Incapacity of an estate trustee

What to do if executors and trustees cannot act

One of the most important decisions to make in planning your will is choosing your executor and trustee (referred to as an estate trustee). Who should act, whether you should have two or more act jointly, and who to appoint as the alternate(s) should your first choice be unable or unwilling to act can be critical to the success of your estate plan?

But what happens if all of your chosen estate trustees cannot act? Untimely deaths can occur, as can illnesses and injuries, which render a person incapable of fulfilling such a demanding role, or even incapable of managing property at all.

Additionally, one or more chosen individuals may decide that they cannot or do not wish to undertake the role, or may begin acting but later decide they cannot or do not wish to continue (see Stephanie Battista’s article on considerations when deciding whether to take on an estate trustee role.)

Where an estate trustee wishes to resign, whether or not a replacement is desired or required, and if there are no provisions included in the will regarding such matters, they must look to the law to determine if and how they can proceed.

First, a note about terminology. While we often refer to executors as “estate trustees” in Ontario (due to revisions made some years ago to the Rules of Civil Procedure, which introduced this term for executors and other legal representation of an estate where no executors are named), the role of an executor versus a trustee are distinct.

In summary, executors complete the initial administration of the estate, and trustees administer long-term trusts set up under the will. This division may or may not be relevant to any particular estate, but it can be legally important.

The Trustee Act (Ontario) has some helpful provisions to deal with replacing trustees, which can fill in if the trust agreement does not contain such provisions

Under the Trustee Act, if there are three or more trustees, a trustee may resign and no replacement is needed in their place. Where a trustee dies, wishes to resign, or becomes incapable or otherwise unfit for office (as set out more specifically in section 3(1) of the Trustee Act), the surviving or continuing trustee(s), or the estate trustee of the last surviving or continuing trustee, may appoint a replacement for the trustee who is no longer able or willing to act.

Further, the estate trustee of a last surviving or continuing trustee can take on that trustee’s role and exercise their powers. A sole or last surviving or continuing trustee can appoint by their will another trustee (or trustees) to replace them after their death.

Even though these provisions of the Trustee Act can assist in some situations, the Trustee Act states that some parts specifically do not apply to executors, and practitioners generally agree that these provisions cannot be relied upon by executors.

When an executor wishes to retire from that role or is no longer able to act, or where the trustee replacement provisions in the Trustee Act are not of assistance (which is the case in some circumstances), a court order will be required to remove an executor from office and to appoint a replacement executor or trustee. As you may expect, this can be a time-consuming and expensive exercise.

The good news is that you can include additional powers in your will to allow for the existing trustee or trustees, a selected individual, series of individuals with alternates or a group (such as adult, capable beneficiaries) to appoint additional and/or replacement executors and trustees.

You can also provide for a mechanism for the resignation of a trustee in all circumstances. Such powers are more often seen in inter vivos trusts, but can equally be included in wills, and are advisable where long-term trusts are part of the estate plan.

Thinking ahead for potential, although unhappy, scenarios with your professional advisors can save a great number of problems and significant cost later on, and ensure there is always a suitable trustee who can continue the administration of your estate and any trusts you include in your will.

Susannah Roth is a partner at O’Sullivan Estate Lawyers, based in Toronto. Her practice focuses on estate administration, including cross-border and multijurisdictional administration, advising attorneys and guardians of property, executors, administrators and beneficiaries, real estate transfers and rectification, estate planning (including wills, powers of attorney, insurance and testamentary trusts), and estate litigation. This article originally appeared in the O’Sullivan Estate Lawyers blog. Reprinted with permission.

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The foregoing is for general information purposes only and is the opinion of the writer. It is not intended to provide specific personalized advice on any individual situation, including, without limitation, investment, financial, legal, accounting or tax advice. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your particular circumstances.