It is common for someone writing a will to appoint as their executor a family member or friend. Sometimes this is done without understanding what it means to be an executor. Sometimes the ability and propriety of the proposed executor is not considered. Often, the relationship between the proposed executor and the will-maker changes after the will has been written. Sometimes joint executors cease to get along. These types of issues frequently do not come up until after the will-maker has died. However, each of these scenarios may cause problems in administering an estate or trust. In addition, this may give rise to misunderstandings and distrust between the executor/trustee and the beneficiaries, often other family members. The administration of the estate or trust can, sadly, descend into acrimony and bitterness with the executor doing nothing, doing things that may not be appropriate or joint executors failing to agree. What can be done?
One possibility is to seek to remove the executor. An executor’s conduct is circumscribed by both the common law and statute. The court has an inherent jurisdiction to remove a trustee but there is also statutory authority to do so. For example, the sections 30 and 31 of the Trustee Act allow the courts to remove a trustee in appropriate circumstances and substitute a new trustee. Stated generally, this will be done where it is necessary to safeguard the welfare of the beneficiaries of the estate. Not every mistake or act of neglect by a trustee will lead to replacement. The acts or omissions must be found to endanger the trust property or show a want of honesty, fidelity, or proper capacity to carry out a trustee’s duties. Not surprisingly, the application of this test has been the subject of numerous cases in a myriad of situations.
One instance where the welfare of beneficiaries may be endangered is when the executor is in a conflict of interest. Not all conflicts of interest will merit removing a trustee. The case must be one where there is a significant conflict between the trustee’s duties and his personal interest such that it he (or she) is unlikely to act against their interest. The case of Thomasson Estate (Re) was such a case. The proposed executor was passed over because he was unlikely to make adequate inquiry or sue himself over a gratuitous transfer of land made to him and his spouse by the deceased several years beforehand.
Another case, Le Roux v. Shannon reached an opposite result. The deceased had owned a yarn shop which, in her will, she instructed the executors to sell with the proceeds being distributed to the residuary beneficiaries. The joint executors took three years to probate the will and, during that time, operated the yarn shop. It was eventually sold to one of the two executors. The beneficiaries applied to have the executors removed on the grounds of a perceived conflict and “self-dealing”. The court refused to do so, noting that the evidence fell short of establishing the trust property was “endangered” or that the trustees had acted improperly. The court pointed out that the executors had a duty to provide a full accounting of the estate to the beneficiaries. When that was done, the beneficiaries could request specific information about the yarn shop and, if they felt it was improvidently sold, sue the executors for the loss in value to the estate. As it was, the executors had satisfactorily explained how the yarn shop came to be sold to one of them.
The recent case of Re: Newton Trust is an example of joint trustees not getting along to the point that one was ordered replaced. The court found that one of the three trustees was the primary cause of the dissension among them and, in addition, that he favoured one group of beneficiaries over the others. As a result, the continued involvement of that trustee’s was held to be preventing the trust from being properly executed and he was removed. Regrettably, this was preceded by years of acrimony and considerable expense to the trust.
There are remedies short of seeking to remove an executor or trustee. The case of Iaci Estate v. Iaci is such an example. One of the beneficiaries applied to court for an interim injunction and a disclosure order relating to the estate of her father. The executors had done little to conclude the estate which had a value of about $2 million, largely made up of financial assets. It was not a complicated estate. The executors had been asked to provide information about the estate and to pass their accounts but failed to do so. The evidence disclosed that the executors had improperly taken a “pre-advance” on their fees, the exact amount of which was in some doubt. They had also co-mingled estate assets (money) with their own personal funds and failed to produce information about who the payees were on estate cheques totalling $250,000. The executor had also made distributions to some beneficiaries (his children) but not others. The executor argued that the applicant needed to satisfy the stringent test for the removal of a trustee. The Court disagreed, pointing out that the applicant was not seeking the executor’s removal, just an injunction to preserve the remaining estate assets and to compel the executor to provide financial information. The Court granted the order sought. The Court recognized that, depending on how the executor responded to the order to produce information and, if he did so, what that information disclosed, the injunction may be a stepping stone to a subsequent application to remove the executor.
If you have questions about the propriety of an executor or trustee’s conduct, there are remedies available to hold them to account. These include seeking their outright replacement or simply compelling them to produce information. All trustees have a duty to account. The issue is often whether they are doing so accurately, candidly and in a timely way. If they are not, this may be grounds to seek their replacement or otherwise compel them to take certain steps.
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