Toronto Estate Law Blog : Toronto Estate Lawyer : Hull & Hull Law Firm : Trust Mediation and Succession Planning : Serving Ontario, Ottawa, Mississauga, Hamilton

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Several recent stories in the news highlight the importance of making sure your estate plan includes a directive for health care in the event you are incapable of making health-related decisions.  Diane Sawyer, speaking on a segment for ABC news recently, covered the amazing story of a 65 year old woman who awakens from a coma after suffering a cerebral hemorrhage (watch the video here).

Regrettably, the outlook for many terminally ill patients is not as rosy and not every person faced with such odds gets a second chance.  Reminiscent of the case of Terri Schiavo in 2005, a father of a brain-damaged 23 year old has appealed a ruling by the Delaware Court of Chancery that could allow the removal of a feeding tube and end her life (read about it here).  Lauren Richardson was pregnant at the time she fell into a persistent vegetative state, and she was kept alive to enable her to give birth (which she did successfully last year).  The Court has now granted guardianship to her mother, who insists her daughter did not wish to live this way and wants the artificial life support measures withdrawn.      

In Ontario, having a Power of Attorney for Personal Care and a Living Will in place will ensure that your intentions regarding treatment will be considered.  Without the guidance afforded by these critical documents, your family may be unable to carry out your wishes (such as discontinuing medical treatment where there is no hope of recovery).  Including health care directives as part of your estate plan also enables you to specify instructions, such as requesting medication to alleviate suffering or distress, even though this may hasten the moment of death.

Sarah Hyndman Fitzpatrick  

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What are some of the "red flags" to be wary of in the course of a retainer to prepare a Will?  Corina Weigl considered this issue in an article she wrote for the 2007 LSUC Six Minutes Estates Lawyer (find it here) titled "How to Bullet-Proof Your Will".  By far the most typical "red flag" arises in the context of third party involvement, such as where a close friend or relative (commonly a child of the testator), contacts the lawyer directly asking for advice in respect of the testator’s estate (i.e. “My Dad needs a will drawn up”). This is a common scenario for most estate planning practitioners. The lawyer should remind the third party who the "real" client is and that best practice demands that he or she deal with the testator (as opposed to the third party) directly.  Lawyers are advised to hold meetings in private with the "real" client; to prepare detailed notes of telephone conversations and meetings with the "real" client, and to scrutinize motivations in cases where there are blatant departures from the provisions of former Wills. Another “red flag” is the unequal treatment of beneficiaries. To avoid the possibility of a dispute down the road, clients should be clear in expressing their wish to exclude an obvious beneficiary (i.e. leaving out 1 of his 3 kids). The lawyer may ask for an explanation of why the person is being treated differently, and the lawyer will likely take notes. Unequal treatment inevitably leads to family friction and may up the chances of a will challenge. Lastly, it is a lawyer’s duty to be satisfied that their client has the requisite mental capacity – once again the lawyer is advised to take notes and when in doubt, consult expert opinion.

Sarah Hyndman Fitzpatrick

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I came across a really interesting blog (find it here)  the other day that considered an article published recently by Kristine S. Knaplund  (Professor of Law, Pepperdine School of Law), entitled The Evolution of Women’s Rights in Inheritance, 19 Hastings Women’s Law Journal 3 (2008).

The article describes how archived probate files in Los Angeles are a valuable source of information on the history of women’s inheritance rights. Issues such as whether women were routinely appointed as the executrix of their husband’s estate, and whether they were left the residue of an estate outright or with a life interest or by way of a trust, are considered.   The following is an excerpt from article:

“The probate files are a rich source of information about the lives of women and men in Los Angeles as it transitioned and grew into a major city. The availability of land and the use of promissory notes allowed the industrious the opportunity to save money and leave an estate to their families and friends. Ten women left estates over $10,000 in 1893 dollars, compared with twenty-two men. Of these, one woman began as a maid from Ireland who ended up being the richest woman dying in Los Angeles in 1893, with an estate of over $285,000.”

The article summarizes that Los Angeles in the 1890s was ahead of other parts of the country in women's rights. For example, men in Los Angeles routinely named their wives as executrix of the estate. Relatively few men tied up legacies to a wife or daughter in a trust or a life estate, choosing instead to give the beneficiary an outright interest in the property.  I would be interested to see how the history compared to women living at the same time in Ontario and the rest of Canada.

Sarah Hyndman Fitzpatrick

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A new study (find it here) suggests that even when a testator (and family members) support organ donation, there is no guarantee that these wishes will be carried out when someone dies. Researchers at the University of Southampton in the UK have concluded that relatives are often reluctant to carry out the deceased’s wishes regarding organ donation, due primarily to conflicting feelings over “protecting the body” of the deceased and “making a gift of life”.

In Ontario, custody of the deceased’s body belongs to the Executor and Trustee, and he or she has the authority to make the necessary arrangements. Testamentary instructions regarding organ donation have no legal effect and depend solely upon the wishes of the next of kin and the trustee for implementation.

Nevertheless you may wish to include such instructions in your Will. Making your views on the subject known to family and your Trustee, and signing your Ontario driver’s license, may also help to ensure your wishes are respected. Various charitable organizations (such as the Kidney Foundation) have sample donation clauses, and Part II of the Trillium Gift of Life Network Act is worth considering.

Sarah Hyndman Fitzpatrick

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I recently attended this CLE program of the LSUC chaired by Laura Kerr, Jennifer Pfuetzner and Corina Weigl. The panel used an annotated Will as a framework to consider drafting tips, and highlighted many significant recent developments.

Notable provisions included “Air Miles Designations” (of value if a testator or testatrix has acquired a significant quantum of frequent flyer points), a “Debts, Funeral and Testamentary Expenses” clause which included provision for “reasonable travel expenses” for relatives and/or friends wishing to attend the funeral, and an updated “RESP” clause. Because an RESP is the property of the deceased subscriber (usually the parents or grandparents of the beneficiaries), consideration should be given to whether the testator wants to plan to continue after his death (and, if so, who should become the succeeding subscriber). Alternatively, the testator may prefer that the Trustee collapse the plan and direct the proceeds into the residue of the estate.

Many more issues were canvassed with a focus on emerging concepts in estate planning. Most significantly, the attendees were urged to keep an eye on the definition of “issue” in light of the current reality of more complex family relationships (i.e. common law, step families) as well as potential challenges raised by the more widespread use of reproductive technologies in today’s world.

Sarah Hyndman Fitzpatrick

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In January, Justin de Vries wrote a blog about an 84 year old Orthodox Jew who was on life support.  He had suffered brain damage from a fall and was unable to walk, talk, breathe, or eat on his own.  Doctors said that he had no chance of recovery and wanted to remove him from life support. 

His family opposed the idea saying that it would hasten his death, which would be tantamount to murder and would run counter to the gentleman's Orthodox beliefs.  The gentleman did not have a living will and had not left any end of life instructions.      

On February 13, 2008, a judge ruled that the case should go to trial and the court should determine whether or not he should be taken off life support.  At issue will be whether the doctors can disconnect him in the face of opposition from the family. 

In Manitoba, the College of Physicians and Surgeons leaves the ultimate decision to the doctors, providing that they consult with family members and give them four days notice of when treatment will end. 

For their part, the gentleman's family says that they have obtained medical opinions from the United States that suggest his brain function is improving. 

The motions judge directed that the trial be held quickly, so hopefully the dispute will be resolved soon. 

Have a great weekend,

Megan F. Connolly

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I came across an interesting article in The Prairie Star, a Montana-based newspaper, about an incentive being offered to farm and ranch couples, both young and old, who plan their estates early. 

Montana State University is offering a promotion whereby the first 40 couples who work through an estate planning process will receive $100.00 off any follow-up legal fees.    

A reason for the program is to encourage families in the agricultural business to start thinking about how they are going to plan their estates early on.  This is especially important where there is an operational farm which will make up the bulk of the estate.  Complications can arise when, for example, there is no clear plan in place and one beneficiary wants to keep and run the business, while another wants to take his or her inheritance in cash.

The presence of a family farm can affect the estate planning of more than one generation.  For example, members of an older generation may control the farm, while members of a younger generation may be structuring their estates in anticipation of inheriting it.  Or, members of multiple generations might have ownership interests in the farm that will affect the way it can be dealt with in the estate of any one of them. 

Of course, many of the issues that families owning a farm in Montana my face are the same as those faced by families owning any kind of business anywhere.  However, the program does underscore the importance of planning early and planning well. 

You can read more about the program in Montana here.

Thanks for reading,

Megan F. Connolly

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With the deadline for RRSP contributions right around the corner, I thought it would be worthwhile to review the tax treatment of RRSPs on an annuitant’s death. 

Generally speaking, when an annuitant dies, the fair market value of the RRSP is attributed to the annuitant’s income during his or her final year of life and must be included on the terminal return. The result is that an RRSP will be generally taxed in the hands of the deceased. 

However, there are exceptions to this rule.  The estate can avoid paying the taxes on an RRSP if the following are the beneficiaries:

a)      The annuitant’s spouse or common-law partner; or

b)      The annuitant’s dependant child or grandchild. 

The tax implications for the above beneficiaries vary.  If the beneficiary is the spouse, common-law partner, or a dependant child or grandchild with a physical or mental infirmity, then tax can be delayed by transferring the funds to an RRSP or RRIF. 

A dependant child or grandchild (with no infirmity) has the option of staggering the tax consequences by purchasing an annuity that matures no later than his or her 18^th birthday. 

However you choose to deal with your RRSPs when planning your estate, it is always a good idea to talk with your estate planner about the tax implications of any designations you are making. 

For more information, check out the Canada Revenue Agency’s memo on the “Death of an RRSP Annuitant”. 

Thanks for reading,

Megan F. Connolly  

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James Brown’s estate has been subject to litigation by his grandchildren, his children, people who say they were his children but whose paternity has not been established, three former wives, and a companion who claims she was his fourth wife. Allan Socken discussed this litigation in his blog on January 8, 2008.   

Now, according to an article in the New York Times, his court appointed estate trustees have filed a lawsuit against his long-time business managers, alleging that they stole millions of dollars from Brown.  In the suit, the trustees also accuse a law firm and bank of conspiracy to defraud, negligence, and breach of fiduciary duty. 

The suit alleges that, since 1999, one of Brown’s advisors siphoned $10 million from an investment account that the advisor was controlling.  It also accuses the advisor of forging Brown’s signature in order to obtain a 40% interest in a James Brown dancing doll. 

In the suit, the trustees also allege that the bank that is named was negligent for failing to prevent the advisors from mismanaging funds through accounts that it held and accuse the law firm of working in tandem with the business advisors to take excessive fees and commissions. 

It’s unclear what impact this litigation will have on the claims being brought by various family members, although it has the potential of increasing the amount of money that is in the estate to fight over. 

Of course, given the amount of litigation underway, it might all go to the lawyers. 

Thanks for reading,

Megan F. Connolly

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Listen to Valuations and Appraisals

Ian celebrates the 100th episode of Hull on Estate and Succession Planning.

He discusses the question of valuations and appraisals and how these affect estate mediation.

Comments? Drop us a line at 206-457-1985 or send us an email at hullandhull@gmail.com.

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Robert Brown claims to be the unacknowledged “love child” of Queen’s Elizabeth’s late sister, Princess Margaret. In his quest to prove his claim, he has sought access to the secret Royal Wills of Princess Margaret and the Queen Mother.

In 2002, shortly before the deaths of Princess Margaret and the Queen Mother, lawyers for the Royal Family, the British Treasury, and the Attorney General met with England’s highest ranking family judge seeking a practice direction to codify the century-long convention that Royal Wills be kept sealed from the public. The Order was passed and the “secret pact” was not made known to the public or Parliament.

Mr. Brown sought to have the Wills unsealed in family court but his case was struck down as vexatious and baseless. Mr. Brown sought leave to appeal and the court of appeal granted Mr. Brown leave and found that he was entitled to a hearing of his claim to have the Wills inspected. Despite calling his claim to be Princess Margaret's son “irrational and scandalous”, Lord Chief Justice Lord Phillips found that the public interest outweighed the Royal family’s right to privacy and called the pact unconstitutional.

News of the “secret pact” resulted in an outcry in the British media and calls for transparency within the Royal family. Mr. Brown’s lawyer submitted that members of the Royal family who receive national assets should have their Wills inspected by the public to ensure those assets are not mixed with personal property.  If Mr. Brown wins, he will overturn the long standing convention that Royal Wills be kept sealed; a convention started in 1911 by Queen Mary to seal the will of her brother, Prince William of Teck and prevent a Royal scandal.

You never know who is going to change the law.

Have a great (long) weekend,

Diane Vieira

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I recently came across Osgoode Hall Law School’s blog site about the Supreme Court of Canada, The Court. Under the supervision of faculty, law student editors write on the upcoming decisions that are scheduled to be heard or have been recently decided by the Supreme Court of Canada.

There are a number of legal scholars who regularly comment on the decisions and readers are encouraged to post their own comments.  The “exchange of ideas” format is designed to appeal to both legal practitioners and other interested citizens and makes for interesting reading. The archives go back to November 2006 and decisions are searchable by subject.

Aside from the commentary, there are a number of online resources related to the Supreme Court, including online texts and a statistical database of recent Supreme Court decisions. There is also a link to Top Court Talk where correspondents from around the world discuss the decisions of their highest court.

It is an interesting way to keep informed with what is going on with the Supreme Court.

 Enjoy your day,

Diane Vieira

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The Globe and Mail recently interviewed a man living in British Columbia who may be the son of John F. Kennedy.

The article made me reflect on the different ways solicitors deal with persons born outside of marriage when drafting a Will. Since March 1978, persons born inside of marriage and outside of marriage are entitled to share equally in an intestacy estate. In a testate administration, unless a contrary intention is included in the Will, any words identifying a class of persons such as “issue” and “children” includes persons born outside of marriage.

However, a testator may want to exclude persons born outside of marriage from being considered as part of a gift class in order to remove the obligation on an executor to search for members of the gift class who were born outside of marriage.

Given the prevalence of common law relationships, to include a boilerplate clause excluding persons born outside of marriage from inclusion in the gift class may result in the unintentional disinheritance of grandchildren or great-grandchildren.  Any exclusion clause has to be considered carefully.

The upcoming LSUC CLE program, The Annotated Will, being held on February 21, 2008, discusses how to deal with difficult drafting issues. The two hour program is being chaired by Laura Kerr, Jennifer A. Pfuetzner, and Corina S. Weigl and promises to offer valuable advice on avoiding common drafting errors.

Have a nice day,

Diane Vieira

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Listen to Pre-probate Checklist

This week on Hull on Estates, Ian and Suzana discuss last week's Ontario Bar Association Conference (featuring Clare Burns and Jordin Atin as speakers).

They then wrap up their ongoing discussion about some useful steps to remember when administering an estate.

If you'd like to leave a comment, call us on our comment line at 206-457-1985 or leave us an email at hullandhull@gmail.com or you can visit our blog at estatelaw.hullandhull.com/.

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Even as Canadians, we cannot help but get caught up in the media frenzy surrounding the U.S. Presidential State Primaries. In the last couple of months, the dominating story has been the campaign between Hillary Clinton and Barack Obama for the Democratic Party nomination.

Last week, Michael Geist, noted technology law professor, columnist, and blogger wrote an interesting article about how Barack Obama has courted the youth vote by embracing technology, especially social networks, like Facebook, MySpace, and YouTube. Obama’s approach appears to have worked as a social networking tool. The official Obama Facebook support page has over 500,000 friends versus Hillary’s 100,000 friends.

Aside from using technology to reach voters, Obama has also taken positions on issues that are important to young voters, such as net neutrality legislation and digital copyright, subjects most politicians, including Canada’s mainstream political parties fail to address.

From the sidelines, it will be interesting to see how the primaries work out and if more Facebook friends results in more delegates. I would encourage anyone interested in technology, privacy law, and social media to regularly read Mr. Geist’s blog.

Thanks for reading,

Diane Vieira

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I am currently attending Osgoode Professional Development’s Fifth Annual Intensive Wills and Estates Workshop which has considered, among other things, common drafting errors and how to avoid them.

When it comes to charitable gifts, a solicitor should confirm the information the testator provides to them. A testator may misname a charity or not know that the charity is no longer in existence. The solicitor drafting the clause should ensure that the correct and exact name of the charity is used.

They may want to refer to a directory, such as the Canadian Donor’s Guide or the searchable charities database available on Canada Revenue Agency’s website, http://www.cra-arc.gc.ca/tax/charities/online_listings/canreg_interim-e.html. It is also important to note for tax purposes, the differences between not-for-profit organizations and registered charities.

For lesser known charities, a solicitor may want to include the registry number of the charity or contact the organization directly to determine how the charity should be named in the testamentary gift. 

The solicitor may also want to discuss with the testator what will happen if the named charity is no longer in existence at the time of the testator’s death. Will the charitable gift lapse or will there be a gift-over to an alternate charity? Including these types of instructions in the clause may prevent the need to later on seek directions from the court and attempt to have the gift applied in accordance with the cy-pres doctrine.

Thanks for reading,

Diane Vieira 

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One final note of caution arises from the Rooney (2007), CarswellOnt 6560 decision – a decision of the Ontario Superior Court of Justice that I have referred to in my blogs earlier this week. This caution refers to the release that the Estate Trustee seeks from the beneficiaries.

In Rooney, the beneficiary was provided with a form of accounts, and was told that if she signed a release, she could receive a distribution from the estate. (The court was critical of this practice.) The beneficiary did so.

Later, the beneficiary sought to compel a passing of accounts. The court allowed the Application.

The trustee had asserted that because of the release, the beneficiary could not compel a passing. The court stated “It is not an answer to say that the beneficiary approved of the accounts and gave a release. One of the obligations of the solicitor acting for the trustee is to ensure that all beneficiaries have competent, independent advice in reviewing the accounts. There is no suggestion by the solicitor that he advised the [beneficiary] to obtain independent legal advice when reviewing the trustee's accounts which he had prepared.”

Additionally, the court noted that the account rendered by the solicitor to the estate was a blended account, and included both solicitor’s work and trustee work. “The solicitor was in the best position to know what charges related to which services. He was also in the best position to know what portions of his fee account should be paid by the trustee out of her compensation or by the estate. There is no evidence that he gave any advice about these distinctions to the beneficiary so that she could consider them.”

The court concluded by stating that “There is no evidence that the beneficiary executed the release knowing that double charges for the trustee's work had been made against the estate. There is no evidence that the beneficiary knew the solicitor charged the estate more for legal and trustee's services than would arguably be allowed on quantum meruit basis. In these circumstances, the release was not a fully informed one; it cannot be enforced against the beneficiary.”

What is an Estate Trustee to do to protect himself or herself? The Estate Trustee might send out accounts that are as complete and informative as possible, so that the release can truly said to be an informed one.   Solicitor’s accounts might be included, and these accounts could specify the nature of the services provided. Beneficiaries should be advised to obtain independent legal advice. 

In many cases, an Estate Trustee may wish to obtain a court passing in any event.

Thanks for reading.

Paul Trudelle

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 Yesterday, I referred to the Ontario Superior Court decision of Rooney Estate v. Stewart Estate (2007), CarswellOnt 6560, which addressed the distinction between the role of the Estate Trustee and the role of the estate solicitor.

One of the responsibilities of the Estate Trustee is to prepare a set of accounts for the approval of the beneficiaries or the court, as may be required.

The decision expands on this requirement. Citing an article prepared by Rodney Hull, Q.C. (“Fundamental Principles and Concepts Relating to Executors and Trustees’ Accounts” (1983), Estates and Trusts Quarterly 146), the duty of an Estate Trustee in keeping accounts is said to include the duty:

1.                  To keep clear and accurate accounts of the estate, rendered at appropriate intervals to the beneficiaries;

2.                  To keep the accounts distinct from other accounts;

3.                  To retain supporting documents for all accounts;

4.                  To produce to any beneficiary the accounts when requested. Income or revenue beneficiaries are entitled to have accounts at reasonable intervals; accounts must be presented to residuary beneficiaries when entitled to possession;

5.                  To make all beneficiaries fully aware of their rights;

6.                  To disclose any and all breaches of trust;

7.                  To allow all beneficiaries adequate time to investigate the accounts;

8.                  To ensure that all beneficiaries have competent, independent advice in reviewing the accounts; and

9.                  To notify all interested beneficiaries of any court audit.

In Rooney, the court held that a release signed by a beneficiary was not a bar to compelling a passing of accounts. The beneficiary was not advised to obtain independent legal advice when reviewing the trustee’s accounts, and the accounts did not disclose that there were double charges for the trustee’s work made against the estate, or that the solicitor charged more for legal and trustee’s services than would arguably be allowed on a quantum meruit basis. As such, there was a breach of one of the obligations associated with keeping accounts. Furthermore, the release was not a fully informed one. Accordingly, it was not enforceable as against the beneficiary.

Thank you for reading.

Paul Trudelle

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The recent case of Rooney Estate v. Stewart Estate (2007), CarswellOnt 6560 serves to highlight the “distinct but complimentary” roles of the Estate Trustee and the estate solicitor. There, the court noted the responsibilities of each.

The court held that the Estate Trustee is responsible for:

1.         arranging for the funeral and disposition of remains;

2.         locating the will and instructing the solicitor to apply for the appropriate grant of appointment;

3.         locating all the assets of the estate, including making arrangements to secure, preserve, and dispose of such assets in accordance with the terms of the will;

4.         advertising for creditors and paying all debts of the estate including the filing of appropriate tax returns;

5.         preparing a set of accounts for the approval of the beneficiaries or the court, as is required; and

6.         distributing the estate.

The court noted that, generally, the role of the solicitor is to apply for a certificate of appointment for the trustee and to attend upon a passing of accounts. The Estate Trustee is entitled to pay these legal expenses out of the Estate.

The Estate Trustee can claim compensation for carrying out his or her duties. That compensation may also include reimbursement for professional help. However, the Estate Trustee cannot claim compensation for services provided by others whose services are charged to the estate.

Problems can arise where the solicitor performs work that falls within the Estate Trustee’s responsibilities. While this is permissible, the court will ensure that the estate is not being doubly charged. Further, the court will not normally allow a solicitor to charge solicitor’s rates for trustee work.

In the decision, the court cautions that the “solicitor should not perform trustee’s work unless instructed to do so by the trustee. If such a request is made, the solicitor should advise the trustee that he will render an account to the trustee personally for doing her work. Generally, the estate is not liable to pay this account; rather, it falls to the trustee to pay out of her compensation.”

Thanks for reading.

Paul Trudelle

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Comments? Send us an email at hull.lawyers@gmail.com, call us on the comment line at 206-350-6636, or leave us a comment on the Hull on Estate blog.

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Listen to Asset Particulars

This week on Hull on Estate and Succession Planning, Ian and Suzana talk about the importance of keeping track of asset details.

Comments? Send us an email at hullandhull@gmail.com, call us on the comment line at 206-457-1985, or leave us a comment on the Hull on Estate and Succession Planning blog.

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Does the Court have jurisdiction to set aside a Family Law Act election, or is such an election irrevocable?

This question was recently considered in the Ontario Superior Court of Justice decision of Iasenza v. Iasenza Estate 2007 CanLII 23351.

As background, Ontario’s Family Law Act (“FLA”) allows a surviving spouse to elect to either receive benefit under the deceased’s will (or on an intestacy if there is no will), or receive an equalization of net family property under the FLA. Normally, the surviving spouse seeks information regarding each of the options, and then elects for the greater benefit.

However, information regarding the values of each option is not always forthcoming in a timely fashion. The election must be filed within 6 months of the date of death, or the surviving spouse is deemed to elect to take under the will or on an intestacy.

The Court held that it did have discretion to set aside an election made in favour of an equalization. However, the Court noted that the discretion will be exercised sparingly and only in “restrictive circumstances where the interests of justice require it and where the balance of the interests of effected parties clearly warrants it.”

In considering whether to exercise its discretion, the Court will consider:

a.                  Was the election filed as a result of a material mistake of fact or law made in good faith?

b.                  Was there any responsibility or culpability on the part of the effected parties in relation to the election?

c.                  Was the notice of intent to seek revocation of the election given in a timely way, and in particular, how long after the 6 month filing period was notice given?

d.                  Has the estate been distributed or would interested parties otherwise be adversely effected?

e.                  Does the election result in an injustice to the surviving spouse in all of the circumstances?

On the particular facts of Iasenza, the Court decided to exercise its discretion and set aside the election filed by the surviving spouse. As a result, the spouse was entitled to receive 1/3 of the estate under the will, whereas she would have received nothing under the election.

Thanks for reading.

Paul Trudelle

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As we all know, it is not uncommon for any investor to occasionally experience a substantial decrease in the value of one of the stocks in his or her portfolio.  But what if the investor is a trustee?   

In light of the recent amendments to the Trustee Act which appear to embrace the modern portfolio theory, it will be interesting to see how the Court will utilize this theory to assess a trustee's investment performance. Section 28 of the Trustee Act adopts an approach that is consistent with the modern portfolio theory.  Under this section, a trustee is insulated from liability if “the conduct of the trustee, which led to the loss from the trust, conformed to a plan or strategy, for the investment of the trust property, comprising reasonable assessments of risk and return that a prudent investor could adopt under comparable circumstances”.

Under the “statutory legal list” approach, which I described yesterday, a trustee was limited to investing trust assets in authorized investments.   However, with the development of the prudent investor rule, trustees are provided with a broader range of investment choices, which will likely increase their responsibility in determining an acceptable standard of care.

Presuming that a trustee is found liable for breaching the standard of care, section 29 of the Trustee Act permits a court to assess “the overall performance of the investments” when it is assessing damages.  Based on the language of section 29, it appears that a trustee may be allowed to offset the loss of a bad investment against the gain of a good investment.

The trusts and estates bar will be watching with interest to see how the judicial consideration of the prudent investor rule evolves.

Happy Super Bowl Weekend!  Go Patriots!

Rick