Removing An Estate Trustee Is Difficult
Most Wills names a specific person, or persons, to be the executor(s) or estate trustees of the estate. If a beneficiary does not approve of the choice, there is not much he or she can do about it. Courts are loathe to interfere with the choice of the testator who named the executor. A 2016 Ontario Superior Court of Justice decision illustrates how difficult it can be to remove an executor.
During the course of the marriage, the matrimonial home had been transferred from joint ownership to the wife, primarily to prevent the husband's creditors from seizing it. The wife left the husband a life interest in the property with the couple's four sons being residuary beneficiaries following his death. After the wife's death, in order to obtain better rates on a mortgage, the husband transferred the home into his name. He also increased the amount of the mortgage and paid himself $30,000 for what he claimed were repairs and improvements to the house. Three of the sons approved of these transactions but the fourth son brought an application to have his father removed as trustee.
In denying the application, the court stated:
A testator’s wishes as to who should act as trustee should only be interfered with in rare circumstances.
A named trustee should only be removed on the “clearest of evidence” and only where there is no option available other than to remove the trustee.
The main guide for determining whether a trustee should be removed is the “welfare of the beneficiaries.
A conflict of interest with the estate is one basis upon which an executor can be passed over.
The court found an absence of conflict of interest, despite the fact that the father transferred the house to himself. Rather, the court ruled, that the transfer had occurred to obtain preferable mortgage terms, thereby benefiting the beneficiaries. Moreover, since the renovations and repairs to the house had occurred, the father was justified in taking reimbursement. The beneficiaries were protected especially since the father had created a declaration of trust that he held the house for the four boys.
The Lesson for Beneficiaries: Removing a trustee is very difficult to do, especially in a situation where any conflict of interest is not clear. If you expect that a trustee or executor is acting in his or her own interest, it is better to put him or her on notice and require the executor to pass the estate's accounts. In this author's opinion, it is easier to establish certain transactions were made for the benefit of the executor and require repayment than to remove the executor.
The Lesson for Executors. Rather than subject yourself to scrutiny and a potential legal battle, it is better to obtain approval of the beneficiaries prior to major or controversial transactions. A little proactivity can save significant headaches and costs in terms of time and money.
Ricci v Ricci, 2016 ONSC 6614 https://www.canlii.org/en/on/onsc/doc/2016/2016onsc6614/2016onsc6614.pdf
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