A testator may also want to appoint someone in the role of executor but not want that person to have the additional responsibility of administering an ongoing testamentary trust. In such situations, one or more other persons can be appointed to the role of trustee and a provision can be included in the Will stating that the transfer and delivery of the trust property to the trustees constitutes a full discharge to the executor, and that the executor is under no obligation to see that the terms and conditions of the trust are carried out.
A testator may wish to provide unlimited powers to an executor in administering the estate, or may choose to place limitations on what he or she can do. With respect to investing the assets of the estate, the Trustee Act imposes a “prudent investor” standard of care, which requires that an executor and/or trustee exercise the care, skill, diligence, and judgment that a prudent investor would exercise in making investment decisions. A trustee must consider the following criteria in planning the investment of trust property, in addition to any other criteria that is relevant to the circumstances:
- General economic conditions;
- The possible effect of inflation or deflation;
- The expected tax consequences of investment decisions or strategies;
- The role that each investment or course of action plays within the overall trust portfolio;
- The expected total return from income and the appreciation of the capital;
- Needs for liquidity, regularity of income, and preservation or appreciation of capital; and
- An asset’s special relationship or value, if any, to the purposes of the trust or to one or more of the beneficiaries.
As well, a trustee must diversify the investment of trust property to an extent that is appropriate to the requirement of the trust and to general economic and market conditions. It is not a breach of trust for a trustee to rely on professional advice or to delegate to a professional agent if a prudent investor would do so under comparable circumstances. An trustee may not authorize an agent to exercise function on his or her behalf, however, unless the trustee has prepared a written plan or strategy comprising reasonable assessments of risk and return, together with a requirement that the agent report to him or her at regular stated intervals.
Thanks for reading “The Estates Nutshell” – questions and comments are very welcome at estates@cklegal.ca.