for sale as soon as possible.

As tempting and easy as it might be, the estate trustee must first take steps to:

get a copy of the will and the deceased’s financial records
take possession and control of all assets
ensure that a proper inventory is made and that appraisals are obtained where necessary
make sure that all required insurance and bonding is in place

There is another reason. An estate trustee will be putting more pressure on themselves than they should bY making piecemeal distributions. Regardless of value, making a quick distribution to one of the beneficiaries will only give rise to all the other beneficiaries clamouring for their entitlements. The estate trustee may not be in a position for some time to be able to make a proper distribution to all other beneficiaries. This will only lead to headaches for the estate trustee.

Why some children may not want to be an estate trustee

There can be danger in being an estate trustee. In my last blog, I highlighted specific expertise and knowledge that an estate trustee must have. I also discussed how a licensed insolvency trustee (formerly called a bankruptcy trustee) also possesses the same skill set required of an estate trustee.

A trustee, including an estate trustee, acts in a fiduciary capacity. The estate trustee is fully accountable for all decisions made and steps were taken with respect to the assets. Not only is it important to have the necessary financial skills, but an estate trustee also has to be aware of the myriad of income tax issues. Final income tax returns must be filed. The estate trustee has a duty to ensure that all income tax legislation requirements are met, including the obtaining of clearance certificates. Any loss to the estate as a result of things an estate trustee either did or did not do, the estate trustee will be personally liable for.

The steps required in formulating an appropriate sales process for the different asset types not being directly distributed to beneficiaries is not totally scientific. There is some art to it as well. Making wrong decisions can expose the estate to loss of value, which will blow back right onto the estate trustee.

For these reasons, children may not wish to take on responsibility. The smart ones will understand that they do not have the required skill set. In other cases, the children may see the real possibility of creating family strife if they were to take on the role of an estate trustee. So what if children are named in the will as the estate trustees, but they don’t wish to take on the role. Must they anyway?

Renunciation of estate trustee Ontario

If you have not yet applied for probate or have otherwise not started to administer the estate, you do not have to be an estate trustee. There is a specific form to complete in order to renunciate your position as an estate trustee. Again, it must be done before you take any action as the estate trustee. If you have already applied for probate, or have started administering the estate and now find that you are in over your head, you cannot renunciate your position. You must make application to Court for an Order removing you as the estate trustee. I would suggest that if you are the sole estate trustee, you should have someone else lined up to succeed you. Otherwise, the Court may not allow you to be removed.

Two real-life examples

Example 1

In my blog, COURT APPOINTED ESTATE TRUSTEE CASE STUDY: IF IT WAS EASY YOU WOULDN’T NEED US, I described one of our case studies where we were appointed estate trustee to sell real estate. In that case, neither of the beneficiaries were capable of agreeing on anything. They were also incapable of carrying out the role of taking possession and control of the real property, Insuring it and selling it. Legal counsel for one of the beneficiaries made an application to Court seeking an Order appointing Ira Smith Trustee & Receiver Inc. as an estate trustee.

The Court made the Order. With the approval of the Court, we listed the property for sale, obtained approval to our actions and activities, including a sale of the property. We then proposed a distribution of funds which also was approved by the Court. We made the distribution and obtained our discharge. This is a perfect example of how our skill set as a licensed insolvency trustee was recognized by the Court and allowed us to carry out the mandate in an efficient way.

Example 2

Recently, one of Ira Smith’s cousins needed to update her will and name an estate trustee. This cousin has three children. None of the children believed that they had the necessary skills and knowledge to be an estate trustee. They also agreed that it was not a good idea for any of them to take on that role.

However, there was one thing that the mother and her three children could all agree on. That was that Ira had the necessary skills to be the estate trustee. They unanimously agreed that it would be a good idea for Ira to take on that role. Ira’s cousin asked him if he would. He told his cousin that he was honoured that they all thought so highly of him. He agreed to be named in her will as the estate trustee.

The children were smart. They knew what they didn’t know. They all agreed on the estate trustee being proposed. A huge weight was taken off of the mother’s shoulders.

Trustee of parents estate: Why not appoint a Toronto bankruptcy trustee?

I hope that you can see that the knowledge, experience, and expertise of a licensed insolvency trustee would stand him or her in good stead to act as executor, executrix or estate trustee of a deceased estate. Many times, it may be a smart move to allow an independent neutral third party act as the estate trustee. Especially one like a licensed insolvency trustee who is used to acting as the independent Court officer.

If you have any questions about a deceased estate and the need for an estate trustee, whether it is solvent or insolvent, contact the Ira Smith Team. We have decades and generations of experience in helping people and companies overcome their financial problems. You don’t need to suffer; we can end your pain.

In the meantime, if you have any questions at all, contact the Ira Smith Team.