I like to tell the executors of estates (also called estate trustees in Ontario) about kings who behaved badly throughout history. King Louis XVI held the Estates General – a widespread consultative conference – 173 years after the last one, and was put to the guillotine on January 21, 1793. King John invited the ire of the northern English Barons with his high-handedness and was brought to heel at Runnymede with the signing of the Magna Carta on June 15, 1215. King Charles I bullied Parliament and was beheaded on January 30, 1649.
What these stories have in common is the abuse of power. And what they point to is their opposite: the virtue of responsible stewardship.
And so I like to caution my clients away from what I like to call “Executoritis” – a condition as yet unrecognized in psychiatric literature but perhaps suggested by the Stanford Prison Experiment, and observable in a good many executors: the unwillingness to account to beneficiaries, disclose information, seek the assistance of professionals or follow the rules.
The analogy between executors and kings is apt, for both are responsible for stewarding property for the benefit of others. Furthermore, both subjects and beneficiaries can cause a great deal of stress to kings and executors.
Thankfully, in Ontario, executors are required to fulfill the following duties:
The Duty to Account
This is the duty to render accounts to beneficiaries about estate assets, liabilities, income, expenses, capital receipts and capital disbursements. To paraphrase the Court in Sandford v. Porter in 1889, if a beneficiary calls you up, you need to be ready with your accounts.
To fulfill the duty to account, I recommend the following strategies.
- Hold regular “Beneficiary Question Periods”. Having a Question Period every quarter is a good idea. Doing so with the benefit of legal advice is also wise. Beneficiary Question Periods allow beneficiaries to get clarity and maintain a healthy relationship with the executor. It is alright to revert to beneficiaries with answers later. And, worse than answers that beneficiaries don’t like is no answer at all, because a vacuum of information easily gets filled with doubt, gossip, inuendo, resentment and a lack of trust.
- Hire an estate accountant. An estate accountant can help file taxes, prepare estate accounting and advise on how much to hold back as a contingency fund for unforeseen debts, taxes and expenses;
- Prepare an estate accounting for beneficiary approval;
- Prepare monthly reconciliations of income, expenses, capital receipts and capital disbursement.
Act Loyally and in Good Faith
For example, executors should never prefer their own interests over the interests of the beneficiaries. This includes urging beneficiaries to obtain Independant Legal Advice before approving the estate accounting, which reports executor’s compensation.
The Duty to Invest Prudently
A good strategy to invest prudently is to retain and meet quarterly with professional investment counsel. Reviewing the terms of the Will is also a good idea, in order to make sure investments are handled in accordance with the testator’s wishes, for example, with respect to pooled or separate trust funds and contributions to RESPs.
A good model of responsible stewardship I like to point to is Joseph in the Old Testament. A humble and faithful servant, he rose through the ranks of the Egyptian government and became the Vizier, or Prime Minister, of the Pharaoh. He is credited with saving Egypt from a severe famine because he had to wisdom to invest Egypt’s surplus grain and distribute it wisely.
In summary, the best advice I can give executors is to be humble, or beheaded.
This blog post was written by Dylan McGuinty, Jr., a member of the Wills and Estates and Estate Litigation teams. He can be reached at 613-369-0379 or at dylan.mcguinty@mannlawyers.com.
