This post was written by: Gosha Sekhon, LLB, TEP, ScotiaWealth Management
Since joining Scotiatrust in late 2010, one of the trends I have noticed is the increase in estate litigation. This has translated into increased requests for the Trust Company to take on the role of Estate Trustee During Litigation (“ETDL”). Coming from a solicitor-side practice, it has been helpful to have the input and guidance from colleagues specializing in Estate Litigation to navigate this new reality in the Estate and Trust industry.
One recent update was provided at the STEP 2016 National Conference. Here is a summary of the key points I noted from the session “The Role of an Estate Trustee During Litigation”, which I hope provides a helpful refresher on the topic.
- ETDL appointments are temporary positions.
a. They are in place until the litigation between the parties is resolved.
b. As there is no formal mechanism to conclude the ETDL, it is prudent to obtain a court order at the conclusion of the litigation to address issues such as:
i. Who will be the Estate Trustee to complete the Estate Administration, including distributions;
ii. The terms of the transfer of assets under the care of the ETDL;
iii. Whether a formal Passing of Accounts is required from the ETDL.
- While an ETDL has all the powers of an Estate Trustee (except the power to distribute), from a practical perspective, the Court Order by which the ETDL is appointed should also include a specific mandate for such matters as:
a. Document collection (medical, legal, etc.);
b. Asset preservation;
c. Ability to deal with real estate;
d. Management of any ongoing business concerns;
e. Expected regularity of reporting to the parties;
f. Compensation for the ETDL (allowed reasonable remuneration);
g. If a Trust Company is appointed, it is not required to post security.
- An ETDL should not assume that the court will accept an Application for Directions on issues that the ETDL finds challenging to administer.
a. It is best to seek Directions from the court only where the matter involved is complex and where there is no consent among the parties;
b. A request for Directions on an administrative decision that the ETDL simply feels uncomfortable making, may not be sufficient grounds for the court to weigh in.
- Lastly, and perhaps most importantly, parties should not assume that the court will grant an ETDL appointment anytime such a request is made. Section 28 of the Estates Act is clear that the appointment of an ETDL is within the discretion of the court. There are instances where the court may determine that such an appointment is not necessary, practical, or cost-effective. In the session, Justin DeVries provided a helpful overview of examples of such rulings, including:
a. Re Lloyd (1979) – estate involved privately held companies and the court declined the appointment of an ETDL as it was determined that the person managing the ongoing operations of the companies was carrying out the necessary tasks sufficiently;
b. Re McArthur Estate (1990) – the executor named in the Will had already begun to act and there had been no issue with the administration ;
c. Dempster Estate (2008) – the court determined that the value of the estate did not merit the costs of an ETDL and instead appointed a co-trustee to act with the named Estate Trustee.
The reality is, with the impending transfer of one of the largest amounts of wealth in our history from one generation to the next, we are likely to see a continued up-tick in estate litigation. Along with that there will be the increased need for a neutral party to preserve the assets of the estate during the course of such litigation. Individuals or entities that are prepared to take on the ETDL role would do well to understand the parameters of their duties and thereby limit potential liabilities.