Can a Trustee Be Removed in Ontario for Mismanaging a Trust?

You are a beneficiary and something feels wrong. The trustee may not answer your calls, may not explain where the money is, or may be using trust property in ways that do not seem right. It is natural to ask whether the trustee can simply be removed and replaced.

The answer depends on what has actually happened and what the trust documents say. This article explains what trustees are generally expected to do, how to gather information, what tools exist short of removal, and when it makes sense to talk to a lawyer about asking the court to step in.

What a trustee is expected to do

A trustee holds property for the benefit of other people. In an estate, the estate trustee has a defined job: collect the assets, pay the taxes and debts, and distribute what remains according to the will and the law. Where there is no will, no trustee named, or the named trustee asks for confirmation, a court may appoint an estate trustee.

Other kinds of trusts, such as a family trust or a trust for a person with a disability, have their own terms. The trust document sets out the trustee's powers and limits, so reading it carefully is the first step in judging whether something has gone wrong.

Mismanagement versus a disagreement

Not every frustration is a reason to remove a trustee. Slow progress, a decision you would have made differently, or a personality clash is not the same as a trustee who is failing at the job. Whether something amounts to mismanagement depends on the facts, so it is worth confirming with a lawyer.

These are examples of concerns that are worth documenting and raising with a lawyer:

• The trustee will not provide information about what the trust or estate owns, owes or has spent.
• Assets appear to have been sold, moved or used for the trustee's own benefit.
• Debts, taxes or required returns are being ignored.
• Distributions you are entitled to under the document are being held up without explanation.
• The trustee is treating one beneficiary differently from others without a reason found in the document.

Ways to get answers before asking for removal

Removal is a serious step. In many situations the first move is to ask for information. A written request for accounts and supporting records, sent calmly and kept on file, creates a clear record of what you asked for and how the trustee responded.

There is also a formal route. Where a minor, or an unborn or unascertained person, has an interest in an estate, the Office of the Children's Lawyer must be served on an application to pass estate accounts. The Office can ask an estate trustee for accounts and supporting records, and if the trustee does not respond or the accounts raise concerns, it may ask the court for an order requiring the trustee to bring an application to pass accounts. Whether this route applies to your family depends on who has an interest, so it is worth confirming with a lawyer.

Tax filings can also show whether a trust is being run properly. A resident express trust that is not a listed trust must file a T3 return every year, even if it had no income. The return and any balance owing are due no later than 90 days after the trust's year-end. Where there is no unpaid tax at the deadline, the late-filing penalty is $25 a day, with a minimum of $100 and a maximum of $2,500.

Removal, replacement and other court options

How a trustee can be removed and replaced depends on the trust document and the facts. The test the court applies, the evidence it expects and whether removal is the right remedy all depend on the facts, so this is the point where a lawyer's review of your documents is most useful.

A court may appoint an estate trustee where there is no will, no trustee named, or the named trustee asks for confirmation.

Removal is not the only possible outcome. Depending on the trust, a court application might be aimed at getting accounts, at directing the trustee to act, or at ending the trust altogether. In one line of cases, beneficiaries of full legal capacity who together hold all of the beneficial rights, and who all consent, may end a trust, but contingent interests are not enough. A sole competent adult who is absolutely entitled can also collapse the trust. This will not suit most situations, especially where some beneficiaries are minors or have only a contingent interest.

What to do next

• Collect the will or trust document and any amendments.
• Write down dates, calls, emails and what the trustee said or failed to provide.
• Send a clear written request for accounts and records, and keep a copy.
• Note whether any beneficiary is a minor, since the Office of the Children's Lawyer must be served on an application to pass estate accounts where a minor has an interest.
• Check whether tax returns appear to have been filed on time.
• Do not take trust property or confront the trustee in ways that could make your position harder.
• Speak with an Ontario estates lawyer before filing anything in court, and ask about time limits.

Ask the lawyer to explain the likely cost, the evidence you will need, and whether a less drastic step could solve the problem. Acting early often keeps more options open.

Frequently asked questions