Professional Estate Trustee Services
Katzman Estate Law offers professional estate trustee services. Our experience with high-conflict, legally complex estate matters equips us to steer estates through troubled waters while remaining neutral, responsive, and professional regardless of the circumstances.
The Role of an Estate Trustee
An estate trustee, sometimes referred to as an executor, is one or more people responsible for the administration of an estate. Proper estate administration means managing and distributing the assets of an estate according to a Will. If there is no Will, the intestacy provisions of the Succession Law Reform Act determine how the estate is distributed. After being appointed, an estate trustee’s first task is to identify and secure all estate assets and assess its debts. Then, subject to the provisions of an applicable Will, the estate trustee is to sell estate assets for the best available price and distribute property that was specifically identified in a Will to go to certain recipients, called specific bequests. Distributions are subject to an estate’s ability to satisfy its debts, including tax debts. An estate trustee is required to pay all outstanding debts and liabilities of an estate, including taxes, before distributions can be made to beneficiaries. Final distributions can be made from what is left of the estate, called the residue, though an estate trustee may want a release from beneficiaries or have their performance approved by the court first, called a passing of accounts.
Estate trustees must act with an even hand, meaning they may not, without clear authorization in a Will, prioritize one beneficiary’s interest over another’s. Estate trustees owe fiduciary duties to the beneficiaries of an estate, meaning that they must put the interests of the estate’s beneficiaries first. Estate trustees must not profit from their role as estate trustee, except by way of trustee compensation or as authorized by a Will or the court. An estate trustee can be sued if they breach their fiduciary duties and may be liable in negligence.
The Difficulties of Being an Estate Trustee
The passing of a loved one often exacerbates any underlying tensions and conflicts within a family, in turn making properly managing and distributing an estate difficult. There may be distrust between beneficiaries and uncertainty with respect to who should act as estate trustee, even if a person or people are designated as estate trustees in the Will. Moreover, a designated estate trustee may not want to act when tensions are high as they will be put in the middle of family conflict. In the context of a Will challenge or other litigation involving an estate trustee, a neutral third party is either necessary or advisable to protect an estate, even on a temporary basis. Estate trustees may be in conflicts of interest such that they cannot continue to act, or they may prefer to advance their own interests as a beneficiary without the burden of neutrality imposed on estate trustees.
Furthermore, being an estate trustee is more work than most people appreciate, even without the spectre of litigation. It is not an easy task to catalogue property, potentially have property appraised, have property sold or otherwise distributed, manage all of an estate’s debts, and interpret a Will that may not read as clearly it did pre-death; all the while keeping beneficiaries reasonably informed as to the estate’s progress. The government is always owed its due by way of taxes and an estate trustee can expect to spend hours collaborating with accountants to resolve inconvenient tax debts that may even have pre-existed the death of a deceased. Especially considering that an estate trustee can be sued for errors and omissions, there is value to using a professional estate trustee to save a party from rigors of the position.
Estate Trustees During Litigation
When tensions escalate to the point of litigation, an estate trustee’s primary obligation shifts. Instead of focusing on efficiently and effectively distributing the estate, an Estate Trustee During Litigation (“ETDL”) is appointed to manage estate assets without making distributions until the litigation over what should be done with an estate concludes. During litigation, the obligation to remain a neutral is particularly important.
Why Katzman Estate Law
First, our lawyers’ practice is focused exclusively on estate law. Whether it be in estate litigation, probate, or difficult estate administration, we live and breathe estate work and come to each file with a wealth of experience. Being estate litigators as well as administration lawyers perfectly positions us to advance an estate through difficult circumstances, including litigation. We are unafraid of matters that must be handled quickly, properly, and delicately.
When litigating as a beneficiary, parties are free to advance their own interests. When a party assumes the role of estate trustee, selfishness is no longer an option. Having removed several estate trustees ourselves, we thoroughly understand the high standard that estate trustees are held to and how to best meet that standard in practice.
Katzman Estate Law is an ideal solution when the most significant problem between the parties is trust. We can be relied upon to resist improper requests from parties and comply with reasonable requests as we administer an estate to its conclusion.
McLaughlin v McLaughlin – Neutrality May Rule
Sometimes, a professional estate trustee may be the only reasonable option, even in cases where named estate trustees, beneficiaries, or other family members are willing to act as estate trustees and have education or experience relevant to estate administration. Recent cases, such as McLaughlin v. McLaughlin 2021 ONSC 5120, (“McLaughlin”), demonstrate why this is true.
In McLaughlin, a wealthy family found itself divided into two opposing groups. The deceased’s widow was given a specific bequest of $5,000,000 in the Will. Twelve years after the deceased’s death, the estate trustees, three of the deceased’s children, had failed to distribute these funds, claiming that the estate was not liquid enough to do so. Instead, they had been providing periodic payments against the $5,000,000 lump sum which would eventually be provided to the widow. The widow applied to the court to remove the estate trustees. The court considered the issue of who should be appointed as the replacement ETDL.
In a prior conference, the Judge endorsed that the parties propose new estate trustees who consented to act should they be appointed by the court. The current estate trustees proposed either a trust company or a lawyer who had worked with the estate’s various assets in the past and was familiar with the family and its dynamic. The court considered both of these options, as well as several family members who had interests in the estate. The court based its decision on whether any one appointment would likely cause further litigation, the effect on the value of the estate, the intentions of the deceased, as well as the candidates’ relevant education and experience and their ability to be neutral. In his analysis, the judge hearing the matter wrote that:
[j]udges have often expressed a preference for individuals to act as estate trustees over institutions such as a trust company. That preference is expressed in the context of the individual as someone who knew the testator and his/her intentions, understood the family and the dynamics, and could be more reactive to the needs and the circumstances at hand. Further, institutional trustees require longer time to come up to speed with the trust or estate. Finally, institutional trustees charge fees which, often, individual trustees do not.
Despite this preference for individuals over trust companies, the court held that the proposed trust company was the “only reasonable replacement trustee in this case”. This was largely because the trust company could be entirely neutral.
The court reasoned that the complete lack of trust and the division between the beneficiaries and other family members established bias and a high likelihood of future litigation. This ruled out all family members and beneficiaries as candidates, even though it was clear that the deceased had intended for his estate to be controlled an administered by family. Although the trust company charged substantial fees, the court stated that the litigation environment for this matter was already “overheated” such that appointing a family member would likely be more expensive than simply paying the trust company for its services. The judge in Mclaughlin wrote:
In this case, any savings to be achieved by having a family member as a trustee are illusory. Appointing a family member as estate trustee would exacerbate an already fractious and overheated litigation environment. Litigation costs would eat any expense savings many times over.
McLaughlin instructs that, sometimes paying for the professional services of experienced and neutral third party is both necessary and also cost-effective.
Passing Over and Removal of Estate Trustees
To ‘pass over’ someone as executor or estate trustee is to prevent them from ever being appointed as estate trustee. An estate trustee may be passed over where they are in a conflict of interest that makes them unlikely to maintain neutrality. In such circumstances, a person who has an interest in an estate can apply to have the court pass over someone otherwise entitled to be appointed as estate trustee.
If an estate trustee has already been appointed, someone with an interest in the estate would have to file an application to remove the estate trustee. If that application is granted, the court has the authority to replace the removed estate trustee. To learn whether removal of an estate trustee is the right option for you, see our page, Remove an Executor or Remove a Trustee.
Katzman Estate Law: Professional Estate Trustees
Katzman Estate Law sometimes offers flexible compensation arrangements that are often comparable to what a layperson would receive in compensation for Estate Trustee services. Hourly options are also available. Call 1-844-602-4242 to learn more about our professional estate trustee services.