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Conduct due diligence before agreeing to act as an ETDL

If approached to be an estate trustee during litigation (ETDL), it is important to agree to do so only with an understanding of what the role will entail and the inherent risk of personal liability, Toronto estates and trusts lawyer Suzana Popovic-Montag tells AdvocateDaily.com.

“An ETDL is appointed to manage and preserve the assets of an estate for its beneficiaries, usually in circumstances where a will or codicil has been alleged to be invalid — such that no other person possesses the authority to act as estate trustee,” says Popovic-Montag, managing partner with Hull & Hull LLP. “They can play an important role in making litigation run more smoothly, assisting in the gathering of evidence and encouraging settlement.”

If the authority of an estate trustee named in a will or codicil becomes unclear, an ETDL may be appointed to act in the interim, pending resolution of the dispute by settlement or trial, she says.

An ETDL may facilitate early steps in the estate administration, such as ascertaining its assets, attending to the payment of liabilities, making interim distributions, and/or liquidating assets to be later made available for distribution.

Historically, the appointment of an ETDL outside of the context of a will challenge was rare, but Popovic-Montag says more recently, courts have recognized the utility of appointing a neutral third party to administer an estate while litigation is ongoing in different circumstances.

As well, it’s not always necessary to seek the appointment of an ETDL where the authority of the personal representative is not an issue.

“For example, even where certain terms of a will may be unclear or subject to scrutiny, the parties may nevertheless agree that the named estate trustee possesses authority to administer the estate,” she says. “This may be the case where, for instance, the issue of the interpretation of other terms of the will — unrelated to the appointment of the trustee and/or the validity of the will as a whole — has been raised.”

Generally, the court will exercise its discretion to appoint an ETDL when there are assets to be managed and liabilities to be paid, as is generally the case when litigation arises, and may otherwise put these basic steps in the administration of the estate on hold, Popovic-Montag says.

When it comes to who should act as an ETDL, she says a party unconnected to the litigation is the most appropriate candidate for appointment, although exceptions may apply.

An ETDL has authority to deal with all the assets of the estate. Specifically, they have the authority to value, sell, hold, maintain, and lease the assets. However, she says they should remain mindful of their role as the custodian of the assets of the estate and administer only in a manner that is consistent with the potential outcomes of the litigation, without taking any steps that may disregard the succession rights of the parties.

“The ETDL should behave in an even-handed manner towards all parties,” Popovic-Montag warns. “This obligation extends to court-ordered productions. Any material that an ETDL receives should be circulated to all parties, and everyone should be apprised of the status of the administration on a regular basis.”

Given the extent of the role, a lawyer may be appointed as an ETDL. However, before agreeing to act, consider requesting the following documents for review:

  • a copy of the death certificate
  • details of the estate dispute
  • copies of the contested will(s)
  • a description of the estate assets (including their locations)
  • a draft consent to act as ETDL, and
  • a draft order giving directions

Additionally, she says it is advisable to avoid consenting to act without full disclosure of the scope of the work to be undertaken, the nature of the litigation and the assets to be administered.

“It’s not a good idea to act before considering any potential conflicts of interest as well as the impact that the time demands of the role will have on one's law practice,” Popovic-Montag says. “If you do agree to act, wade into the administration slowly. It is best to take control of the file, gain knowledge and ensure that all necessary steps to safeguard the estate are considered.”

An ETDL can ask for further directions from the court if necessary, but she notes it may not always be practical to do so.

“It may be most efficient to instead consult with the parties and build a consensus on uncontentious issues,” Popovic-Montag says. “An effective ETDL should maintain neutrality and attempt to foster areas of common ground between the parties whenever possible and appropriate.”

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