So You've Been Appointed as an Estate Trustee

For the first part of this blog series see:  Wills: Why Two Is Better Than One    

Whether as a spouse, a child, a sibling, a trusted advisor or a close friend, you are likely to be called upon at some point to act as an Executor and Trustee of someone's Estate (often called an "Estate Trustee"). Like most people however, you might not completely appreciate the nature and extent of the role you have been asked to fulfill and the duties you are obliged to carry out.

As an Estate Trustee you are required to administer the assets of the Estate and give effect to the provisions of the Will. This means collecting the Estate's assets, converting assets into cash as necessary, paying the taxes and debts, satisfying bequests and legacies, and distributing the residue of the Estate to the entitled beneficiaries. Short of handling Estate litigation (a special interim trustee may be called upon to act during such a dispute), you must also address any issues that arise during the administration and manage any conflicts among the beneficiaries.

Some of the important duties that Estate Trustees are required to perform, include:

1. Opening an Estate bank account;
2. Paying outstanding bills (credit cards, insurance premiums, mortgage payments);
3. Preparing an inventory of assets and obtaining necessary valuations;
4. Applying for a Certificate of Appointment of Estate Trustee from the Court and paying the associated Estate Administration Tax out of the Estate (0.5% of the first $50,000 of the value of the estate, and 1.5% of the value of the balance);
5. Obtaining copies of deeds for real property and transferring registered title to the Estate;
6. Filing tax returns, including: the Terminal Tax Return of the Deceased (typically due on April 30^th of the year after death); and the annual Tax Returns of the Estate (the first of which is due within 90 days of the Estate's year-end, which can be any date within 12 months of the date of death, but usually is December 31^st for convenience);
7. Setting up testamentary trusts (if any) pursuant to the terms of the Will; and
8. Making distributions to beneficiaries.

As a general rule, as an Estate Trustee you must carry out your responsibilities personally, however, you are entitled to delegate work to professionals that a prudent business person acting in the ordinary course of business would delegate (for example, accounting work such as preparing the tax returns, and legal work such as preparing and filing the Certificate of Appointment of Estate Trustee).  Despite obtaining outside advice, you will always be responsible for the final decision-making.

For the duration of the administrative process, you must keep a detailed record of the Estate's accounts, including an inventory of the original assets, all money received and distributed, all outstanding liabilities, all investments, and any compensation you have claimed.

As payment for fulfilling this challenging and time consuming role, under the common law, you are generally entitled to claim compensation equal to: 2.5% of the value of all receipts (income and capital received by the Estate), 2.5% of all disbursements (income and capital paid out of the Estate to creditors, professional advisors, and beneficiaries), and 0.4% of the average annual value of the assets as a "care and management fee". Such compensation may be varied by the Court to reflect the magnitude and complexity of the particular Estate, the degree of care and responsibility required, the time spent, the skill demonstrated, and, the success achieved. It may also be varied by the terms of the Will, or precluded by the Will altogether, which is often the case where you are also a Beneficiary under the Will.