The Important Role of an Estate Trustee

Getting an estate plan in place is among the most important things you can do to protect yourself, your loved ones, and your wealth. A key element of any estate plan is the appointment of an estate trustee or “executor” who will handle your affairs after your death. It’s a very significant role that comes with a lot of responsibilities.

So, what is an estate trustee (or executor)? And what are the responsibilities of an estate trustee? Let’s have an in-depth look at the role of estate trustees in the context of BC estate planning and estate administration.

Estate Trustees in British Columbia

How is an estate trustee chosen?

When you write your Last Will and Testament, you choose an estate trustee to handle the administration of your estate. You can appoint just one estate trustee, or you can appoint multiple people.

If you name more than one trustee, you get to decide whether they are required to act unanimously or independently of each other. You also have the option of naming an alternative trustee who can step in if your first choice is unwilling or unable to fulfill the role.

Who to choose as your estate trustee?

You can appoint an individual over the age of 18 to be your estate trustee, such as a family member or friend. Or you can appoint a professional trustee such as a trust company or lawyer who will provide professional services to administer the estate for a fee.

There are pros and cons of appointing a professional trustee such as a trust company. For example, a trust company will be impartial and will likely have a higher level of experience with managing investments, estate accounting, etc. than one of the deceased’s family members. Conversely, a trustee offering professional services often charge higher fees and may be less responsive or more inflexible when it comes to the needs of the designated beneficiaries.

Regardless of whether you choose an individual or a professional trustee, there are overarching considerations. You’ll want to choose an estate trustee who is trustworthy, organized, financially responsible, and available (both geographically close and able to commit their time). You also want the estate trustee named to be familiar with your final wishes and committed to honoring them.

Role and Responsibilities of an Estate Trustee

What does an estate trustee do?

At its most basic, the estate trustee’s responsibility is to carry out the terms of the Last Will and Testament and ensure that the final wishes of the deceased person are respected. A deceased’s estate typically includes all assets—both personal and real property—owned by them at the date of death.

The estate trustee’s central task is to distribute the estate’s assets to the beneficiaries named in the Will, in accordance with the law and the instructions contained in the Will. But as you will see from the list set out below, estate trustees have a fairly broad range of duties to see to throughout the estate administration process.

Basic duties of an estate trustee

An estate trustee—sometimes also known as an “estate executor”—is the only person (or people) with legal and fiduciary responsibility to manage and administer the estate on behalf of the deceased person. Here are some of the basic duties of an executor in the estate administration process:

• Locate the deceased’s Will and any other relevant documents.
• Make funeral arrangements.
• Notify the beneficiaries and other interested parties of the deceased’s passing.
• Gather and inventory the deceased’s assets and debts/liabilities.
• Obtain a death certificate.
• Secure and value estate assets, including real property, investments, and personal property.
• File the Will with the BC Supreme Court and apply for probate, if necessary.
• Pay any estate administration tax due (also known as “probate fees”).
• Notify creditors of the deceased’s passing and contest or settle outstanding debts.
• File any necessary tax returns, including a final income tax return and estate tax return, and pay any taxes owed.
• Interact with beneficiaries, address their concerns, and keep them updated throughout the estate administration process.
• Distribute the estate’s assets to the beneficiaries according to the Will.
• Administer any trusts established in the Will.
• Keep accurate records of all transactions and decisions made on behalf of the estate.
• Obtain legal advice and guidance as necessary.

Distinguishing estate trustee from other roles

Now that you have an understanding of an estate trustee’s role, let’s discuss what an estate trustee does not do:

• An estate trustee is not responsible for the care of your minor children. In your Will, you can name a guardian of your minor children (i.e., kids under the age of 19) who will be responsible for your children’s care and upbringing, which is particularly important if you are a single parent or the child’s other parent predeceases you.
• An estate trustee is not the same as a power of attorney. You can appoint the same person to act as your power of attorney and your estate trustee if you wish to—but you don’t have to because the roles are completely different. An Enduring Power of Attorney is used to give a person or people authority over your legal and financial affairs during your lifetime. It remains in force if you become mentally incapable, but it ceases to operate when you die. An estate trustee, on the other hand, does not have any power or authority to act on your behalf until you have passed away.
• An estate trustee is not the same as a person appointed under a Representation Agreement. A Representation Agreement is used to appoint a personal representative to make health care decisions for you in the event that you are not mentally capable of doing so. A Representation Agreement ceases to operate when you die. An estate trustee does not have any power or authority to make health care decisions for you during your lifetime. You can appoint the same person as your personal representative and your estate trustee if you wish to, but you don’t have to because the roles are completely different and operate at different times.
• An executor or estate trustee is responsible for administering any testamentary trusts unless you name a different person to carry out a specific trust. For example, a trust can be set up in your Will requiring your minor child’s inheritance to be held by a trustee on that child’s behalf until the child reaches a certain age. Or, you may create an inter vivos trust (i.e., a trust created during your lifetime). If a person other than the estate trustee is named as trustee of a particular trust, that person is responsible for administering the trust in question and has a fiduciary duty to the beneficiaries of the trust.

Compensation and Costs

The general rule

The general rule is that an estate trustee is entitled to compensation for their efforts in administering an estate. The trustee is also entitled to reimbursement from the estate for reasonable costs and expenses incurred in administering the estate. The trustee must keep receipts and records of all disbursements incurred over the course of administration and provide them to the beneficiaries for review to support the amounts claimed.

Compensation for the estate trustee must either be set out in the Will or agreed to by the estate trustee and the beneficiaries. In the majority of cases, the parties will agree on a reasonable amount of compensation, as they both recognize the effort carried out by the estate trustee and want to avoid the cost and delay of asking the court to settle the matter for them.

Court application to settle trustee’s fees

Where the deceased’s Will does not specifically outline the estate trustee’s compensation and the parties can’t agree on the trustee’s fees, the dispute will have to be settled by the court by application of the BC Trustee Act. Section 88 of BC’s Trustee Act governs remuneration and an estate trustee is entitled to be paid a “fair and reasonable allowance, not exceeding”:

(i)  a maximum of 5% of the gross aggregate value of the estate,

(ii)  a maximum of 5% of the income earned during the administration of the estate, and

(iii)  an annual “care and management fee” of 0.4% of the average market value of the assets.

The percentages in s. 88 of the Trustee Act are a rough guide to assist in appropriate calculation of a trustee’s fees. In the end, the court must be satisfied that the remuneration “bears some reasonable relationship to the work and responsibility involved. Various factors are considered when determining whether the proposed fee is “fair and reasonable” including but not limited to:

• the magnitude of the estate,
• the care and responsibility involved,
• the time occupied to administer the estate,
• the skill and ability displayed, and
• the success (or lack thereof) achieved in the administration.

Navigating Conflicts and Challenges

Estate trustees must meet certain duties and standards

Estate trustees have a legal duty to act with scrupulous good faith and to act in the best interests of the deceased person and the beneficiaries named in the Will. What if there’s a conflict between beneficiaries and the estate trustee?

Unfortunately, estate administration does not always go smoothly. Disputes and conflicts of interest may arise. Communication may break down or the trustee may be refusing or failing to keep beneficiaries reasonably updated. Beneficiaries may suspect that the estate trustee has mismanaged estate assets, failed to pay estate debts, used estate funds for their personal benefit, committed fraud, or breached their fiduciary duty in some other way.

Options for beneficiaries locked in dispute with estate trustees

Beneficiaries have several options for addressing conflicts and challenges with the trustee. In some cases, intervention by legal counsel hired by the beneficiaries is enough to get past a conflict. Negotiation and mediation are great options for addressing trustee/beneficiary disputes.

In other situations, intervention by the court will be necessary.  For example, a trustee who has acted contrary to the law can be sued for breach of fiduciary duty. Beneficiaries can sue on behalf of the deceased person’s estate to recover property or to enforce a right, duty, or obligation. Successful beneficiaries will obtain damages for the breach or compensation for the loss caused by the trustee.

An application can be brought to force an estate trustee to act, or to “pass over” or remove a trustee appointed in a Will in favor of the alternative trustee or some other person. These principles will guide the court in deciding whether to remove an estate trustee:

1. the court will not lightly interfere with the will-maker’s choice of executor(s) or estate trustee(s);
2. clear evidence of necessity is required;
3. the court’s main consideration is the welfare of the beneficiaries; and
4. the executor or estate trustee’s acts or omissions must be of such a nature as to endanger the administration of the estate.

Clear, Trusted Legal Advice for Beneficiaries and Estate Trustees

We are here to help with whatever estate issues you are facing. We can help you get your estate plan into place, including guidance in selecting the most appropriate estate trustee (or trustees).  We provide advice to executors, administrators, and trustees on their duties and responsibilities every step of the way. We also advise beneficiaries and can help you determine whether the actions taken by an estate trustee violate his or her duty and whether you’re in a good position to challenge the trustee.

At Onyx Law Group, we believe it’s important to know your legal rights and obligations before making any decisions. That’s why we offer free consultations to give you the opportunity to discuss your matter with a passionate and knowledgeable lawyer who can advise you on the best steps forward. We welcome you to contact us today!