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Executor and Trustee?

Why do modern wills almost always appoint one or more persons as ‘my Executors and Trustees’ in one of their first clauses? And why do they then state that thereafter the word ‘Trustees’ will be used in the will to refer to both of these offices? I suppose that the facile answer is, ‘Because we’ve always done it that way’. But the question cannot be dismissed so easily. As I have demonstrated at length on other occasions, the offices of executor and trustee are distinct and we must take care not to confuse them.[1] Moreover, they have different origins and in consequence they each retain many of their own particular characteristics. The office of executor originates in the law of probate and developed over many years in the ecclesiastical courts in England. We inherited that law in common law Canada and retain it still, even though the law of probate is now administered in the superior courts of most Canadian common law jurisdictions in Canada, while those courts also administer other laws, including equity and the law of trusts.[2] In contrast, the trust developed over many years in the Court of Chancery in England, and we have of course also inherited that law. But it is important that the two types of law remain distinct.

When we appoint a person as executor and trustee, we not only conflate the two offices which, for the reasons just expressed, is wrong, but the appointment also suggests that the one person is both executor and trustee from the outset. And that is also wrong. The executor is a fiduciary, who has the duty to administer the deceased’s estate. That includes arranging for the deceased’s funeral, gathering in her assets, paying her debts and expenses, constituting any trusts in accordance with the will, distributing the legacies and bequests, transferring any devises, and finally distributing the residue. Until that is done, the executor is not a trustee.[3] He may become a trustee of the trusts provided for in the will or not. That depends on what the will says. But if the will names him as trustee of those trusts, his office takes effect only when the trusts are constituted. And that does not happen until he, as executor, assents to transferring money or other assets from the estate to himself as trustee.

However, the law is clear that once the executor has administered the estate and the only thing she still has to do is to distribute the net assets to the beneficiaries, she becomes a trustee. That is because her task as executor has been completed.[4] At that point the executor should assent expressly to the vesting of the property in the beneficiaries and the trustees that may have been named. However, in most cases there is no express assent, but the law infers from her conduct that she has assented to the vesting of the property.[5] Thus, at that point she holds the property for the beneficiaries as trustee until it is transferred to them, and that may take some time when, for example, the beneficiaries are minors.

Thus, in my opinion, we should not name a person as ‘Executor and Trustee’. Is there any harm in doing so? Yes, because it confuses the two offices and their respective roles. However, as a practical matter, we have not worried about it in Canada.

Re McLean[6] considered the point in detail. The testator appointed three persons as executors of his will and trustees of his estate. They discharged their duties as executors by 1968, having established certain trusts in accordance with the will, and having transferred the residue to the persons beneficially entitled. In 1980 one of the original appointees resigned as trustee by deed. This was effective because his co-trustees consented.[7] However, he continued as executor. His mental and physical condition had deteriorated to such an extent that he could no longer carry out his office, so the other executors and trustees brought a motion to remove him as executor and also, if necessary, as trustee. The court held that it was not necessary to remove him as trustee, since his resignation from that office was effective. So, the court needed to remove him solely as executor and did so under s. 37 of the Trustee Act.[8] Section 2(2) of the Act does not permit an executor to resign but empowers the court to remove an executor under s. 37. The court distinguished Foxwell v Kennedy,[9] because, on the peculiar facts of that case, the court treated the offices of executor and trustee as inseverable.

Justice Osborne took note of the common practice of appointing the same person as executor and trustee and opined that this confusion of roles is compounded by the fact that s. 1 of the Trustee Act defines ‘trust’ to include the duties of a personal representative. Nonetheless he recognized the differences between the two offices. He also considered Re Heintzman.[10] In that case a corporate executor and trustee resigned as trustee and made an application for an order removing it as executor and appointing two of the deceased’s children in its stead. The other executors and trustees made an application to have the will varied to add the deceased’s children as trustees. The court accepted the resignation of the corporate executor and trustee as trustee and granted both applications. However, it expressed the view that the estate did not have to proceed under s. 37, since the executor’s work had been completed. I doubt that this is correct. Since an executor normally holds that office for life, removal under s. 37 seems necessary to ‘clear the decks’. Indeed, Justice Osborne said as much in paragraph 29 of McLean, where he stated: ‘After the executor has fully administered the estate the role of trustee is assumed. This, however, does not mean that the person appointed to fulfill both functions, ceases to be an executor merely because that function has been performed’. Consequently, the court granted the motion and removed the executor.

What the case says, though not in so many words, is that the two offices are successive in time or run chronologically. The person appointed to both offices acts as executor exclusively until administration is complete. After that she assumes the office of trustee, unless of course the will appoints someone else in that role. Heintzman effectively comes to the same conclusion, although again not in so many words. This was also the conclusion of an early text[11] and the current edition continues to be of that view.[12]

Therefore, appointing a person as executor and trustee is not problematic, so long as we understand and remember that the two offices operate sequentially: first the executor and then the trustee.

But there is another practice that may have more significant consequences. Most modern Canadian wills contain another clause that appears near the beginning of the wills. This clause gives all the testator’s property to the trustees he has just appointed upon trust, first to pay all the deceased’s debts and then to distribute the estate in accordance with the will. I confess that I had not paid much attention to this clause, but in his recent excellent article, ‘Scottish Trusts in the Common Law’, Lionel Smith draws attention to it.[13] He points out, ‘it is highly unlikely that testators wish to promote their creditors into trust beneficiaries’ and refers to an article by P. Millett, ‘The Quistclose Trust: Who Can Enforce it?’[14] who noted that creditors do not have the right of enforcement that trust beneficiaries enjoy. In a subsequent email exchange, Smith drew my attention to an English case, Re K (Deceased),[15] in which the court was faced with a similar clause and expressed similar concerns. Such a clause could have the effect of giving creditors whose claims were statute barred to be paid before the beneficiaries.[16] But in fact, creditors are not beneficiaries. In Re Blow, Governors of St Bartholomew’s Hospital v. Campden,[17] counsel argued that creditors were beneficiaries of a trust because of the fiduciary duties owed by personal representatives. However, the majority of the Court of Appeal rejected this argument. Swinfen Eady LJ said, ‘An executor is not an express trustee for residuary legatees or next of kin, and certainly not for creditors’.[18]

I agree with Smith that such a clause is unnecessary. The executor, being a fiduciary, has the duty to pay the testator’s debts, as well as the duty to distribute the net estate to the beneficiaries in accordance with the will. No trust is necessary for those purposes. In fact, it is otiose. The executors have a right to be paid no matter what the will says[19] and they have priority over the beneficiaries. Therefore, neither the executors nor the trustees have to be told to pay them. There is no harm in telling the executors (not the trustees) to do so, of course, especially as a way to inform lay executors of their duties. It may prevent them from distributing the estate before paying the debts. And thus it will serve to protect them from liability should they do so. They would be personally liable to the creditors if they were harmed by the distribution. Clearly, the will has to instruct the executors (not the trustees) about how and to whom they should distribute the net estate.

I wonder how long the practice of turning the whole estate into a trust (also for creditors) has existed. Did this happen after legislation was enacted in England[20] and copied in the ‘colonies’ which states that on a person’s death, ‘whether testate or intestate’, the person’s property, ‘despite any testamentary disposition, devolves to and becomes vested in his or her personal representative … as trustee for the persons by law beneficially entitled thereto … subject to the payment of the person’s debts. …’?[21] Elsewhere I pointed out that this statutory ‘trust’ is not a true trust but was enacted in this form to prevent the artificial destruction of contingent remainders and executory interests by turning them into equitable interests.[22] Proof that this kind of legislation did not convert executors into trustees can be found in Commissioner of Stamp Duties (Queensland) v. Livingston,[23] and other cases,[24] which point out emphatically that a personal representative is not a trustee. They reached this conclusion despite the existence of the above legislation.

In his article Smith points out there was earlier legislation in which executors are called trustees. This is the Executors Act 1830.[25] This Act reversed the old common law rule that an executor became entitled to the undisposed residue of the personal estate of the deceased person for himself. Section 1 provided that the executor or executors ‘shall be deemed by courts of equity to be a trustee or trustees’ for the statutory next of kin unless the will expressly left the property to them. In fact, that is how the courts of equity applied the common law rule.  The legislation was copied in the ‘colonies’.[26] Smith’s point is that calling personal representatives trustees derives from the progressive encroachment by equity on testamentary matters, in consequence of which statutes adopted equity’s practice of referring to executors as trustees. He says, ‘The Court of Chancery appropriated jurisdiction over contentious matters of succession in the 17th century, and as it developed its principles of fiduciary administration, they were naturally applied to personal representatives’.[27]

Thus, it seems that equity is to blame for much of the conflation of the two offices. Not all of that has been bad, but we should ensure that it does not completely overwhelm the law of probate. And that was the burden of my article on ‘Discrete Functions’.[28]

[1]    Albert H. Oosterhoff, ‘Locus of Title in an Unadministered Estate and the Law of Assent’ (2018), 48 Adv. Q. 41, §2 (‘Locus of Title’); Albert H. Oosterhoff, ‘Locus of Title in an Unadministered Estate Redux’, http://welpartners.com/blog/2020/02/locus-of-title-in-an-unadministered-estate-redux/; Albert H. Oosterhoff, Why Does Ontario Have Estate Trustees’, https://welpartners.com/blog/2021/05/why-does-ontario-have-estate-trustees/.

[2]    For a detailed description of the distinct jurisdictions see Albert H. Oosterhoff, ‘The Discrete Functions of Courts of Probate and Construction’ (2017), 46 Adv. Q. 316, §§1-4, including the Excursus to §4 (‘Discrete Functions’).

[3]    On this point, see also Re Blow, Governors of St Bartholomew’s Hospital v. Campden discussed in the text at footnote 17, infra.

[4]    It is true that she remains an executor for life (unless her appointment was for a shorter period or the court removes her from the office), but her duties qua executor have ceased (although they can be reactivated if further assets of the deceased are discovered later).

[5]    Attenborough v. Solomon, [1913] AC 76 (HL) at 82, per Viscount Haldane. See also In re Ponder; Ponder v. Ponder, [1921] 2 Ch. 59 and Re Cockburn’s Will Trusts, [1957] Ch 438; Re Munsie Estate, 1941 CarswellOnt 7, [1941] 2 DLR 778. And see Oosterhoff, ‘Locus of Title’, footnote 1, supra, §3.3.4, which refers to a number of Canadian cases on point.

[6]    1982 CarswellOnt 614, 11 ETR 293, 37 OR 2d 164 (HC).

[7]    See the current Trustee Act, RSO 1990, c, T.23, s. 2(1).

[8]    Ibid.

[9]    1911 CarswellOnt 180, 18 OWN 782 (HC), affirmed 1911 CarswellOnt 372 (Div. Ct.).

[10]   1981 CarswellOnt 494, 31 OR 2d 724 (HC).

[11]   Charles Widdifield, Surrogate Court Practice and Procedure, 2nd ed. (Toronto: Carswell, 1930) §15.1.1, p. 15-3.

[12]   Widdifield on Executors and Trustees, 6th ed., by Carmen Thériault (Toronto: Carswelll, 2005, loose leaf edition), §15.1.1, p. 15-3.

[13]   (2021), 40 ETPJ 309 at 331-333. The article is a revised and annotated version of a lecture he gave in Edinburgh in 2010 that was published in Edinburgh in 2013.

[14]   (1985), 101 LQR 269 at 288-99

[15]   [2007] EWHC 622 (Ch).

[16]   Ibid., at para. 36ff.

[17]   [1914] 1 Ch 233 (CA).

[18]   Ibid, at 246.

[19]   In Re K (Deceased), ibid, para. 36 the testator purported to give specific legatees priority over the creditors, but counsel for the administrators acknowledged that the testator lacked the power to do so.

[20]   Land Transfer Act 1897, 60 & 61 Vict, c 65, s. 2(1).

[21]   Taken from Estates Administration Act, RSO 1990, c E.22, s. 2(1), emphasis supplied.

[22]   See Oosterhoff, ‘Locus of Title’, Footnote 1, supra, §2.7, Excursus.

[23]   [1965] AC 694, [1964] 3 All ER 692 (PC).

[24]   Discussed by me in ‘Locus of Title’, supra, §2.2.

[25]   11 Geo IV & 1 Will IV, c 40.

[26]   See, e.g., Succession Law Reform Act, RSO 1990, c. S.26, s. 33. And see Oosterhoff on Wills, 9th ed by Albert H. Oosterhoff, C David Freedman, Mitchell McInnes, and Adam Parachin (Toronto: Thomson Reuters, 2021), §13.4.2.(i).

[27]   Smith, footnote 13, supra, p. 330.

[28]   Footnote 2, supra.

This paper is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This paper is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

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