Duties and Best Practices of Fiduciaries During COVID-19
The emergence of the COVID-19 pandemic has significantly impacted life as we know it in Canada, and it will continue to do so into the near future. There is extreme turbulence in the financial markets, businesses have been ordered to close, many people are working from home exercising “social distancing”, and we are communicating primarily by way of electronic communications.
Those who have fiduciary obligations, such as attorneys for personal care, attorneys for property, estate executors, and trustees, should take extra care to ensure that they are upholding their fiduciary duties, and that they are able to defend their conduct if necessary.
Fiduciaries have a duty to properly manage the assets and affairs of beneficiaries, in the beneficiaries’ best interests. This includes staying informed about the wishes and interests of the beneficiary and the state of their assets as the case may be, so that the beneficiaries’ affairs can be managed prudently and in line with their wishes. In the face of the COVID-19 crisis, care should be taken to take these required steps and to keep diligent records of your activities.
Communication with beneficiaries, investment advisors, health care providers, and other professional service providers may be difficult during this crisis. Beneficiaries who are experiencing health issues may be in facilities that have restricted access to the public. Health care providers may be overrun with higher priorities. Financial advisors and professional service providers may be working remotely, or be ill at home or caring for family members. It may not always be possible for a fiduciary to achieve the level of contact or timely contact that would typically be expected when exercising their duties.
Compounding the situation is the economic volatility we are experiencing in Canada and around the world as this crisis persists. For fiduciaries who are managing the financial assets of others, timely communication with financial advisors may be critical to properly managing those financial assets. Losses may be significant and the impact on beneficiaries, particularly the elderly, could be severe.
There is no doubt that the standard to which fiduciaries will be held will account for the COVID-19 reality, however the duties will remain. It will be important for fiduciaries to make best efforts to comply with their duties as they would in normal circumstances, and proper record keeping will be critical in these circumstances. Fiduciaries should consider recording even unsuccessful attempts to manage affairs or assets, and support those records with documents where possible. For example, if you have traditionally contacted your parent’s financial advisor by phone, and now cannot get a response, you should document the attempts and follow up in writing with an email or letter. Diligence in these difficult times can be critical to avoiding disputes in the future.
When difficult decisions are made, or financial losses are incurred, even if they are outside of a fiduciary’s control, it invites scrutiny into the fiduciary’s conduct by beneficiaries or interested parties (family, estate beneficiaries). Certain fiduciaries such as attorneys for property and estate trustees are required to maintain current books and records showing their conduct in relation to the disabled party or deceased’s assets. These records are required to be produced without delay. Now more than ever, fiduciaries should ensure that their statutory record keeping obligations are also satisfied (with proper and current books and records) to make sure that they are protected in the event of accusations that they negligently depleted the beneficiary’s assets by failing to exercise the appropriate degree of diligence.
Further, the COVID-19 crisis and the government response to the pandemic may have implications for fiduciaries in relation to tax filings (and tax deferral or relief for a beneficiary or deceased person), passing of accounts, or obtaining necessary court orders. The courts in Ontario are presently hearing only urgent or emergency matters until further notice. Alternatives to in-person appearances may be available in certain circumstances (video conferencing, teleconferencing, proceeding in writing), however it will depend on the circumstances and the specific jurisdiction.
We would be pleased to provide additional information about the content of a fiduciary duty in a particular circumstance, or advice about best practices during this difficult time.