As trustees, executors owe many duties. These trust duties are owed to the beneficiaries of the estate. They are enforced by the Courts.
Obligations v. Rights.
Strictly speaking beneficiaries do not really have ‘rights’.
What beneficiaries have is the ability to force the estate trustee to perform their duties.
Beneficiaries do NOT have a right to do anything of the things that the executor is obliged to do. For instance, beneficiaries do not have the right to:
- probate the estate;
- get private information from third parties;
- collect or take assets;
- administer the estate;
- file tax returns;
- receive ‘minute by minute’ information about the estate; or,
- select or hire professional advisors for the estate.
Objecting before appointment
Ontario estate law is premised upon the concept that trustworthy people are appointed as estate trustees, that they perform their duties without interference, and then provide an accounting to the beneficiaries.
Beneficiaries may attempt to prevent the appointment of an unsuitable estate trustee by ‘objecting’. To enforce this right a Notice of Objection should be filed with the Court before the Certificate of Appointment issues (retroactive objection is possible but must more difficult).
The Rules of Civil Procedure set out a process for dealing with objections. The fundamental issue is whether their is evidence that the proposed estate trustee is unlikely to perform their duties properly. Evidence that the proposed trustee has breached trust obligations in the past (fraud, etc.) would, of course be relevant. So too would be evidence that the executor has failed to probate or commence administration of the estate in a reasonable period of time (over a year).
If the proposed trustee is the executor named in the will of the deceased, there is a presumption that the testator’s choice should prevail. However, this presumption can be overcome and the executor ‘passed over’. Of greatest significance in most passing over applications is evidence that hostility of the trustee towards one or more beneficiaries will lead to the trustee failing to perform their duties. Sometimes the proposed trustee has threatened the beneficiaries to this effect.
Note: hostility of beneficiaries to the trustee is not the same, and is not a basis to pass over an executor.
Sometimes (but not always) a clear conflict of interest will render a proposed trustee unsuitable. For instance, if the executor also resides in the house of the deceased and is refusing to pay rent or sell the house, this conflict of interest is a possible grounds for passing over.
Removal after appointment
Removal of an estate trustee after appointment is difficult. The beneficiaries will need to present clear evidence of misconduct that cannot be addressed by a passing of accounts or the appointment of an estate trustee during litigation (see below).
Once appointed, estate trustees are obligated to administer the estate in a timely manner in accordance with the law.
They are not entitled to do nothing for extended periods of time. They must act, or they should resign.
Trustee misconduct & conflict of interest
Estate trustee are not entitled to depart from the law or unfairly favour themselves or any other beneficiaries. Absent unanimous consent of all beneficiaries, they should not breach or depart from any term in the Will.
An estate trustee cannot make a contested claim against the estate (such as a dependent support claim, or contested debt), nor can the estate trustee ‘challenge the will’. An executor who wishes such a claim should renounce and not be appointed; and if appointed, should resign or be replaced (at least by an estate trustee during litigation).
Beneficiaries are entitled to a proper accounting of the estate.
The executor must provide proper accounting, in Court format, to beneficiaries in a timely manner.
Note, however, that as a general rule the executor is not obliged to provide a) ‘minute by minute’ on-going reporting to beneficiaries, or b) all back up documentation (as in photocopies of expenses etc.- referred to as ‘vouchers’). It is unreasonable to expect accounting during the first months of the estate, and the executor is not obliged to consult with beneficiaries about every decision, nor provide them with back up documentation on an on-going basis. A trustee is obliged to provide in a passing of accounts vouchers relevant to items reasonably in dispute.
An accounting is usually the proper time and forum to address:
- the expenses incurred by the trustee (such as legal fees)
- the values received by the estate trustee for assets (such as real estate)
- the compensation claimed by the estate trustee.
Estate trustees during litigation
An estate trustee may use estate funds to defend the estate and the will of the testator (for instance, if the validity of the will is challenged).
An estate trustee should not use estate funds to defend the trustee’s personal interests (for instance, the trustee’s share as a beneficiary).
The mere existence of a dispute between the trustee and beneficiaries is not grounds for removing the estate trustee.
However, if there is evidence that an estate trustee is not performing properly, or, a dispute with beneficiaries makes it difficult or impossible for the trustee to perform, it is possible to have a third party appointed as ‘estate trustee during litigation’ (the “ETDL”). Once appointed, the ETDL assumes responsibility for administration of the estate, which can include selling assets and managing investments. Importantly, however, an ETDL does not have power to distribute the estate.
The test for appointment of an ETDL is much easier to satisfy that either the test to ‘pass over’ an executor prior to appointment or removal of an estate trustee after appointment.
How to force an executor to perform
Ultimately, the only way to force an executor to perform properly is to go to Court. There is no other way to force an executor to do or not do anything – only a judge can dictate to an executor.
Often, executors have failed to do something, such as:
- failed to ever apply for probate;
- failed to sell real estate (the house of the deceased);
- failed to distribute the estate to the beneficiaries; and
- failed to account to the beneficiaries.
No amount of letter-writing, screaming, or complaining will force the executor to act.
However, for an experienced lawyer, it is relatively straightforward to commence proceedings on behalf of beneficiaries to force the executor to act and fulfill their duties. These proceedings do not have to be slow, expensive or complex (although much depends on how the executor responds). In the majority of cases, executors suddenly become much more active when they are confronted with a reasonable Court proceedings by the beneficiaries to enforce their rights.
We are experienced at forcing executors to do the right thing. If you are facing difficulties with an executor, please contact us for an initial consultation.