It’s not easy being an Estate Trustee and a beneficiary. However, an Estate Trustee must be ever mindful that she wears the executor “hat” first. In other words, the duties an Estate Trustee owes to the beneficiaries must come before the Estate Trustee’s own interests. Otherwise an Estate Trustee will be at risk of breaching her fiduciary duties and, at the end of the day, may not be entitled to compensation even if the conduct is not egregious.
In Clark v. Kane et al, 2022 ONSC 5525 (CanLII) (“Clark”), the court did not agree with the Estate Trustee that she should receive compensation of almost $30,000.00. The court declined to order any amount of compensation, arising primarily out of the Estate Trustee’s delinquency to provide her estate accounts. By the time the court heard the issues between the Estate Trustee and her sister (the applicant), it had been almost 4.5 years since the deceased (their dad) died.
The bequests in the will were not complicated: a 30% share of dad’s estate was left to each of his three daughters and the remaining 10% was left to a granddaughter. Shortly after the deceased died, one of his daughters died intestate, leaving her two surviving sisters (the Estate Trustee and the applicant) to receive her share of dad’s estate. The Estate Trustee was receiving disability payments and therefore her share was to be held in a Henson Trust.
The assets in the estate were also not complicated: dad owned a house that he lived in, another property which he rented to the Estate Trustee, and about $40,000 in a bank account. Not long after her dad died, the Estate Trustee sold his house and the money was held in her lawyer’s trust account. The Estate Trustee continued to live at the other property but stopped paying rent a few months after her dad died. More than 1.5 years after death, the Estate Trustee and her sister agreed on the division of dad’s estate, including that the Estate Trustee would buy the remaining property (for a fixed price) with her share of the estate – after she provided her accounts. But no accounts were provided. The sister requested accounts on multiple occasions. She even went so far as to prepare draft accounts (twice) and provide them to the Estate Trustee with fill-in-the-blanks. Still, no accounts were provided. Finally, after the sister commenced an application for directions the Estate Trustee delivered her accounts, approximately 3 years and 4 months after date of death.
The court reviewed that “the obligation to account and disclose information to beneficiaries has been variously described as: representing the first duty of a trust; being at the heart of a trust relationship; or as being the core element of the trust.” While it may seem trite, this duty is fundamental to the role of a trustee. The court in Clark cited the Ontario Court of Appeal decision in Sandford v. Porter (1889), 16 OAR 565 (CA), which states that the “duty of a trustee or other accounting party is to have his accounts always ready, to afford all reasonable facilities for inspection and examination, and to give full information whenever required.”
Beneficiaries should not have to ask, repeatedly, for an Estate Trustee to provide her accounts or to provide accurate and complete information about the trust. In the case of Clark, not only did the court find that the Estate Trustee was “dilatory in the preparation and presentation of her accounts” but that the Estate Trustee was not adversely affected by her refusal to provide accounts and distribute the estate. The same could be argued for an Estate Trustee who is not a beneficiary (and therefore has no ‘skin in the game’), but whose delay in administering the estate prejudices the beneficiaries who are forced to wait, and wait, for their bequests. In Clark the court found that, because the Estate Trustee’s delay only prejudiced her sister, the Estate Trustee failed to keep an even-hand and ultimately preferred her interests above that of the other beneficiary. The court declined to order any compensation to the Estate Trustee and reduced her legal costs to be paid out of the estate. Sometimes it is not egregious conduct which warrants no compensation to an Estate Trustee. Sometimes it is the failure or refusal to carry out a fundamental obligation owed to a beneficiary.