Advising on Trustee & Executor Obligations
As fiduciaries, trustees and executors owe critical duties to the beneficiaries of the trusts or estates they administer. Therefore, they are held to strict benchmarks for their legal and ethical conduct and must follow the terms of the applicable trust or Will. Protracted disputes involving trustee or executor conduct can fracture relationships and deplete estate or trust assets.
Executor Duties in British Columbia
An executor is an individual (or multiple people), usually named in a testator’s Will, responsible for carrying out a Will’s instructions and administering the estate. An executor’s duties include the following:
Applying for probate of the estate to the Supreme Court of British Columbia. A Grant of Probate confirms the validity of the deceased’s Will and authorizes the executor to administer the estate;
Notifying necessary parties of the deceased’s death, including beneficiaries, next-of-kin, insurance companies, the federal and provincial government, and financial institutions;
Making an inventory of the estate’s assets and debts, including their values;
Paying the deceased’s debts and expenses, including taxes, credit card bills, and funeral expenses;
Managing the estate while it is in the process of being administered by protecting estate property;
Distributing the estate assets as set out in the Will (or, if the Will doesn’t apply in some respect, per intestacy laws) to the beneficiaries;
Passing accounts and reporting back to the beneficiaries and, if required, the Court.
Trustee Duties in British Columbia
Trustees are tasked with holding property for the benefit of someone else. In most cases, trustees are also responsible for making decisions concerning that property, following the terms of the trust.
A trustee’s duties include the following:
Overseeing the trust assets’ preservation by keeping detailed records, including records of all beneficiaries;
Communicating with beneficiaries and keeping them apprised of the status of the trust assets;
Handling the trust’s tax obligations;
Investing trust assets in accordance with the terms of the trust;
Distributing trust funds to beneficiaries as directed by the trust agreement and through the trustee’s discretionary powers;
Fiduciary Duties in Estate Cases
Over and above their technical and legal obligations, trustees and executors have several fiduciary duties owed to the estate/trust and its beneficiaries. As fiduciaries, trustees must:
Act with uncompromising loyalty to the beneficiaries of the estate/trust and acting in their best interests (and without preferring one beneficiary’s interests over the others);
Avoid any conflict of interest in the execution of their duties;
Manage estate/trust assets with the same skill, care, prudence, and diligence as would any reasonable person in similar circumstances;
Make sound investment and financial decisions when dealing with estate/trust property;
Act in accordance with the terms of the Will or trust documents;
Execute their duties promptly and without undue delay;
Act personally and refrain from delegating their duties to another person or entity, unless authorized by the trust instrument or Will; and Keep detailed, transparent accounts for reporting back to beneficiaries and/or passing accounts before the Court;
Removing a Trustee or Executor
If a trustee or executor is negligent in executing their duties, a party (often a beneficiary or someone acting on their behalf) can apply to the Court to remove the trustee/executor from their role. A trustee or executor may also need to be removed if they become unable to meet their obligations, such as through incapacity or if an unforeseeable and unavoidable conflict of interest arises.
When determining whether to remove an executor or trustee from their role, the Court’s primary concern is the best interests of the estate/trust and its beneficiaries. The Court will also examine whether the estate or trust will be at risk if the executor/trustee is permitted to stay in their role.
Executor & Trustee Liability for Losses
Executors and trustees can seek indemnification from an estate/trust for liabilities incurred while administering the estate or trust, so long as they acted prudently and within the scope of their powers. However, trustees and executors may be held personally liable for losses caused by the executor/trustee’s negligence, misconduct, or actions not authorized by the trust or Will.
In addition to being ordered to pay damages to compensate an estate/trust for losses caused by their breach of fiduciary duty, executors and trustees can also be liable for punitive damages (i.e. a monetary judgment intended to punish the executor/trustee for particularly egregious misconduct). To avoid further damage to the trust or estate, the Court can also make other remedial orders, including tracing the distribution of estate or trust assets and freezing financial accounts.
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