Comprehensive estate planning is the best way to manage family wealth and offer ongoing support for dependants and loved ones following one’s death. Despite the overwhelming practicality and simplicity afforded by well-drafted trust and/or will, conflicts may nonetheless arise between trustees, who are appointed to oversee the management of a trust or estate, and the beneficiaries. When a person dies without any directives in place, otherwise known as dying “intestate”, things can become even more complicated.

A recent Ontario dispute began after the deceased died intestate, leaving behind a significant estate including a comprehensive art collection, real estate, and other assets. The deceased had no spouse or children, and so his three surviving siblings, one sister and two brothers, we deemed the beneficiaries in accordance with Ontario succession law. The sister was appointed as the estate trustee by a court, and as such was required to manage the distribution of the estate’s assets amongst the three beneficiaries.

The case, known as Toller James Montague Cranston (Estate of) has been playing out in court and in news headlines for some time, and recently concluded with an order that two of the beneficiaries of the estate must pay over $300,000 in costs to their sister. The basis for the extraordinary costs award is several unfounded allegations that, in her capacity as estate trustee, the sister had mismanaged estate funds and committed fraud in carrying out her duties under the law. The recent court finding demonstrates how a misinterpretation of the duties of an estate trustee can be a costly mistake.

Accusations of Mismanagement and Fraud

Since the appointment of the estate trustee, the brothers have raised more than 300 objections to their sister’s handling of various aspects of the estate, including dealing with the art collection and expenses paid for the management of the estate. Notably, the deceased lived in Mexico when he died, and so as estate trustee, the sister was required to travel there to oversee much of the process and pay to ship artwork and other assets back to Canada. In addition to the 300 objections, the brothers have also made accusations of fraud against their sister.

Misconceptions About Trustee Duties

The Court clarified two key misconceptions, among other issues :

  1. The standard of care relating to estate record-keeping, and
  2. When and from whom the trustee is required to take direction with respect to their actions or decisions.

As it concerns the first misconception, the Court, with reference to previous Supreme Court jurisprudence, highlighted that a trustee’s standard of care is not that of perfection, but rather, is the standard of care of a person of ordinary care and diligence. In relation to the second misconception, the court stated that there is no obligation for an estate trustee to obtain the consent of each beneficiary on every matter that arises during the administration of an estate.   

Record-Keeping: Standard of Care for Estate Trustee

In this case, the trustee faced some-300 objections by family members to expenses allegedly incurred by the estate. The objectors specifically took issue with the reimbursement of expenses for which there was no written receipt. They argued that the trustee incurred certain expenses that did not provide any benefit to the estate and that these expenses should be repaid to the estate. The beneficiaries also raised concerns regarding the appropriate method of documentation of trustee accounts and in the administration of the estate, and how much compensation an estate trustee should receive.  

With regard to rendering accounts for an estate, the court reiterated s. 74.17 (1) of the Rules of Civil Procedure, which sets out an estate trustee’s obligation to keep accurate records of the assets and transactions in the estate and the information that must be included in those records.

Keeping in mind that s. 74.17 (1) does not provide a definition of “accurate records”, the Court concluded that the detailed passing of accounts presented by the trustee was sufficient. Furthermore, the Court found that the objectors’ argument as to the lack of receipts was not proof of inaccuracy in the accounts and that these receipts were not necessary. Indeed, the Court highlighted that the Supreme Court of Canada had established that the standard of care for an estate trustee with respect to accounts is the “standard of care of a person of ordinary care and diligence in managing their own affairs.” As such, the standard of care does not demand perfection, as was argued by the objectors.

Estate Trustees Are Not Obligated to Take Direction on Every Decision

A second key misconception highlighted by the Court concerns the idea that an estate trustee has a duty to act regarding the estate as directed by a majority of the beneficiaries. The Court underscored that this notion is a “misconception” and is “responsible for a large part of this dispute.” Justice Smith clarified that when administering an estate, there is no obligation for an estate trustee to procure the consent of each heir on every matter that arises during the administration. Furthermore, the Court underscored the fact that a trustee’s duty to make decisions with respect to the administration of an estate rests with the estate trustee and not the beneficiaries. An estate trustee has a general duty to keep beneficiaries informed when requested and to do so within a reasonable timeframe. In the case at hand, the court confirmed that these obligations were, indeed, fulfilled by the trustee.   

Following an in-depth assessment of the facts and arguments presented, the Court found that, although the estate trustee’s accounting was not perfect, she accounted for all capital receipts and all expenses accurately in the particular circumstances of this estate. Therefore, it was determined that she had met the required standard of care of “a person of ordinary prudence using common sense in the complicated circumstances of this estate.”

Given that the brothers were unsuccessful in the vast majority of their objections, in addition to the reprehensible conduct of making unsubstantiated allegations of fraud against the estate trustee, they were ordered to pay costs amounting to $325,000.

Contact the Estate Lawyers at Tierney Stauffer LLP in Ottawa or Arnprior for Comprehensive Estate Planning, Administration & Litigation Services

At Tierney Stauffer LLP, we take a client-focused approach to our work, providing innovative guidance through the estate planning and administration processes. Should a dispute arise during the administration of an estate, we provide practical and honest advice to clients and represent their interests in litigation. Our estate lawyers have extensive experience and will work to secure the results our clients need in order to move forward. Call us at 1-888-799-8057 or contact us online to set up a consultation with an experienced member of our team.

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