Executor and Attorney Obligations: A “Good News” Story?

Executors and attorneys acting under a Power of Attorney are fiduciaries. Fiduciaries have many duties and obligations. Some of these include the requirement to not put their interests before their fiduciary obligations.

They also have an obligation to keep records. Unfortunately, many executors and attorneys fail to satisfy these fiduciary obligations. Sometimes this failure is due to willful neglect of educating themselves on their responsibilities, duties and obligations; other times, the failure is due to greed and actual theft.

The duty to keep records and accounts are requirements for all executors and attorneys. However, in Ontario, it is not always necessary to have the records and accounts approved by a court. Accounts are approved by the court by way of a Passing of Accounts. In many cases, this step is never required. Unfortunately, this leads to many executors and attorneys to being lulled into a false sense of security. This false sense of security encourages these fiduciaries to not keep the required records and accounts.

Not keeping the required records and documents up to date can have disastrous consequences if at the end of your time as a fiduciary, a passing of accounts is suddenly demanded. This passing of accounts could require records that stretch back for decades. Trying to put together a passing of accounts in a form acceptable by the court without having the required records and documents can be extremely stressful, time consuming and expensive. It is much easier to keep the proper records up to date throughout the process.

The court system in Ontario is full of stories of executors and attorneys failing to satisfy their fiduciary obligations. However, in today’s post, I get to talk about a “good news” story. In Re Daniel, Justice Di Luca was extremely pleased with the job done by Linda and Ted. The judge explained that:

[8] For well over 20 years, Linda and Ted provided assistance to Isabel and Wayne. While the assistance initially involved simple neighbourly tasks, in later years Linda and Ted became constructive full-time care attendants.

[9] Isabel and Wayne were an elderly couple with no next of kin and no one else to look after them. They were high net worth individuals. Wayne had a penchant for wise investing and amassed a significant portfolio. Isabel and Wayne were also engaged in philanthropy and dedicated a significant amount of money to a foundation named in honour of their deceased daughter.

[10] In their later years, their health declined. They both suffered strokes and were physically disabled. They were effectively confined to their home, though with the assistance of Linda and Ted they were able to continue living independently and together.

[11] Linda and Ted would regularly attend at the Daniels’ home and would perform all manners of chores and tasks, from banking, preparing tax returns, minor household repairs, grocery shopping and the like. They also drove them to a large variety of medical and other appointments, and assisted with purchasing medical equipment required to support independent living. Lastly, Linda and Ted would spend social time with the Daniel’s providing comfort and company.

A Passing of Accounts was voluntarily sought by Linda and Ted in order to have their compensation approved by the court. Justice Di Luca speaks glowingly of the efforts made to prepare the financial analysis for the time that Linda and Ted acted as attorneys and then as executors.

[17] In terms of finances, Linda and Ted assisted the couple with all of their day to day affairs. They acted conscientiously and scrupulously in this regard. This is confirmed by a detailed financial analysis…

[18] The accounting analysis is very helpful. It includes a source document review for a seven year period and includes a review of the Daniel’s complicated investment portfolio. Every material expense is reviewed, a reconciliation of investments accounts is undertaken and amounts are cross-referenced to the couple’s tax returns…

[19] The accounting analysis reveals no issues in terms of Linda and Ted’s handling of the couple’s funds. Not only were the funds well handled, over the period of the Austin’s stewardship the investment portfolio grew in value from $6.06 million to over $7.36 million.

Estate planners always advise their clients to be sure to pick an executor or attorney that has the skills and desire to satisfy their obligations. The Re Daniel case is a great example of how smoothly everything can go if the right fiduciary is chosen.

For people that are acting as fiduciaries, it may encourage you to know that Justice Di Luca approved compensation in the amount of $757,659.87 for Ted and Linda.