RESIGNATION AND RENUNCIATION OF EXECUTORS AND TRUSTEES

Introduction

Being a trustee or an executor involves taking on a great deal of risk and responsibility, typically for little reward. While there are many good reasons for taking on the job, any number of circumstances could arise where it may be advisable for a trustee or executor to look for a way out. Unfortunately, calling it quits is not as easy for a trustee or executor as one might expect.

Although the term “estate trustee” appears in the Succession Law Reform Act, we will use the terms “executor” and “trustee” herein to avoid confusion and to accord to the language used in the Trustee Act.1 As well, the roles, powers and duties of an executor and of a trustee differ under the legislation and the common law, whatever nomenclature is used.

Renouncing or Retiring as Trustee – Statutory Routes

Where one is acting as trustee and not as executor, the Trustee Act contains provisions to allow resignation without the involvement of the court under certain circumstances.2

If there are three or more trustees, the Act provides that one can step down by deed declaring a desire to be discharged.3 If the co-trustees consent by deed, then the trustee will be deemed to have retired.4 This provision does not apply to an executor or administrator, and will be of no assistance to an estate trustee looking for an out from that role.5

Where there are only one or two trustees, section 3 of the Trustee Act provides for a way out if a trustee wants to be discharged from the role or refuses to act.6 In this case, if the trust instrument nominates a person responsible for appointing new trustees, he or she can appoint a new trustee by way of writing.7 If there are two trustees, then the remaining trustee can appoint a replacement of the resigning trustee.8 The wording of the section is unclear, however, as to whether a sole trustee can rely on this provision to resign and replace him or herself.9

In any event, the will or trust instrument itself should be the first place to look for a trustee or an executor desiring to resign or renounce. If the instrument provides a protocol for the retirement or replacement of trustees, then trustees can, generally speaking, rely on that.10 The Trustee Act provides at section 67 that the powers and rights that it grants to trustees are in addition to those granted by the trust instrument.11

If retirement or resignation by deed is not an option, then the assistance of the court must be sought. One may bring an application under section 5 of the Trustee Act for the court to substitute a trustee with a new one.12 The court has inherent jurisdiction to remove a trustee as well.13

Renouncing or Resigning as Executor

The courts are eager to have someone to fix with the responsibility for the administration of estate or trust assets and to impose upon him or her the associated duties, powers and liabilities.

There is a significant distinction in the law regarding resignation of an executor based on whether or not the executor has begun to act. Under the Estates Administration Act, all property vested in a person (except jointly-held property), devolves and becomes vested in that person’s personal representative on his or her death.14 This occurs at death, and not at the time of probate.15 Once an executor has begun to act as executor, he or she cannot retire from the position without an order of the court removing him or her.16

Such an order can be obtained under section 37 of the Trustee Act.17 The grounds for removal of an executor are the same as those upon which a court can remove a trustee.18

Intermeddling and Executors de Leurs Torts

Where an executor has taken steps which indicate an acceptance of the role, he or she will no longer be able to renounce his or her right to the role and will require the assistance of the court to be removed from the office. The key seems to be acts which evidence the putative executor’s intention to take on the role. Nonetheless, some acts may unintentionally pin the role on an unsuspecting individual.

The 1867 case of Vannatto v. Mitchell,19 is something of an outlier but sets out the relevant principles. The named executors had renounced, but had prepared an inventory, assisted in threshing grain that had been sown by the testator, and one of the executors had assured a creditor that he would be paid. Surprisingly, the court did not hold them accountable as executors, although the result might be different today. Spragge V.C. set out the following:

The question which lies at the threshold of the plaintiffs’ case is, whether they acted in the affairs of the estate so as to render themselves liable; and I agree with Mr. Strong, that whatever acts will make a man liable as an executor de son tort, will be deemed, and taken by the Court as an election by executors named, to act as executors; and that whatever executors named do, in relation to the effects of the testator, which shews an intention on their part to take upon them the executorship, will amount to an acceptance of the office; and I think it may also be stated, that in as much as the assets of the testator vest in the executors without probate, any authority that they may exercise in relation to them will be an acceptance of the executorship.20

VOLUME 18, NUMBER 2, MAY 2013

By: Suzana Popovic-Montag and Joshua Eisen

Breakfast Series

The Probater is a quarterly newsletter provided as an information service. It is a summary of current legal issues of concern to estate law practitioners. The comments and articles are not meant as legal opinions and readers are cautioned not to act on information provided

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RESIGNATION AND RENUNCIATION OF EXECUTORS AND TRUSTEES Continued Spragge V.C., in coming to his decision, deduced from the prior authorities the rule that “in the case of persons named as executors, it is generally a question of intention; but that nevertheless they may commit themselves by acts contrary to their intention”.21

If a named executor is sued in his or her capacity as executor and files a defense without denying that he or she has taken on the role, that may be enough to constitute an acceptance of the job.22

Even an individual who is not a named executor can be held liable as an executor de son tort for his or her actions while intermeddling with an estate. Whether or not an individual is acting as an executor de son tort is a question of law.23 An act that would render a stranger an executor de son tort will very likely fix a named executor with the role.24

An individual who assumes responsibility for the property of the testator mistakenly believing it to be his or her own may not be liable as an executor de son tort.25 There must be an intention to usurp the role, and taking possession of assets under colour of title (even if the claim later turns out to be incorrect) does not render the possessor an executor de son tort.26

Filing an application for probate, even when not yet granted, appears to be sufficient to close the door to a named executor’s desire to renounce. A Manitoba court was presented with a request by an executor to resign during a trial on an application to prove a will in solemn form. The court declined to allow him to do so, stating that “the courts have been reluctant to allow an executor to renounce after having intermeddled in the estate, or after having applied for probate”.27

It appears from the cases that the best way for a named executor to be certain that he or she is not bound to the position is not to take any steps at all with respect to administering the estate. He or she should avoid signing any documents as executor with financial institutions, funeral homes, etc., and avoid identifying himself or herself as executor. He or she should visit a lawyer and renounce in writing as soon as possible.

Can an Executor and Trustee Resign in One Capacity and Not the Other?

The distinction between the roles of executor and trustee is somewhat blurry. In particular, the Succession Law Reform Act has introduced the term “estate trustee” for a person in the role of executor, further muddling the distinction.28

In McLean, Osborne J. made the following observations about the overlap between the two roles:

It is common practice for a testator to appoint the same person to act as both executor and trustee. Wills rarely divide the function of that person between the two roles in any specific way. The confusion of roles is compounded by the fact that under the Trustee Act the personal representative holds the assets of the estate in trust.29

There are differences in the ability of a trustee and an executor looking to retire. As discussed above, the Trustee Act provides mechanisms for the retirement of trustees, but the option to resign under section 2 by way of deed is not available to an executor.30 The differences in function between the two offices need to be examined.

There is a line of case law which seems to indicate that the distinction between the roles of trustee and executor is chronological.31 After gathering in the assets and establishing the trusts required by the will, the role of trustee begins.32

In McLean, the court held that an executor and trustee could resign from the role of trustee by way of deed under subsection 2(1) of the Trustee Act, but nonetheless continued to be an executor until removed by the court.33 This was held to be true notwithstanding that the functions which are traditionally carried out by an executor had been completed (trusts under the will had been set up and the residue had been distributed).34

Although it is generally possible to resign as trustee without relinquishing the role of executor, it may be best practice to seek to be removed as executor as well in order to avoid unexpected surprises and future liability. An application for removal under section 37 of the Trustee Act may be ideal.35

Conclusion

The differences between executors and trustees at common law and under legislation have created a regime where one individual can hold both offices, but with different rules that attach to each. A trustee can resign, but an executor may not resign once he or she has started to act. A person can resign from the office of trustee while continuing as executor. The evolution of the term “estate trustee” has inspired discussion as to whether or not there should be any distinction at all between the two offices. It will be interesting to see if and how the two roles of executor and trustee will change or evolve, converge or diverge in the future.__________________________________________________________________________________________

17 Trustee Act, supra note 1 at s. 37(1).18 Ibid.19 Vannatto v. Mitchell (1867), 13 Gr. 665 (Ont. Ch.).20 Ibid. at para. 4.21 Ibid. at para. 5.22 McDonald v. McDonald (1890), 17 O.A.R. 192 (Ont. C.A.), aff’d 1892 CarswellOnt 31, 21 S.C.R. 201 (S.C.C.).23 Padget v. Priest (1787), 2 Term. Rep. 97, 100 E.R. 53 (K.B.).24 Coleman v. Ryan (1923), 55 O.L.R. 182 (C.A.).25 O’Reilly, Re (No. 2) (1980), 7 E.T.R. 185, 28 O.R. (2d) 481, 111 | D.L.R. (3d) 238, aff’d by O’Reilly (No. 2), Re, 123 D.L.R. (3d) 767n, 1981 CarswellOnt 1306, 33 O.R. (2d) 352 (Ont. C.A. 1981).26 Femings v. Jarrat (1795), 1 Esp. 335, 170 E.R. 376.27 Stordy v. McGregor (1986), 42 Man. R. (2d) 237.28 Succession Law Reform Act, supra note 1.29 Re McLean (1982), 135 D.L.R. (3d) 667 (On. H.C.J.) [McLean].30 Trustee Act, supra note 1 at s. 2(2).31 Widdifield, supra note 9 at 15-3.32 See Heintzman, Re (1981), 9 E.T.R. 12 (Ont. H.C.) and Munsie, Re, [1941] 1 W.W.R. 334 (B.C. S.C.). 33 Trustee Act, supra note 1 at s. 2(1); McLean, supra note 29.34 McLean, ibid.35 Trustee Act, supra note 1 at s. 37.

1 Succession Law Reform Act, R.S.O. 1990, c. S.26 [Succession Law Reform Act]; Trustee Act, R.S.O. 1990, c. T.23, [Trustee Act]. 2 Trustee Act, ibid.3 Ibid. at s. 2(1).4 Ibid.5 Ibid. at 2(2).6 Ibid. at 3(1).7 Ibid.8 Ibid.9 Carmen S. Theriault, ed., Widdifield on Executors and Trustees, 6th ed. (Toronto: Thomson Carswell, 2002) [Widdifield] at 15-4.10 Ibid. at 15-1.11 Trustee Act, supra note 1 at s. 67.12 Ibid. at s. 5.13 St. Joseph’s Health Centre v. Dzwiekowski, [2007] O.J. No. 4641 (Ont. S.C.J.), at para. 25.14 Estates Administration Act, R.S.O. 1990, c. E.22, at s. 2(1).15 Canadian Encyclopedic Digest, 4th ed. “Executors and Administrators (Ontario)”, vol. 25 (Ontario: Thomson Carswell, 2010) at I.2.16 A.H. Oosterhoff et al., Oosterhoff on Trusts: Text, Commentary and Materials, 6th ed. (Toronto: Thomson Canada Limited, 2004), at 920; see also Cooper (No. 1), Re, 1976 CarswellOnt 924, 21 O.R. (2d) 574, 90 D.L.R. (3d) 710.

EDITOR: Suzana Popovic-Montag