Being a director of a corporation may require an entirely different skill set than a trustee, and may require specialized expertise that the trustee may not have. Since often a trustee becomes a director only as an afterthought, it may well be that the testator has not thought through the fact that the same person will need to fulfil both roles. If the executor also happens to be a shareholder of the corporation and keeps the estate assets invested in the corporation, there may be an obvious avenue for argument by the beneficiaries that the director used the estate assets improperly to enrich his interest in the corporation.

One way to avoid this conflict would be simply to choose not to accept the role of an executor and trustee at all. In addition to the common law fiduciary duties applicable to directors there are numerous liabilities imposed on them by statute in the corporate, labour, environmental and taxation areas. This is another reason to potentially refuse to accept a role as trustee if it were victate also accepting a role as a director. The following factors, among others, can lead to inherent conflicts of interest faced by a trustee director:

1. Risk - successful corporations, in order to be successful, need to take significant risks, but any executor who takes substantial risks with trust assets is exposing him or herself to complaints by the beneficiaries and potential personal liability.

2. Income/Capital - a corporation will often reinvest income or profit over time in order to ultimately benefit the corporation, but in most estate situations there is an income beneficiary who will take all the income from the trust. The need to pay out income and the fact that an income beneficiary will likely immediately complain if the income stops, can mitigate the corporate objective of ensuring there are sufficient assets in the corporation to grow the corporation over time.

3. Time Lines - corporations are theoretically immortal as long as the corporation is successful. Trusts for the most part have a defined end point, usually the end of life of a specific person. Investing in a corporation over an extremely long term may make perfect corporate sense, but for a trust there may well be different timing considerations in play.

Thanks for reading. Sean. --------

During the testator's life his or her assets will have been invested as the testator saw fit, for instance in risky but high return ventures. That entrepreneurial approach tends to be inconsistent with estate and trust principles, where somewhat conservative investment principles tend to be more suitable. For example, diversification is so important in trust administration that it has been enshrined in section 27 of Ontario's Trustee Act, but diversifying may have been the last thing on the testator's mind during his or her lifetime. Some of the fundamental duties of executors and trustees are:

1. the executor must obey the provisions of the Will; 2. the trustee must act impartially between beneficiaries; and 3. the trustee must exercise ordinary care and prudence.

Duties of a director are somewhat different. Section 34(1) of the Ontario Business Corporation Act provides for the following: 1. every director and officer of a corporation in exercising his or her powers in discharging his or her duties shall,

(a) act honestly and in good faith with a view to the best interests of the corporation; and (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

These duties can come in direct conflict as I will discuss further in tomorrow's blog. Thanks for reading. Sean. --------