Selecting an Estate Trustee - Hull on Estates #184
Listen to: Selecting an Estate Trustee - Hull on Estates #184
This week on Hull on Estates, Paul Trudelle and Sarah Fitzpatrick discuss considerations relevant to the testator's selection of an Estate Trustee when preparing a Will.
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Paul E. Trudelle - Click here for more information on Paul Trudelle.
Sarah Hyndman Fitzpatrick - Click here for more information on Sarah Fitzpatrick.
Selecting an Estate Trustee -
Paul Trudelle: Hello and welcome to
Welcome to
Sarah Fitzpatrick: Hi and welcome to another episode of
Paul Trudelle: And I’m Paul Trudelle.
Sarah Fitzpatrick: If you want to be heard on
Paul Trudelle: Hi Sarah, how are you today?
Sarah Fitzpatrick: I’m great, Paul. How are you today?
Paul Trudelle: Great, thanks. We were talking a bit before the show today and we thought we would spend a little time speaking about considerations that would be taken into account when selecting an estate trustee and naming an estate trustee in your Will.
Sarah Fitzpatrick: That’s right. It’s one of those considerations that’s extremely important. In fact, it’s one of the most important decisions you can make when you’re thinking about your estate planning.
Paul Trudelle: Yes it’s a very important job. It’s a difficult job and the selection of the right person can be very important as far as carrying out your wishes with respect to your Will and also with respect to avoiding problems that may arise and litigation that may ensue down the road, which is always our goal.
Sarah Fitzpatrick: Well exactly. So often I think when we’re trying to arrive at a decision of who to appoint in this regard, typically you can consider all of the client’s background. Not only their financial affairs but their personal affairs, perhaps their attitudes towards family members. And take all of these considerations into account and get a really clear and complete picture of the client’s personal and financial background before sort of delving into the discussion of who would be appropriate in that regard.
Paul Trudelle: So a first step then would be to get that broad background. Find out what their assets are, who they’re comfortable with, who they’re not comfortable with, who may be a likely candidate for being the estate trustee.
Sarah Fitzpatrick: That’s right. And in the vast majority of cases, you’re going to have a situation where it’s your spouse. And that’s typically what most people think of when they think of appointing your estate trustee. It’s most typical to appoint the spouse. And that’s very appropriate in cases where you may have a very simple Will with an immediate distribution. But in other cases where you may have ongoing trusts, in which case the administration may be ongoing for quite a long period of time, that’s when the selection of the estate trustee may become a more comprehensive type of inquiry.
Paul Trudelle: So that inquiry might arise where there’s a spousal trust set up perhaps? Or where there’s a trust…
Sarah Fitzpatrick: Exactly.
Paul Trudelle: …for children.
Sarah Fitzpatrick: Or a trust for children. And certainly you want to look at the life span of that potential trust and take into consideration…we were chatting before. For example, age would be a consideration.
Paul Trudelle: Would you suggest to elderly clients that they may, in addition to or instead of naming a spouse, that they name someone else who might be better prepared to take on and complete the job?
Sarah Fitzpatrick: Absolutely. Somebody so that there could be some continuity if the trust was alive for many, many years. Certainly that you wouldn’t have a, you know, jumping from trustee to trustee. So not only would the age be a consideration so you could appoint someone that could really grow with the trust. But also giving some consideration in that event to possibly more than one trustee or an alternate trustee as well, to make sure that during the course of that administration, the trust is never left without someone in that position. That’s critical.
Paul Trudelle: Ideally you don’t want to have to go to Court to appoint a new trustee because there’s a gap or a hole with respect to appointing an estate trustee. So having some succession planning there with respect to your estate trustees is very important.
Sarah Fitzpatrick: Absolutely. And certainly, if you’re looking at having one, a single estate trustee, having an alternate, a substitute would be something you would definitely want to have in there.
Paul Trudelle: Okay. With respect to the ability of the trustees and their level of sophistication, what considerations come into mind?
Sarah Fitzpatrick: Well certainly you want someone with the requisite business acumen. Somebody that’s got some savvy that can certainly deal with your financial affairs. That would be something…you know, not only do you want to trust somebody implicitly but you want to make sure that they’re going to be able to navigate through your financial circumstances. So it’s got to be someone that’s got the background in that respect, that you trust and that has a financial background that can deal in that situation.
Paul Trudelle: And I guess the level of skill or sophistication that they have to bring to the table would depend upon the level of sophistication of your estate. So if it’s a simpler estate, then it’s not as much…
Sarah Fitzpatrick: Absolutely.
Paul Trudelle: …of a concern, but if there are family-owned companies or proprietorships or things like that, it’s a more difficult job.
Sarah Fitzpatrick: And that really also then gets into the issue of having perhaps more than one. If you have family members and you might have family-owned businesses and so forth, considerations there. How well do your family members get along with each other? Would there possibly be the necessity to have a majority rule or a veto clause in there as well? And certainly in larger estates, more complex estates, you can give consideration to a trust company as well. And that, in certain circumstances, might be appropriate.
Paul Trudelle: I think it’s appropriate in a number of cases because as we were talking before, it serves to take the personality or the family conflict out of the estate administration if there’s a neutral third party who can help administer the estate or act as the estate trustee. So that may be a good option to consider.
Sarah Fitzpatrick: Now I guess you do need to be careful that it doesn’t infuse an element of conflict as well. Certainly there could be…you know, if you looked at the personality and again this goes back to I guess getting a really full picture of your client. If you think there might be a potential that some of the children, for example, that might also be appointed as trustees or if they were beneficiaries, could take insult to the fact that you had appointed an impartial family member that was going to be delving into private family matters that could actually cause strife. So it’s a delicate balance there but certainly there would be situations where a trust company would be appropriate. And perhaps we could talk a little bit, just about I guess the fees. I mean that would obviously be something as well. People should be aware that a trust company is going to expect a fee arrangement as well.
Paul Trudelle: Right and all estate trustees would be entitled unless the Will provides otherwise, to claim a fee. But the estate trustee…where a trust company is the estate trustee, they’ll want something in writing and usually that forms or is attached to the Will. Their fee agreement.
Sarah Fitzpatrick: Exactly. And that’s something that if you…you can even negotiate that beforehand and perhaps negotiate a fixed rate so there’s some comfort at knowing what that compensation would be going down the road.
Paul Trudelle: Right. And it’s not necessarily the case that they’re going to be more expensive than any other trustee, depending on the assets in your estate…
Sarah Fitzpatrick: Absolutely not.
Paul Trudelle: …you could negotiate a rate that’s actually lower than what the Court might otherwise award.
Sarah Fitzpatrick: Absolutely. And then if you have that signed up, you can actually incorporate it by reference into your Will as well and make it binding.
Paul Trudelle: Just on the point of having the trust company as the estate trustee and not wanting to offend any of your beneficiaries. It’s also possible for the trust company to work as co-estate trustee along with an individual.
Sarah Fitzpatrick: Absolutely. Yeah. And often when you see those majority rule and veto powers, they often come into play a little bit more in the context of perhaps when a trust company is appointed. I mean it could go really one of two ways: you may want to direct that the trust company be one of the majority perhaps. Or conversely, you may want to say that if there are three, and one of them is a trust company, perhaps one of the family members is always one of the majority. So that’s obviously getting more complicated but that can arise in many situations as well.
Paul Trudelle: What do you feel about naming all of your children. Let’s say, if you have 5 children, naming them as estate trustees so that…
Sarah Fitzpatrick: Terrible idea.
Paul Trudelle: …no one is offended.
Sarah Fitzpatrick: Terrible idea. Definitely appointing, you know, you can see 2, you can see 3 at times. But if you’re getting into trying to appoint perhaps all your children thinking I don’t want to offend anybody, I want to make everybody really happy. And I’m going to give everybody a roll. It’s just too unwieldy having that many people agree. And it can just be disastrous. So that would be something to steer very clear away from appointing, you know, 4 or 5 estate trustees. Thinking that you’re trying to make everybody happy, it’s probably going to do the exact opposite.
Paul Trudelle: Exactly. And you’re trying to get them all together in the same room to administer by committee and it’s just not something…
Sarah Fitzpatrick: No, it’s not workable.
Paul Trudelle: Okay. Now with respect to certain Wills where we see ongoing trusts. Let’s say I have a Will where I have a spousal trust for the benefit of my spouse. Do you suggest that I name her as the trustee or sole trustee? Should I name my children who may be the residual beneficiaries as the sole trustee? Or what sort of problems can arise in that sort of a context where there will be or may be competing interests as between the life tenant and the residual beneficiary?
Sarah Fitzpatrick: Right, you always want to be keeping a very keen eye out for potential or apparent conflict or actual conflicts of interest. So that’s something you do have to bear in mind. Certainly when you’ve got the different…you’ve got a life tenant, for example, and a residual beneficiary, it can be a good idea to appoint more than one estate trustee, and perhaps one from each beneficiary class representing each of their interests from each of the different beneficiary classes. And that can assure that they can basically each have a voice and that somebody is speaking for each side, so to speak. So that can be a useful tactic in that situation a well, but certainly always bearing in mind that there can be a potential conflict of interest. Another good example would be your guardian of your children and the estate trustee. That can be a very obvious conflict of interest for many reasons. For example, if your guardian requires a new home in which to live with the children, whose money are they using for that? Are they using their own money or are they using the trust money for the children? So that’s a big red flag, a potential conflict of interest. So you’ve always got to be mindful of those as well.
Paul Trudelle: And potential conflicts that can arise and how they can be dealt with. It may not be evident at the time you’re making the Will that there will be a conflict but these things tend to arise at some point.
Sarah Fitzpatrick: That’s right. Latently, absolutely.
Paul Trudelle: Okay. We talked a bit about, or we should talk a bit about where your trustee lives. Is there a problem with naming my brother in
Sarah Fitzpatrick: Right. Well, I guess there’s two problems. There’s the logistical problem of them not being close. Because in reality there’s going to be a lot of necessity to have them close by, just for the day-to-day dealing with the estate.
Paul Trudelle: Because part of the estate administration is a lot of hands-on work.
Sarah Fitzpatrick: Absolutely.
Paul Trudelle: With the physical assets.
Sarah Fitzpatrick: Right. So just practically you’re going to want somebody close by. But also there is, you do want somebody to be in the province. There is a necessity to post a bond for executors that reside outside of a province for Court applications. So that is something you want to pay attention to as well and make sure that your estate trustee is in
Paul Trudelle: The bond itself is…
Sarah Fitzpatrick: That can be very helpful.
Paul Trudelle: …they’re onerous to get and they come at cost…
Sarah Fitzpatrick: If not impossible, yeah.
Paul Trudelle: And if you can avoid the necessity of having to post a bond, then it should be done.
Sarah Fitzpatrick: That’s right.
Paul Trudelle: Okay. I think we’ve covered quite a few considerations to take into account when appointing an estate trustee. So maybe at this point we’ll wrap it up. We want to thank you for listening this week.
Sarah Fitzpatrick: Thank you. It’s been a pleasure, Paul.
Paul Trudelle: And we look forward to hearing from you. If you can get in touch with us. If you want to get in touch with us, send us an e-mail at hull.lawyers@gmail.com. Be sure to visit our blogs which are posted everyday at estatelaw.hullandhull.com and you’ll also be able to find our show notes there and access to our other podcasts as well.
Sarah Fitzpatrick: Great. Thanks Paul.
Paul Trudelle: Thank you.
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