So what options do the beneficiaries have to check up on the work of the estate trustee? How can an estate trustee ensure he/she is properly paid for the work done? The answer is the same for both – commence an application to have the estate trustee pass his or her accounts.
Passing Of Accounts
So what does the phrase “passing of accounts” mean? Essentially, the estate trustee is a fiduciary who has a duty to keep all the records. They have to keep the deceased’s money in a separate account and cannot intermingle it with the estate trustee’s own funds. All the receipts and documentation showing what money the estate received, where it is from as well as all the expenses of the estate and where it was spent has to be provided to the court.
If the estate trustee cannot show the court where the money went (i.e. – cash is withdrawn and paid for certain services) there is a strong possibility that the court will draw an adverse inference and order that the money be returned to the estate. Why? Because the court may presume the estate trustee did not use the money for the benefit of the estate.
The law in Ontario has a very rigid format for the accounting process. In the context of an estate accounting, for those interested in seeing that format I refer the reader to Rules 74.17(1)(a) –j), (2) and (3) of the RULES OF CIVIL PROCEDURE – R.R.O. 1990, Reg. 194. In the context of a Power of Attorney accounting I refer the reader to Accounts and Records of Attorneys and Guardians, O. Reg. 100/96.
Much of the litigation surrounding the accounting done by the estate trustee does not involve any allegations of dishonesty or mismanagement of estate assets. Often – it’s a fight over the fees claimed by the estate trustee.
Fees Claimed By The Executor
By law an estate trustee is entitled to such fair and reasonable allowance for the care, pains, trouble and time expended in administering an estate. Generally, the courts considers five factors when reviewing the executor’s fees claimed:
- The size of the trust;
- The care and responsibility involved;
- The time occupied in performing the duties;
- The skill and ability shown; and
- The success resulting from the administration.
There is a custom and convention or general rule of thumb (the “tariff”) about how much estate trustees should charge. The tariff is one of the things courts consider to ensure that the fees are fair and reasonable. Estate trustees can ask for more and if the higher charge is justified by the five factors a court may very well award the estate trustee more money. As well, sometimes the testator, in his/her will indicates agreement to a particular compensation package. But, for now let’s get back to the tariff.
|Fees Charged Under The Tariff|
|2.5% against Capital Receipts.|
|2.5% of Capital Disbursements.|
|2.5 % of Revenue Receipts.|
|2.5 % of Revenue Disbursements.|
|2/5 of 1% of average market value of the capital in the trust every year is payable to the estate trustee for the overall care and management fee.|
For those interested in a more comprehensive treatment on how to distinguish between income and capital in the context of an estate accounting I refer you to chapter 19 of Professor Waters authoritative text, Waters’ Law of Trusts in Canada, 4th ed., (Toronto:Carswell, 2005) (“Waters”) and Chapter 7 of Carmen Theriault’s text, Widdifield on Executors and Trustees, 6th ed., (Toronto: Carswell) and chapter 3 of Kimberly Whaley’s text, Whaley Estate Litigation on Passing Accounts, Whaley Estate Litigation on Fiduciary Accounting.
The Next Steps
This short general overview is really just a basic introduction to the topic. It is far from complete. There are many legal memorandum, chapters and legal texts entirely devoted to this topic. I mention this because this short article is not meant to be legal advice. Reading this article is only meant to be the first step for those who are considering commencing an application to remove an Estate Trustee.
I caution the reader that judging the strength of your case could be complicated and one should not conclude it is worthwhile to proceed just because your fact situation sounds similar to the ones outlined above.
The bottom line – nothing replaces seeking out the counsel of a qualified lawyer who specializes in this niche area of the law and has the expertise to guide you in your decision making process.
It’s not just about the law. It’s also about knowing the process well enough to determine whether the prospects of success warrant the economic and emotional investment.
Call us for more information.