ACCOUNTING DUTIES OF THE EXECUTOR AND TRUSTEE - THE FORM OF THE ACCOUNTS - PART V
A common area of complaint stems from an allegation that the executor or trustee was negligent in his or her efforts to administer the assets of an estate or trust. For a comprehensive discussion of the personal liability of trustees, see Maurice C. Cullity, Q.C., "Personal Liability of Trustees and Rights of Indemnification", (1996) 16 E.T.J. 115.
Generally speaking, most claims or objections to accounts arise out of what is perceived by beneficiaries to be negligence or failure on the part of the executor or trustee to maintain a proper standard of care and skill in his or her office. The most common complaints arise out of the following situations:
- investments by the executor or trustee which are not authorized by the will or by the law;
- the failure to provide a proper mix of investments so as to balance competing interests, such as life interests as opposed to remainder interests;
- the negligent or improper investment by the executor or trustee in investments of a speculative nature;
- an executor or trustee can be held liable for not maintaining the value of assets, such as a residence, by effecting proper repairs and would be liable for such neglect;
- executors or trustees must be extremely careful to make sure that all proper considerations are taken into account in making elections under the Income Tax Act, so as to avoid any criticism by the beneficiaries;
- care must be taken by an executor or trustee to ensure that prompt filings of returns are made and that penalties and interest payable on late filings are not incurred; and
- while trustees are seldom culpable for what are perceived by beneficiaries to be unnecessary delays, care must be taken to ensure that damages are not in fact incurred by the beneficiaries by reason of delays caused by inattention.
Surcharging of Accounts
A "surcharge" alleges an omission for which there ought to be credit in the accounts. The most frequent surcharges relate to undervaluation of assets, assets not accounted for, non-disclosure of an asset and, in some cases, the incorrect recording of an entry.
Falsification of Accounts
A "falsification" alleges an item on the debit side of the accounts to be either wholly false or, in some part, erroneous. A claim against the estate which does not exist or is not realistic, or a payment by the estate of an account which is excessive, and in some cases, the incorrect recording of an entry, are all examples.
While the above does not purport to be an exhaustive list of the areas of negligence, we hope it serves as a useful starting point nonetheless.
All the best, Suzana and Ian. --------
