Petley-Jones & Co Law Corporation

Ralph Petley-Jones

Nanaimo Lawyer

Ralph Petley-Jones  B.Comm.  LLB
5732 Hammond Bay Road, Nanaimo
British Columbia, Canada V9T 5N2
250 758.7370
fax 250 758.8703
 

CHANGES TO TRUSTEE INVESTMENT POWERS

The Trustee Act has changed to provide for greater trustee powers. Changes were required due to the popularity of mutual funds and other managed investments. This will not affect most people because many Wills have clauses allowing a trustee to have unlimited trustee investment powers. In the past, in the absence of unlimited trustee powers, a trustee could only invest in certain blue-chip stocks, bonds, and conservative investment vehicles, such as certificates of deposit at major financial institutions.

A trustee / executor may now delegate his or her authority to investment advisors and / or purchase mutual funds without specific authority in the Will. The trustee is only liable for investment losses if he or she acted dishonestly. If the trustee is paid, there is a higher standard imposed.

Now, if you wish to limit the trustee's / executor's powers, you should have a specific provision in your Will. This may be a wise idea because family members who are given this job may not have investment expertise. Given the volatility of markets in recent years, even a sophisticated investment advisor could lose a substantial amount of money. The other problem is that assets are held for short terms by most trustee / executors. Unless there is a long-term trust, assets are transmitted to beneficiaries within a year of death. In this short time frame the market may not have time to recover from a downturn.

Certainly, in most cases it is wiser for a trustee / executor to maintain funds in a secure, albeit low-interest, environment. Our standard advice is that an executor is unlikely to be thanked for making a big profit, but if there are losses, he or she may be sued by the beneficiaries.

This is just a reminder that being a trustee / executor is an onerous task. Trustees may incur liability if assets are destroyed without proper insurance, investments lose value, investments are not disposed of in a timely fashion, or he or she is manipulated by family members to not act in the best interest of the estate. Trustees may also incur significant potential liability when dealing with taxation issues. Under our tax regime significant liability accrues upon death. Death will trigger capital gains and death also triggers RRSPs being included in the final income tax return of the deceased.

These are a few of the reasons to contemplate a professional trustee/executor. Fees are usually charged on a percentage basis, but these may be insignificant compared to financial losses and family strife caused by poor management of your estate.

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