Estates & Wills & Trusts

Keep detailed records, receipts as estate trustee

By AdvocateDaily.com Staff

It is vital for estate trustees to keep detailed records in case they are ever forced to formally pass accounts, says Toronto trust and estate litigator Felice Kirsh.

While executors are rarely required to submit to a formal passing of accounts in court, Kirsh, a partner with Schnurr Kirsh Oelbaum Tator LLP, says their task will be much easier if they keep track of their work.

“The process is something a lay trustee might not have heard of, but anyone who has been to a lawyer will have been told to keep hold of all their records and receipts,” she says. “You want to track every penny that goes in and out of the estate just in case you are ever called upon to pass accounts.”

A potential application to pass accounts typically arises towards the end of an executor’s job, after the trustee has collected all the assets and paid off all the debts owed by the deceased, Kirsh tells AdvocateDaily.com.

Before a final distribution is made, she explains that executors will usually hold back an appropriate amount to cover unpaid taxes, while seeking releases certifying beneficiaries’ approval of their accounts.

“If the beneficiaries won’t give you that release, then you will have to pass accounts,” Kirsh says. “It’s basically a court-ordered release.”

The need for beneficiaries’ approval has its roots in the fiduciary duty owed to them by executors, says Kirsh.

Trustees who keep detailed records of all their work may be able to satisfy beneficiaries that everything is in order, heading off the need for a formal application.

However, Kirsh says some may persist with their objections and disputes frequently arise over investment decisions, particular disbursements, or the level of compensation requested by the trustee.

Even in those cases where a formal court application is launched, she says the parties will often work out their differences via a negotiated settlement or mediation, without the need for a full hearing before a judge.

“Generally, objections can be sorted out, and a consensus can be reached, allowing for a release to be signed,” Kirsh adds.

This is the first part of a mini-series about the passing of accounts in estates disputes. Stay tuned for part two, where Kirsh will explore the pros and cons of forcing a trustee to pass accounts.

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