Acting as a fiduciary can be particularly onerous for a lay person. As a lawyer whose client may be considering taking on the role (or is currently in the role) of an estate trustee, attorney for property or a trustee, it is of utmost importance to equip your clients with the knowledge and tools they need to prepare for their role, particularly where there is a need to pass their accounts in court.
A passing of accounts is essentially a court audit of a trustee’s accounts for the period of time in which the Deceased or incapable person’s property is being managed. Passing of accounts may be initiated by a beneficiary or another person who is challenging the accounts or it may be compelled by way of a court order. Fiduciaries may also voluntarily pass accounts. Where there is a minor beneficiary involved or there is an incapable person, the Office of the Children’s Lawyer or the Office of the Public Guardian and Trustee need to be notified.
Bearing this in mind, it is wise to advise your clients of the following:
1. Keep accurate and up to date records
It is of particular importance for estate trustees/ fiduciaries to maintain accurate records of all transactions taking place within an estate or trust. Source documents such as bank statements, deposit slips, receipts, etc. should be kept safe. It may be wise to work with an estate accountant from the get go to ensure all transactions are accounted for.
This is particularly the case when it is a contested passing of accounts. There may be disputes about particular transactions or which assets are considered to form part of the estate.
One of the most litigated aspect of estate accounting is executor compensation. The right to take compensation is derived from Section 61 of the Trustee Act. Estate trustees/ guardians are entitled to take compensation based on a fair and reasonable allowance for their time, care and trouble. It is important to keep dockets for time spent doing executor’s work.
3. Court Form
The form of accounts on a passing of accounts need to be in court form. The proper form of the accounts are set out in Rule 74.17 of the Rules of Civil Procedure. Depending on the complexity of the accounts themselves (i.e. multiple investment accounts, properties, etc.) it may be wise to hire a professional to prepare the accounting in the proper format. Fees paid for such services are deducted from the compensation as opposed to the estate or the guardian’s accounts as the preparation of the accounts are considered to be one of the duties of the fiduciary.
4. Deadlines, deadlines and more deadlines
Depending on whether the matter is uncontested or not, there are different rules around filing deadlines and the materials to be filed (i.e. on a contested passing of accounts, a Notice of Objection must be filed at least 35 days before the hearing date specified in the Notice of Application).
While this is a non-exhaustive list, the key take away when advising your clients who take on the role of a fiduciary is that it is not a responsibility to be taken lightly. Accurate record keeping both of transactions and the fiduciaries’ time will go a long way to minimize or prevent unnecessary and costly litigation.