Considerations in Changing Trustees
There are a variety of reasons for the removal and replacement of a trustee, some voluntary on the part of the departing trustee, others involuntary. A trustee might decide to retire or resign from his or her position. On the other hand, a trustee may need to be changed as a result of, amongst other reasons, the trustee’s death, incapacity, bankruptcy, the conduct of the trustee or the relationship of the trustee and the beneficiaries of the trust. Depending on the circumstances, the removal and replacement of the trustee may be done by way of deed or by way of court order.
The transition of the outgoing trustee and of an incoming trustee may be critical to each trustee as well as the beneficiaries of the trust, perhaps for very different reasons. The requirement (or not) to apply to Court to change trustee(s), the satisfaction of the administration of the trust to date, the outgoing trustee’s accounts, a passing of accounts, the vesting of the trust’s assets in the new trustee and/or any co-trustees, the trustee’s compensation, who is an appropriate replacement and the provision of releases and the indemnification of the trustees involved are all considerations, amongst others, for those involved.
It is noteworthy to distinguish between the removal and replacement of a trustee and the removal and replacement of a personal representative of a deceased person’s estate because of the different ways that they are treated. A trust instrument may provide for the retirement, removal and/or replacement of a trustee. If there are specific provisions in the trust instrument for the retirement, removal and/or replacement of a trustee they will govern. To the extent the trust instrument does not govern the issue, generally, sections 2 to 8 of the Trustee Act R.S.O., 1990, c. T. 23. (the “Act”) apply to the removal and replacement of trustees, while section 37 of the Act relates to the removal and replacement of personal representatives.
The balance of this week’s blogs will focus on certain considerations to be taken into account when negotiating the retirement, removal and/or replacement of a trustee. More specifically, I will touch on considerations involving the parties who should be involved with the negotiation, liability considerations and structures of the removal and/or replacement.
Thanks for reading.
Craig
