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Saturday, July 27, 2019

How can a trustee quit?

Most individuals acting as executors and trustees get on with the job as best they can, with no illusions that it's supposed to be fun. I'm sure the majority have the occasional day when they wish they could just drop the whole thing and walk away. For some, though, the job becomes intolerable and they eventually determine they simply cannot continue to be the trustee. An executor - just like any other trustee - cannot just walk away once they've started the job; they need court permission to withdraw. If you do simply walk away from a trust without being properly released, you are attracting personal liability.

Getting that court permission is not guaranteed just because you don't want to do it anymore. A judge doesn't have to grant your request if he or she doesn't think it's a good idea. A  new case from Ontario called Pierce v. Zock has given some useful insights on what the court wants to know when considering this type of application.

In this case, two of Mr. Zock's four children were trustees of a trust that included the family's small farm. The trust was set up in Mr. Zock's will as a Henson trust, which means one that may provide financial assistance to a person who is disabled and is receiving government disability benefits. The person in question was Stephen, a third child of Mr. Zock. He lived at the farm, and most of the land was leased to a neighbour to cultivate. The will directed that if Stephen was not able to live independently and keep up with repairs, the farm should be sold.

After operating the trust for some time, the two trustees approached the court saying they both wanted to resign. They said that their relationship with Stephen had deteriorated badly, that he was belligerent, physically violent, demanding money, that he would not consent to a decent offer to purchase the farm, and that he would not maintain the property in which he lived. They also asked for an order that the farm be sold because it was not being maintained according to the terms of the trust.

The court refused their request for two reasons. One is that they did not present enough evidence to support their claims, and the other was that they did not present alternatives for someone to take over the trust.

Testimony by the parties themselves is evidence. However, the testimony of one party is usually met by denials and counter-accusations by the other side. This case was no different in this regard. Stephen denied pretty much everything his siblings said. The judge wanted additional evidence to clarify these issues that were in dispute. In particular, he said he would have liked to see a medical report establishing that Stephen was (as alleged by the trustees) mentally ill, and an appraisal or evaluation of the property stating whether or not it was as neglected as they were alleging.

The judge noted that a person cannot be forced to be a trustee if he or she doesn't want to do it. A judge can remove trustees as long as there is some arrangement for the administration of the trust. The applicants in this case didn't suggest an alternative trustee. They had asked the Public Trustee, who declined. The estate wasn't large enough to justify the involvement of a trust company. However, there was risk involved in leaving the trust without an administrator. Someone had to manage the income and the lease agreement. The judge allowed only one of the trustees to step down (after passing her accounts, of course). He said that the second trustee would continue on for another year, at which time the court would look at the issue again.

The judge was sympathetic to the difficulties the trustees encountered in dealing with Stephen. To try to make the job a bit easier, the judge made a number of orders about payment of expenses, legal costs, contact between Stephen and the trustee, and inspection of the property.

The trustees' request to sell the property was not issued either. This was again due to a lack of evidence. The judge said that without any appraisal or anything showing the state of the property, the conditions set out by the trust hadn't been met.

I find this case informative for anyone thinking about doing this type of application. Personally, I find it highly surprising that any lawyer would ask for the sale of a property because of lack of maintenance without actually bringing proof of lack of maintenance. But I don't know what went on behind the scenes; perhaps the trustees couldn't pay for an appraisal or didn't agree it was necessary, but in any event, it was a key element missing from their application.

Bottom line: if you're asking the court to remove you as a trustee - prove your case!

1 comment:

  1. Costs: What was the decision on the division of costs and the amounts?


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