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Incorporating, signing a lease, hiring staff? Legal advice can help you avoid costly errors.When You Need to Know the Law: Acting as an Estate Trustee
Acting as an Estate Trustee involves legal responsibilities. This article outlines your responsibilities if you accept an appointment as an Estate Trustee. As your lawyer, I can assist you in determining what needs to be done in order to administer the Estate and in carrying out your responsibilities.
What is an Estate Trustee?
“Estate Trustee With a Will” is the term now used in Ontario to describe an executor - the person appointed in a Will to administer an estate. “Estate Trustee Without a Will” is the term used to describe an administrator - the person appointed by the Superior Court of Justice to administer an estate when there is no Will or where there is a Will but no person named in the Will as an executor can accept the appointment.
When is the appointment effective?
A person named in the Will as an executor may begin to act immediately following the testator’s death. The Will does not necessarily have to be submitted to the Court for probating. For example, if most assets are held jointly with a spouse it may be possible to complete all the necessary transfers without applying for probate. However, if the estate holds real property and there is no surviving owner holding the property as a joint tenant with the deceased or if the value of the assets held in bank or investment accounts is fairly large, probate will likely be necessary. An administrator cannot act until appointed by the Court.
Duties of the Estate Trustee
Your duties as an Estate Trustee include:
- making funeral arrangements in accordance with family wishes
- probating the Will – i.e. applying for appointment as Estate Trustee
- liquidating assets such as real property
- distributing the assets of the estate in accordance with the provisions of the Will or as required for an intestacy
- filing tax returns for the deceased and the estate and obtaining tax clearance certificates from the Canada Revenue Agency confirming all taxes are paid
- managing the estate shares of minor beneficiaries until they are of age.
If you are one of two or more executors you will need to work with your co-executor(s). Decisions must be unanimous unless the Will provides for decisions to be made by a majority of the executors.
Applying for Appointment as an Estate Trustee With or Without a Will
If there is a Will, the person applying for appointment must give notice of the application to all beneficiaries named in the Will. If minor beneficiaries are named, the Children’s Lawyer must also be notified. Beneficiaries of a specific item or cash legacy are entitled to receive an excerpt from the Will setting out the provision describing their gift. Beneficiaries of a share of the residue of the Estate and the Children’s Lawyer are entitled to a copy of the Will.
Ontario’s estate administration taxes payable when the application is filed are $5.00 per $1,000 on the first $50,000 and $15.00 per $1,000 on the value of the estate assets, excluding assets held jointly which pass to the joint owner by survivorship.
Accepting the appointment
Accepting an appointment as an Estate Trustee can be a little daunting. Figuring out what assets are included in the estate, contacting banks and other financial institutions, cleaning out the deceased’s house, determining what taxes have to be paid and in some cases dealing with the pressures of discontented beneficiaries or family members can be stressful, time consuming and intimidating for someone who is unfamiliar with these tasks. However you can engage professional advisors such as lawyers, accountants, and investment advisors to assist you. Usually their fees are payable from the estate assets.
Managing the Estate Assets
Until the estate assets are distributed, the Estate Trustee must invest the assets and try to achieve a reasonable rate of return. The Trustee Act (Ontario) establishes standards for the prudent investment of trust funds, including diversifying the investments, carefully monitoring the investments and maintaining a reasonable balance between generating income and preserving capital. If trusts are held for minors, you must keep the Children’s Lawyer advised as to how the assets held for them are being invested.
If you comply with the statutory requirements, you will not be held liable for investment losses. The Will may also give you broader investment powers than the Trustee Act and relieve you of liability as long as you act in good faith in dealing with the estate assets.
Your lawyer’s role
As an Estate Trustee you can obtain a lot of assistance from a lawyer experienced in estate administration. Your lawyer may assist you in the following ways:
- preparing the application for your appointment as Estate Trustee
- offering advice on the duties of an Estate Trustee
- providing opinions about the interpretation of the Will
- notifying banks and other financial institutions of the testator’s death and obtaining values of the estate assets as of the date of death
- arranging for the registration of assets in the name of the Estate Trustee
- preparing survivorship applications for property held in joint tenancy
- assisting with maintaining proper estate accounts so that they can be submitted to the Court for approval if necessary
- arranging for the preparation and filing of tax returns and the obtaining of tax clearances, and
- preparing and obtaining receipts from beneficiaries for inheritances delivered.
Beneficiaries are normally asked to sign receipts and releases when estate assets are being distributed, confirming that they have received their shares of the estate and releasing the Estate Trustee from any further liability to them with respect to the estate. This is an important protection for the Estate Trustee.
Can Estate Trustees be compensated?
Estate Trustees, whether individuals or trust companies, may charge fees for their services. The scale of compensation is based on the value of property in the estate. In Ontario, the usual fees are as follows:
- Fees charged against the capital of the estate: 2.5% on capital receipts and 2.5% on capital disbursements,
- Fees charged against the revenue of the estate: 2.5% on revenue receipts and 2.5% on revenue disbursements, and
- Management fees: 2/5 of 1% per year of average annual value of estate or trust for ongoing estates and trusts.
Also considered are factors such as the size and complexity of the estate and the time involved in performing the Estate Trustee’s duties.
Passing the Accounts
Beneficiaries have the right to require an Estate Trustee to have the estate accounts approved by the Court. If formal passing of the accounts is required, a very specific format must be used. It is very important to keep very good records from the date of death forward of the original values of the estate assets, all expenses made on account of the estate, all income earned on the estate assets and all distributions made to beneficiaries. These records will also be very helpful for preparing tax returns.
For more information about acting as an estate trustee, please contact me.