A family member or friend has died and you are named as the executor and trustee under their will. You are flattered and honored, but you’ve never acted in this capacity before and you’re unsure of what exactly it means. One key thing you should be aware of is that, if you take the role, the law considers you to be a fiduciary –meaning your conduct will be held to high standards developed by the courts over many centuries.
The hallmarks of a fiduciary relationship, as summarized by the Supreme Court of Canada, are as follows:
- The fiduciary has scope for the exercise of some discretion or power.
- The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests.
- The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power.
Commonly recognized categories of fiduciary relationships include trustee/beneficiary, director/ corporation, lawyer/client, doctor/patient, and partners within a business partnership.
As an executor and trustee, your fiduciary obligations include the following:
- Take due care. In dealing with the estate, you must exercise an appropriate level of care, skill and diligence. You have to care for the trust property in the manner that a reasonably prudent person would care for the property of others for whom they felt a moral obligation to provide.
- Act in good faith. Your decisions must be based on proper considerations, and the interests of the beneficiaries. You can’t use your position to benefit yourself. You must scrupulously avoid entering into deals or arrangements that benefit you in some way or that would otherwise cause your personal interests to conflict with your position as trustee.
- Remain impartial. You can’t favour one beneficiary or group of beneficiaries over another, regardless of your personal feelings and alliances. If the interests of two groups of beneficiaries are in conflict – for example the deceased’s spouse is to receive trust income for life and his children receive the capital on her death – you must take particular care to balance their interests in an even-handed way.
A breach of a fiduciary obligation can have serious legal, financial and reputational implications. If you are finding it difficult to carry out these duties, or are not sure how they apply to you, ask for help.
The Public Guardian and Trustee of British Columbia (the “PGT”) plays many roles in administering and overseeing matters for individuals who lack the ability to do so. For example, the PGT may act as the Committee of the Estate, managing the financial affairs of someone who is unable to do so himself. The PGT also can manage the Estate of a missing person, review the accounts of private Committees, act as a Representative under the Representation Agreement Act, administer an Estate, and act as litigation guardian in any number of types of claims.
In contested Committeeship applications, where family members are unable to agree on which of them will act as the Committee, lawyers will often suggest a neutral third party be considered to act as the Committee of the Estate. Trust companies and the PGT are two of the commonly suggested third parties. Many clients mistakenly believe that the PGT would be the better choice, because it will be “free”. This is not correct.
The PGT plays a critical role in the lives of many British Columbians, particulary those who have no family members able to assist. In order to carry out its mandate, the PGT does in fact charge fees, payable by the Estate of the affected person. The fees are set by the British Columbia government, through the Public Guardian and Trustee Fees Regulation. The Regulation was updated, effective August 1, 2014. The amounts payable to the PGT differ in some cases from fees described in other legislation, such as the Trustee Act. While these fees do not fund the whole of the PGT’s operations, they do contribute to the cost of the operations (note that the PGT does not operate at a profit).
For a fuller explanation of the many roles of the PGT, check out their excellent website here.
A committee is a person or entity appointed by the Court to make decisions on behalf of an adult that is not capable of making his or her own decisions about health care and personal affairs and/or financial and legal affairs (the incapable adult is called the “patient”). On December 1, 2014, section 18(2) of the Patients Property Act will become law and impose additional statutory duties on committees. That section will read as follows:
18 (2) A committee must, to the extent reasonable, foster the independence of the patient and encourage the patient’s involvement in any decision making that affects the patient.
This means that committees have a legal duty to promote the patient’s independence and consult the patient about decisions, to the extent that promoting and consulting is possible. Of course, the performance of the duty will depend on the level of mental capability of the patient in the particular case. The new statutory duty is in addition to this existing duty set out in the Patients Property Act:
18 (1) A committee must exercise the committee’s powers for the benefit of the patient and the patient’s family, having regard to the nature and value of the property of the patient and the circumstances and needs of the patient and the patient’s family.
It is not difficult to imagine situations where a decision made “for the benefit of the patient” does not “foster the independence of the patient”. While these duties should be seen as complimentary rather than conflicting, committees must carefully consider each duty before making decisions on behalf of the patient.
Thanks for reading!