What Is a Trustee's Duty Under British Columbia Law?

Being named a trustee or executor can feel like an honour until you read the paperwork. You are now responsible for property that belongs to other people, and the law expects you to handle it carefully.

This article walks through the main duties in British Columbia's Trustee Act: investing, delegating, keeping accounts and being paid. It also explains what can happen if something goes wrong. Your trust document and the facts of your situation matter a great deal, so treat this as a starting map.

This article covers the law of British Columbia.

Where a trustee's duties come from

A trustee's duties come from three places: the Trustee Act, the document that created the trust or will, and court decisions over many years. The document can add to or change what you must do, so read it closely before acting.

In plain terms, a trustee is expected to act in the interests of the beneficiaries, not their own, and to be fair between beneficiaries who want different things. Those ideas of loyalty and even-handedness come mainly from the trust document and case law rather than from a single section of the Trustee Act, so a lawyer can tell you how they apply to your facts.

Investing prudently

A trustee may invest trust property in any form of property or security in which a prudent investor might invest. That permission does not extend to investing in a way that is inconsistent with the trust itself.

When investing, a trustee must use the care, skill, diligence and judgment that a prudent investor would use. The test looks at your overall plan rather than hindsight on each purchase.

• A trustee is not liable for an investment loss if the conduct conformed to a prudent plan or strategy with a reasonable assessment of risk and return.
• Investments are not assessed one by one, and gains may offset losses when damages are calculated, except where dishonesty is involved.
• A trustee may delegate investment authority to an agent to the degree a prudent investor could under ordinary business practice.

If you delegate, you must set the investment objectives and act prudently in choosing the agent, setting the terms, communicating the objectives and monitoring performance. A trustee who does this is not liable for the agent's decisions. Delegation is not allowed where the trust requires the trustee to act personally.

Keeping records and passing accounts

Good records protect you. Keep every statement, receipt and note of a decision, because you may have to show what you did and why.

Executors, administrators, testamentary trustees and judicial trustees must obtain a court order passing their first accounts within 2 years of the grant or appointment. Other trustees may pass first accounts at any time.

There are exceptions. The requirement does not apply if all beneficiaries approve the accounts in writing, or if the court directs otherwise. Also, once a beneficiary gives notice, the trustee must pass accounts annually.

Getting paid, and what happens after a breach

A trustee or executor may receive a fair and reasonable allowance not exceeding 5% of the gross aggregate value of the estate. An annual care and management fee not exceeding 0.4% of the average market value of the assets may also be applied for. These limits do not apply where the trust instrument sets the trustee's allowance.

If a trustee breaches the trust, beneficiaries may look to the trustee personally. The court may relieve a trustee from liability for breach of trust if the trustee acted honestly and reasonably and ought fairly to be excused. That is a decision for the court, not something to assume.

What to do next

• Read the will or trust document and note any special instructions on investing, pay or acting personally.
• Open a separate account for trust money and keep personal funds out of it.
• Write down your investment objectives before investing or hiring an adviser.
• Keep records of every receipt, payment and decision from day one.
• Note the date of your grant or appointment so you can track the 2-year accounts deadline.
• Speak with a lawyer before paying yourself, delegating, or if a beneficiary is asking questions.

Frequently asked questions