Trustee of parents estate: Introduction I want to talk about an issue which is all
too common. I am also going to give you two real-life18 examples. The issue is that of
children being named as the estate trustee of parents estate.
Trustee of parents estate: Why the children? Many times in drafting a will, parents want
their children to know that the parents trust and love them. So, they not only have their
children as beneficiaries of their estate, they also make them the estate trustees (formerly
known as executor or executrix). This is natural, but may not be the best choice.
The reason I say this is because the role of the estate trustee is a demanding one that
requires a specific skill set. Children don’t always possess the necessary skills. What
if one or more of the children possess great financial skills and have sound judgment,
but others don’t. This can lead to differences of opinion and major arguments. In the most
extreme case, it can lead to costly and lengthy litigation to dissipate estate assets. Executors
must act in the best interests of all beneficiaries. If personal agendas get in the way, then everyone’s
best interests can’t be met. Adult children are probably married. Now you
have daughters-in-law and sons-in-law involved in the background. This can lead to a whole
host of issues that has nothing to do with the efficient administration of the parents’
estate and being even-handed with all beneficiaries. What if some of the children have personal
financial issues. There will be a temptation for self-dealing or self-enrichment. Again
this can lead to major problems. What if you have an even number of children?
Two or four estate trustees can lead to many problems. With two, the estate trustees will
always be deadlocked if they don’t see eye to eye. With four, not only can you have a
deadlock, but too many cooks may spoil the broth!
Trustee of parents estate: Splitting the tasks Sometimes parents split the tasks. One child
will be the estate trustee because she has great financial acumen. The other child will
be made responsible for health and living decisions if the parents first become incapacitated.
Sounds great in theory. However, the way the health decider child wishes the parents to
live may be at odds with the financial person seeing the estate shrinking away. Or, the
health decider may make decisions for the parents to live in a way that does not shrink
away the estate, but is demeaning to the parents and does not provide them with a good quality
of life in their final days. So, as you can see, what started out as the
parents wanting to “do right” by their children, can lead to many problems.
Trustee of parents estate: What an estate trustee should not do
In my last blog, TRUSTEE OF DECEASED ESTATE: WHAT A TORONTO BANKRUPTCY TRUSTEE KNOWS, I
spoke about some basic elements of the role of an estate trustee. I described the process
of becoming an estate trustee, and what the responsibilities are.
Now, I want to touch on some practical matters of what an estate trustee should not do.
The first is communicating with some beneficiaries and not others. As I have previously described,
one of the roles and responsibilities of an estate trustee is to deal with all beneficiaries
evenhandedly. The estate trustee cannot tell certain details to some beneficiaries, and
not others. So, all communications should be with all beneficiaries at the same time;
either in writing or orally. Everyone should get the same information at the same time.
The estate trustee does not wish to be accused of favouring some beneficiaries over others.
The second thing not to do is to rush to distribute smaller personal possessions of the deceased.
The estate trustee may be pressured by family members to distribute certain items quickly.
Possibly because the family member is the proper beneficiary of those small items and
wants them as quickly as possible. Alternatively, perhaps they are not the rightful beneficiary
of all the items they are claiming. However, they want to get their hands on certain items
to stop other family members from getting them. Or perhaps there is a home involved
that must be sold, so family members will pressure the estate trustee to clean out the
home immediately so that the home can be put up for sale as soon as possible.
As tempting and easy as it might be, the estate trustee must first take steps to:
get a copy of the will and the deceased’s financial records
take possession and control of all assets ensure that a proper inventory is made and
that appraisals are obtained where necessary make sure that all required insurance and
bonding is in place There is another reason. An estate trustee
will be putting more pressure on themselves than they should by making piecemeal distributions.
Regardless of value, making a quick distribution to one of the beneficiaries will only give
rise to all the other beneficiaries clamoring for their entitlements. The estate trustee
may not be in a position for some time to be able to make a proper distribution to all
other beneficiaries. This will only lead to headaches for the estate trustee.
Trustee of parents estate: Why some children may not want to be an estate trustee
There can be danger in being an estate trustee. In my last blog, I highlighted specific expertise
and knowledge that an estate trustee must possess. I also discussed how a licensed insolvency
trustee (formerly called a bankruptcy trustee) also possesses the same skill set required
of an estate trustee. A trustee, including an estate trustee, acts
in a fiduciary capacity. The estate trustee is fully accountable for all decisions made
and steps were taken with respect to the assets. Not only is it important to have the necessary
financial skills, but an estate trustee also has to be aware of the myriad of income tax
issues. Final income tax returns must be filed. The estate trustee has a duty to ensure that
all income tax legislation requirements are met, including the obtaining of clearance
certificates. Any loss to the estate as a result of things an estate trustee either
did or did not do, the estate trustee will be personally liable for.
The steps required in formulating an appropriate sales process for the different asset types
not being directly distributed to beneficiaries is not totally scientific. There is some art
to it as well. Making wrong decisions can expose the estate to loss of value, which
will blow back right onto the estate trustee. For these reasons, children may not wish to
take on the responsibility. The smart ones will understand that they do not possess the
required skill set. In other cases, the children may see the real possibility of creating family
strife if they were to take on the role of estate trustee. So what if children are named
in the will as the estate trustees, but they don’t wish to take on the role. Must they
anyway? Trustee of parents estate: Renunciation of
estate trustee Ontario If you have not yet applied for probate or
have otherwise not started to administer the estate, you do not have to be an estate trustee.
There is a specific form to complete in order to renunciate your position as an estate trustee.
Again, it must be done before you take any action as the estate trustee. If you have
already applied for probate, or have started administering the estate and now find that
you are in over your head, you cannot renunciate your position. You must make application to
Court for an Order removing you as the estate trustee. I would suggest that if you are the
sole estate trustee, you should have someone else lined up to succeed you. Otherwise, the
Court may not allow you to be removed. Trustee of parents estate: Two real-life examples
Example 1 In my blog, COURT APPOINTED ESTATE TRUSTEE
CASE STUDY: IF IT WAS EASY YOU WOULDN’T NEED US, I described one of our case studies
where we were appointed estate trustee to sell real estate. In that case, neither of
the beneficiaries were capable of agreeing on anything. They were also incapable of carrying
out the role of taking possession and control of the real property, insuring it and selling
it. Legal counsel for one of the beneficiaries made application to Court seeking an Order
appointing Ira Smith Trustee & Receiver Inc. as an estate trustee.
The Court made the Order. With the approval of the Court, we listed the property for sale,
obtained approval to our actions and activities, including a sale of the property. We then
proposed a distribution of funds which also was approved by the Court. We made the distribution
and obtained our discharge. This is a perfect example of how our skill set as a licensed
insolvency trustee was recognized by the Court and allowed us to carry out the mandate in
an efficient manner. Example 2
Recently, one of Ira Smith’s cousins needed to update her will and name an estate trustee.
This cousin has three children. None of the children believed that they had the necessary
skills and knowledge to be an estate trustee. They also agreed that it was not a good idea
for any of them to take on that role. However, there was one thing that the mother
and her three children could all agree on. That was that Ira had the necessary skills
to be the estate trustee. They unanimously agreed that it would be a good idea for Ira
to take on that role. Ira’s cousin asked him if he would. He told his cousin that he
was honoured that they all thought so highly of him. He agreed to be named in her will
as the estate trustee. The children were smart. They knew what they
didn’t know. They all agreed on the estate trustee being proposed. A huge weight was
taken off of the mother’s shoulders. Trustee of parents estate: Why not appoint
a Toronto bankruptcy trustee? I hope that you can see that the knowledge,
experience, and expertise of a licensed insolvency trustee would stand him or her in good stead
to act as executor, executrix or estate trustee of a deceased estate. Many times, it may be
a smart move to allow an independent neutral third party act as the estate trustee. Especially
one like a licensed insolvency trustee who is used to acting as the independent Court
officer.
If you have any questions about a deceased estate and the need for an estate trustee,
whether it is solvent or insolvent, contact the Ira Smith Team. We have decades and generations
of experience in helping people and companies overcome their financial problems. You don’t
need to suffer; we can end your pain.
In the meantime, if you have any questions at all, contact the Ira Smith Team.