January 9, 2017
The Ontario Court of Appeal’s decision in Cahill v. Cahill demonstrates several valuable lessons for those who agree to be an executor or trustee.
The facts in Cahill probably represent a common scenario. Through his Last Will and Testament, a father appointed his son and daughter as executors. The Will required a trust to be established with $100,000 out of the estate. The daughter completely deferred to the son on all decisions because he was financially knowledgeable. In a short period of time, the son had borrowed the majority of the $100,000 for a business venture. When the business failed, the money was lost.
The beneficiary of the trust, the third child of the testator, sued the executors for the money.
The daughter defended the court proceedings on the basis she relied on the expertise of her brother and had no knowledge of the administration of the trust.
The court determined the daughter was negligent and breached her duties as an executor. The daughter could not simply defer to her brother.
An executor or estate trustee is the person appointed by a will to manage and administer the estate after a person passes away. Sometimes trusts are established under the Will and the executors are named as Trustees of such trusts. The daughter was liable because she had abdicated her duties by doing nothing as the trust was not created as required by the Will. The daughter had a duty to take real active steps to ensure the trust fund was set up.
An executor or estate trustee has significant obligations, described as “onerous” by the Courts. Trustees have the onus of establishing that the management and distribution of the money is consistent with the terms of the Will. An estate trustee is also a fiduciary: they cannot defer or blindly leave management to another trustee, and are jointly and severally liable for the acts of other trustees.
The result is that the daughter is now responsible for approximately $93,000, and has further obligations to carry out the wishes in the Will.
The take away is:
- Ensure you are fully aware of all your obligations as an executor or trustee
- If you do not feel that you can fulfill all your obligations, you must take steps to formally renounce the appointment. You cannot just do nothing
- Do not trust or rely on others to carry out your duties
- Take steps to fulfill your duties.