June 8, 2020

A recent news story highlighted one estate trustee’s regretful experience administering an estate.  Due to lengthy litigation involving the validity of the Will and an unsuccessful result for the estate trustees, the estate trustee was ordered to personally pay over $100,000.00 in legal fees.  While the personal cost order was a result of a unique number of factors, the “loser pays principle” requires estate trustees to asses risks when engaging in litigation as a personal cost award is a possibility despite the principle of trustee indemnification.

Being an estate trustee can be a difficult.  Administering an estate involving multiple disputes can be grueling and risky.  When deciding whether or not to accept an appointment as an estate trustee, some factors to consider include:

Time Commitment – Administering an estate can be complex and time consuming.  It may take years to finalize an estate’s administration. Juggling work, family, and other commitments along with estate trustee obligations is an important consideration;

Record Keeping and Reporting Obligations – Related to the time commitment consideration, it is important to remember that you are being asked to manage someone else’s assets.  There is a high standard of record keeping and reporting required.  Failing to keep proper records or reporting to beneficiaries can result in reduced compensation and a costly passing of accounts application were you may be held responsible for paying court costs;

Personal Liability for Unpaid Debts and Taxes – If an estate trustee distributes funds to beneficiaries before all estate taxes and debts are paid, creditors may pursue the estate trustee for payment or otherwise hold them responsible;

Personal Liability for Investment Losses – An estate trustee may be held responsible for economic losses related to estate assets, such as poor performing investments or property damage.  There are defenses for such losses but a cost is involved in defending against those claims;

Risk of a Personal Cost Award if Engaged in Litigation;

Conflict of interest – An estate trustee must treat all beneficiaries equally.  If there is a conflict of interest, an estate trustee should consider renouncing or resigning and seek the appointment of an alternate estate trustee or professional trustee; and

Emotional Investment – The emotional cost of trying to mitigate competing interests is exhausting and unrewarding.  In a hostile atmosphere, an estate trustee will face intense criticism by the beneficiaries and have a difficult time reaching an agreement about compensation.

In a contentious situation, being an estate trustee can be a thankless and difficult job.  There are ways to mitigate risks including engaging professionals to assist with the estate‘s administration and obtaining legal advice.    As a litigator, I often encounter situations where the early involvement of professional advice would have assisted the estate trustee by making them aware of the risks they faced and the defenses available to them.