Your client is a co-trustee for an estate. But she delegates her duties to the other person.

If she doesn’t pay attention, she could be held legally liable if something goes amiss.

The recent decision of Penman v. Penman demonstrates this, said Hilary Laidlaw, counsel at McCarthy Tetrault LLP at a STEP conference session yesterday in Toronto.

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A woman was named co-trustee on her brother’s estate, along with her nephew. At the same time, another nephew became an estate trustee de son tort, since he gave legal advice and got involved in the estate, explains Laidlaw.

The woman allowed her co-trustee to make all the decisions, and she just signed the documents. Both he and the other nephew siphoned more than $450,000 from the estate and used the funds for their own benefit.

All three were found guilty. But she appealed, saying she’d been duped. The court dismissed her appeal, upholding the decision by the trial court.

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“The courts [didn’t provide] relief based on section 35 of the Trustee Act, a provision that allows a trustee breach of trust in instances when [she] has acted honestly and reasonable,” explains Laidlaw.

That’s because the court found the appellant hadn’t acted reasonably, and what she did “constituted an absolute abdication of her role and responsibilities as estate trustee because she improperly delegated that role to her co-trustee,” says Laidlaw. “She took no steps to monitor, supervise or ask questions, even in light of information that should’ve raised her eyebrows.”

Laidlaw adds it’s important for trustees to “keep an eye on what’s going on, or you’ll end up like the appellant in [a case like this]. It’s not a light obligation and not one you should enter into casually.”

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She also mentions two new legal rules, effective October 1, 2014.

  • In cases where a testator says a professional (i.e. lawyer, accountant, advisor) should be consulted and used for the administration of the estate after death, the lawyer has an obligation to advise the testator in writing the request is not legally binding. Trustees have a right to choose a different professional.
  • In cases where a lawyer drafts a will for a client, the lawyer is no longer allowed a benefit under the estate. However, this doesn’t include situations where a lawyer is also a trustee of that estate. In that case, he’s allowed compensation for his trustee duties.

Originally published on Advisor.ca
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Regarding 2nd last paragraph above…are you sure she said the “beneficiaries” and not the “executor/trix” have the right to choose a different professional?? It would be a significant development if the beneficiaries of an estate were now able to control the administration of that estate?

Friday, May 9 @ 1:24 pm //////


Thanks for your interest. It’s the trustee who has the right to choose to retain different counsel if he or she sees fit. These details can be found under Testamentary Instruments and Gifts, Rules 3.4-37 for the Law Society of Upper Canada.
Thanks again!

-Advisor Group

Friday, May 9 @ 1:44 pm

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