Provincial legislation governing trustee course of conduct stipulates that a trustee may invest trust property in any form of property in which a prudent investor might invest. It also outlines the criteria that a trustee must follow in planning the investment of trust property which includes but is not limited to the following:
1. General economic conditions;
2. The expected tax consequences of investment decisions or strategies;
3. The expected total return from income and the appreciation of capital; and
4. Needs for liquidity, regularity of income and preservation or appreciation of capital.
In Jackson Estate (Re), 2004 CanLII 17468 (ON SC), the court noted that two of the three co-estate trustees, Donald and Suzanne, who were the children of the deceased, fell below the standard of care for a prudent investor, to the detriment of the third co-estate trustee, the deceased`s second wife, Margaret. The will instructed that Margaret was to be maintained in the manner to which she had become accustomed during her marriage to the deceased. The court noted certain actions on the part of the co-estate trustees that are not reflective of a prudent investor, including:
1. The co-estate trustees overweighed the Estate`s portfolio in speculative stock, despite the fiduciary duty that they owe to the Estate and given the wording of the will. Specifically, the Estate went from one in which the deceased had no investments in equities, to one that was at one point over 70% invested in equities.
2. The co-estate trustees did not delegate to the relevant investment agent with enough care: There was no written plan or strategy developed with the agent by the co-estate trustees. It was not clear whether the agent called the co-estate trustees about any of the unwise investments. There was no evidence that the agent had a copy of the will in his file or knew that Suzanne was a co-estate trustee. There was no evidence that Donald and Suzanne had interviewed investment counsel to determine who should manage the portfolio for them. There was no letters of inquiry from Donald to the agent as to what was happening with the investment account, Suzanne was a silent investor and the estate lawyer`s son was running the account which was a conflict of interest.
3. The co-estate trustees did not keep an even hand between the interests of the three beneficiaries in that they preferred their own interests to that of their step-mother, Margaret. In particular, Donald admitted to the court under questioning that it was to his and Suzanne`s advantage to keep the capital as high as possible because they were the residual beneficiaries of it. This was why they never took any executor fees. In the judge`s view, this answer is the key to why Donald and Suzanne made such bad investments.
The court concluded that the capital loss that came about because of the investment policy the co-estate trustees embarked upon constituted a breach of trust and should properly be borne by the co-estate trustees or their issue. The court further concluded that all of the criteria have been met for their removal as trustees, to be replaced by a corporate trustee.
This case stands for the care that estate trustees should take in investing estate assets, particularly in light of statutory criteria and the provisions in the relevant trust or will. If you wish assistance regarding investment of estate assets or estate administration in general, please contact Andrea Kelly.
Andrea Kelly, Lawyer, has extensive experience in wills, trusts, powers of attorney and estate administration matters. She provides clients with a high standard of timely professionalism and expertise, incorporating a very thorough fact finding process. This is quite often enlightening for her clients and facilitates individually tailored services. If you would like to know more, feel free to use the easy contact form or read Andrea’s bio.