The law imposes a duty on all trustees, including estate trustees, to keep accurate and fulsome accounts. A trustee must keep a complete record of their activities and be always able to prove that they administered the estate prudently and honestly. The ability to properly account may impact the amount of compensation an estate trustee is entitled to.

Passing of Accounts

An application by a fiduciary to pass accounts is not strictly, in legal terms, a mandatory requirement. Rather, the fiduciary may choose to pass its accounts, or alternatively, may be compelled to do so by those legally entitled to request a passing. The legal duty is in the maintenance of the accounts as fiduciaries. The right to compel an accounting is not an absolute right, regardless of the circumstances, rather it remains within the discretion of the court to either grant or refuse such an order.

In Zimmerman v. McMichael Estate (“Zimmerman”), Justice Strathy (as he then was) stated that:

[31] A trustee has an obligation to keep proper accounts. A trustee must keep a complete record of his/her activities and be in a position at all times to prove that he/she administered the trust prudently and honestly. He/she must have the accounts ready and give full information whenever required: Carmen S. Thériault, Widdifield on Executors and Trustees, 6th ed. (Scarborough, Ont.: Carswell, 2002) at p. 13-1; Waters’ Law of Trusts in Canada, above, at p. 1063; Sandford v. Porter, [1889] O.J. No. 43, 16 O.A.R. 565 (C.A.).[1] [emphasis added]

The jurisdiction of an estate trustee to pass accounts arises from section 48 of the Estates Act,[2] as follows:

Accounting by executor trustee

1. 48. Every executor who is also a trustee under the will may be required to account for their trusteeship in the same manner as they may be required to account in respect of their executorship.[3]

Beneficiaries under a Last Will and Testament are entitled to accurate information and accounting from estate trustees.  In Estate of Arthur O. Sawdon. v. Watch Tower Bible & Tract Society of Canada, Justice Ricchetti stated that the beneficiary of an Estate is entitled to all the documentation that an estate trustee has.^[4]

The procedure and form for estate trustee accounts is set out in the Ontario Rules of Civil Procedure,^[5] specifically Rule 74.16 to Rule 74.18. Rule 74.14(1) states that estate trustees must keep accurate records of the assets and transactions in the estate. Pursuant to this Rule, estate trustee accounts filed with the court must contain the following:

1. A statement of the original assets at the start of the accounting period;
2. An account of all money received by the estate;
3. An account of all money disbursed by the estate;
4. Where the estate trustee has made investments, an account detailing said investments;
5. An account of unrealized assets at the end of the accounting period;
6. A list of investments at the end of the accounting period;
7. A statement of all liabilities of the estate at the end of the accounting period; and
8. A statement of compensation claimed by the estate trustee.

Estate Trustee Compensation

An estate trustee’s compensation will also reflect his or her administration and accounting of the assets. In Ontario, an estate trustee is generally entitled to claim compensation of 2.5% of capital receipts and disbursements, and 2.5% of all revenue receipts and disbursements above those expenses required to administer the estate (subject to adjustment by a court). This is referred to as roughly 5% of the estate’s value.[6] However, the court has the discretion to assess the quantum of compensation and will do so with consideration of the following factors:

1. the size of the trust;
2. the care and responsibility involved;
3. the time occupied in performing the duties;
4. the skill and ability shown by the estate trustee; and
5. the degree of success resulting from the administration.[7]

In Zimmerman, the estate trustee did not comply with their duty to provide a sufficient accounting to the beneficiaries of the estate and accordingly breached their fiduciary duties. The estate trustee’s compensation was reduced to zero and ordered to repay the pre-taken compensation. Justice Strathy (as he then was) held that:

A trustee must make a proper accounting as a condition precedent to being awarded compensation. Without a proper accounting, the court is unable to assess the conduct of the fiduciary and to determine the compensation to which he or she is entitled.[8]

In Clark v. Kane et al, Justice Abrams reduced the estate trustees’ entitlement for compensation to zero and awarded costs given the accounts were “dilatory in the preparation and presentation of her accounts”.[9]

For further information on this topic including passing of accounts and trustee compensation, please see Whaley Estate Litigation Partners on Fiduciary Accounting (2024): https://welpartners.com/resources/WEL-on-fiduciary-accounting.pdf

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[1] Zimmerman v. McMichael Estate, 2010 ONSC 2947 at para 31.

[2] Estates Act, R.S.O. 1990, c. E.21.

[3] Ibid. at section 48.

[4]  Estate of Arthur O. Sawdon. v. Watch Tower Bible & Tract Society of Canada, 2010 ONSC 4066 at para 23.

[5] Rules of Civil Procedure, R.R.O. 1990, Reg. 194

[6] See section 61 of the Trustee Act; RSO 1990, c T.23; Laing Estate v. Hines, 1998 CanLII 6867 (ONCA). And Farmers’ Loan and Savings Company, (1904), 3 O.W.R. 837.

[7] Toronto General Trusts Corp. v. Central Ontario Railway (1905), 6 O.W.R. 350 (H.C.).

[8] Zimmerman at para 34.

[9] Clark v. Kane et al, 2022 ONSC 5525 at para 31 and para 34.