Executor Duties for a Trust Created in a Will in Ontario

Some wills do more than divide assets. They set up a trust, for example to hold money for a young child until a set age, or to provide for a surviving spouse over time. The person named as executor is often also named as trustee of that trust.

That role can last years after the estate itself is settled. This article outlines the ongoing duties around investing, record keeping, tax filings and accounting, and what to do if the job becomes too much.

Taking on the role, and leaving it

A person named as estate trustee in a will does not have to act. If you are named, think carefully about whether you can manage a long-term responsibility before you step forward.

Once you have acted, leaving is harder. The Trustee Act procedure for a trustee to retire by deed does not apply to executors or administrators, so an executor who wants to step down after acting must apply to court. The court may also remove a personal representative on any ground on which it may remove any other trustee and appoint another proper person, and any person interested in the estate, or an executor who wants to be relieved, may apply.

Investing trust property

In investing estate property, a trustee must exercise the care, skill, diligence and judgment of a prudent investor. In plain terms, you are not expected to chase high returns, but you are expected to act thoughtfully and be able to show your reasoning.

• Think about what the trust is for. A fund for a child's education and a fund supporting a spouse may call for different approaches.
• Because different beneficiaries may benefit from the trust in different ways, ask a lawyer how your duties apply to the people named in your particular will.
• Write down why you made each significant investment decision, so you can explain your reasoning to beneficiaries later.
• Consider getting professional investment advice, and keep a record of it.

The will itself may give extra directions or limits, so read the trust terms closely.

Records, expenses and accounts

Estate trustees must keep accurate records of the estate's assets and transactions. Accounts filed with the court must include assets at the date of death, all money received, all liabilities and a statement of the compensation the trustee claims.

If you believe an expense is properly incurred in carrying out the trust, you may pay it from estate property, or pay it personally and recover it from the estate, but the court may later disallow the payment or recovery. Keep receipts and the reason for each payment.

A beneficiary is an interested person who can compel accounts. A person with a financial interest may also move for an order requiring the trustee to give a statement of the assets, further particulars, or to pass accounts. Passing accounts means filing accounts verified by affidavit (Form 74.43) and the other required documents, serving every person with a contingent or vested interest at least 60 days before the hearing, or 75 days if served outside Ontario. A beneficiary who objects must serve a Notice of Objection to Accounts (Form 74.45) at least 35 days before the hearing.

Where children under 18 are beneficiaries, the Office of the Children's Lawyer may act on their behalf in estate matters.

Compensation and tax

An estate trustee is entitled to a fair and reasonable allowance for care, pains and trouble and time spent, as allowed by a judge of the Superior Court of Justice. The statute sets no percentage or formula. This does not apply where the will itself fixes the allowance. Where a lawyer is the trustee and has provided necessary professional services, the allowance may be increased.

On the tax side, a trust return (T3) must generally be filed no later than 90 days after the trust's tax year-end, with any balance owing due within the same 90 days. A trust must file if its total income from all sources is more than $500, or if it makes a capital distribution to beneficiaries. These filing rules changed for trust tax years ending on or after December 31, 2023.

An estate can be a graduated rate estate for no more than 36 months after the death. A graduated rate estate may have a non-calendar tax year, while other trusts generally must use a December 31 year-end. Ask an accountant how your trust is classified and when its year ends.

What to do next

• Read the trust terms in the will and note any directions on investing, payments and ending the trust.
• Open a separate account for the trust and keep all records in one place.
• Decide how funds will be invested, and write down your reasons.
• Ask an accountant to confirm the tax year-end and T3 filing obligations.
• Plan to give beneficiaries regular updates, and consider passing accounts for a formal approval.
• If you are unsure about continuing, speak with a lawyer before acting further, because leaving later requires court.

If you act honestly and reasonably, the court has power to relieve a trustee of personal liability for a breach of trust where they ought fairly to be excused. It is a discretion, so good habits matter more than relying on it.

Frequently asked questions