Acting as an Estate Trustee responsible for the Administration of an Estate can be a difficult task from an administrative responsibilities and emotional perspective. Listed below are some commonly asked questions related to estate administration and the role of the estate trustee. Specific areas covered include:
WHO IS AN ESTATE TRUSTEE?
WHO MAY ACT AS AN ESTATE TRUSTEE?
WHAT ARE THE RESPONSIBILITIES OF AN ESTATE TRUSTEE?
MAY AN ESTATE TRUSTEE RETAIN A LAWYER TO ASSIST IN THE ADMINISTRATION OF THE ESTATE?
IS AN ESTATE TRUSTEE ENTITLED TO COMPENSATION?
CAN THE ESTATE TRUSTEE BE HELD LIABLE?
MAY AN ESTATE TRUSTEE RENOUNCE THEIR POSITION?
The Estate Trustee (also occasionally referred to as the Executor) is the personal representative identified in a Will to carry out the terms of the Will. The role of the estate trustee is usually confusing and may be quite complicated. An estate trustee requires sound judgment, diplomacy and empathy. The estate trustee’s responsibility should not be taken lightly; it is important that an estate trustee understand the time commitment and duties involved in administering an estate.
When you are creating a Will, you should choose an estate trustee carefully, considering the suitability of the individual for this (at times demanding) position.
Any individual who is at least 18 years of age (and mentally capable) may serve as an estate trustee.
You may appoint multiple estate trustees who will act together. Having a variety of skills and perspectives may be helpful in resolving difficult estate administration issues. You can specify whether all estate trustees have to agree on decisions or if a decision of a majority of them is sufficient. In some cases you may require that a particular person be part of the majority for a decision to be binding (e.g. Your lawyer, accountant, investment advisor etc. if they are one of the estate trustees).
You may choose to appoint a lawyer or trust company as an estate trustee. There are pros and cons to appointing a lawyer or trust company. They may provide a higher level of experience in matters of investment, estate accounting and other estate administration responsibilities. They may also have greater resources than most individual estate trustees and therefore have a greater capacity to manage complex estate administration issues. A trust company also offers permanence, a good idea if the Will provides for trusts that may last a long time. Trust companies, are sometimes perceived as less responsive and flexible than lawyers or individual estate trustees. You may find that the most effective solution is to appoint an individual and a lawyer or trust company to serve as co-trustees if your estate is complicated but still needs a ‘personal touch’ approach when dealing with individual family members.
The responsibilities of the estate trustee are to wind up the assets, debts and financial matters of the deceased. The estate trustee collects in, manages and invests the assets as required, pays debts and then distributes the assets to the beneficiaries. Depending upon the terms of the Will, the estate may be distributed immediately or some (or all, in some cases) of the property may have to be held in trust for a period of time or until a specific event has occurred. The estate trustee is ultimately accountable to the beneficiaries of the estate.
Some of the specific responsibilities an estate trustee will need to carry out (or delegate to a lawyer specializing in estate administration) are:
- Arranging for the funeral and burial of the deceased (these arrangements are not made by a surviving spouse or other family member unless they are appointed as an estate trustee).
- Determining that the Will appointing them as the estate trustee is the last Will of the deceased.
- Determining the names, addresses and ages of the beneficiaries and notifing them of their interests.
- Determining the nature and value of the assets and debts of the deceased including compiles a detailed inventory, which includes the contents of safety deposit boxes.
- Ensuring that property is protected (e.g. that real property has sufficient insurance and appropriate management).
- Continuing and overseeing the operation of any business interests.
- Instructing the lawyer assisting in the estate administration to open an estate bank account. Most banks now require that law offices open and oversee these accounts rather than individual estate trustees.
- Arranging for the payment of debts and contests debts if not convinced of their validity.
- Preparing and filing the necessary tax returns in all relevant jurisdictions and paying any tax owing. Estate trustees may instruct the lawyer assisting with administration to assign this task to an accountant or alternately work directly with an accounting firm to complete this task.
- Maintaining proper accounts.
- If required to do so, providing the beneficiaries and the court with an account of all dealings with the estate assets during the term of administration.
- Setting up and administering any trusts established by the Will.
- Distributing the assets according to the terms of the Will and obtaining releases from the beneficiaries.
Click here for more detailed information on Executor Duties
The Estate Trustee may choose to retain a lawyer to advise and assist in some or all of the administration of the estate but all final decisions must be made by the estate trustee, who cannot delegate this decision-making responsibility to others. Note that even with professional assistance the estate trustee is ultimately responsible to the beneficiaries of the estate. Here are some of the key areas that a lawyer can be of great help to the estate trustee:
- The estate trustee will often look to the lawyer to advise on all legal matters involving the interpretation of the Will and the administration of the estate.
- Prepare and file the application for the certificate of appointment of the estate trustee with the Ontario Superior Court of Justice.
- Prepare the advertisement for creditors if the estate trustee wishes to advertise for claims against the estate.
- Assist the estate trustee in the transfer and/or sale of assets by preparing any documents required for that purpose; assist the estate trustee in maintaining bookkeeping records.
- Assist the estate trustee in preparing the accounts for audit by the Ontario Superior Court of Justice if the estate trustee is required to present the accounts for a formal audit (called a “passing of accounts”).
- Prepare documents for the beneficiaries to sign to acknowledge that they have received their entitlement under the Will and to release the estate trustee from liability.
In Ontario, the entitlement of an estate trustee to compensation for their efforts on behalf of the Estate is statutory in nature. Specifically, Section 61(1) of the Trustee Act provides that “A trustee, guardian or personal representative is entitled to such fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the estate, as may be allowed by a judge of the Superior Court of Justice.” Certain criteria have been applied in many Ontario cases when fixing the compensation of Executors:
- Magnitude of the Estate
- Care, responsibility and risks assumed by the estate trustee
- Time spent by the estate trustee in carrying out their responsibilities
- Skill and ability required and displayed by the estate trustee
- Results obtained and degree of success associated with the efforts of the estate trustee.
The testator can avoid the guideline by providing in the Will the amount that he or she wishes the Executor to receive in compensation.
The law requires that the estate trustee demonstrate care, diligence and reasonable prudence in carrying out his or her duties. The estate trustee should be organized, responsible and capable of making financial decisions. Should the estate trustee act in a careless or negligent manner or take unnecessary risks with investments the estate trustee could be held liable for any losses the estate suffers as a result of these actions.
You are not obligated to act as estate trustee. You may renounce your position at the start of the process by signing a “form of renunciation”. If you have already begun to administer the estate then your opportunity to renounce the position as estate trustee is lost and you may be held liable for any issues arising from an improperly administered estate.
Feel free to contact us at any point for assistance or advice with respect to Estate Planning, Estate Administration, Estate Litigation or Estate Law. We may be reached at 705-435-4339 / 1-877-85LEGAL (1-877-855-3425) or contact us via email.