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Estate Trustees Held Entitled to Charge Investment Counsel Fees to Estate

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Trusts, Wills, Estates and Charities Bulletin

The Ontario Superior Court of Justice has held that executors of an estate are entitled to hire investment counsel to assist them in making investment decisions, and the fees for doing so should not be deducted from their compensation:  In the Estate of Alaine Jackson Young, 2012 ONSC 343.

A trust company was one of two succeeding estate trustees with a will in the Estate of Alaine Jackson Young. The estate trustees sought an order passing the accounts of the estate for a four year period. The only objection, which came from the Children's Lawyer, was that investment management fees charged to the capital of the estate should have been deducted from the compensation paid to the trustees. Up to 2008, the trustees had been investing the estate's assets in a pool of so-called "Common Funds" that the trust company managed. After the trust company wound up the funds it had to determine how to invest the Estate's assets. Neither estate trustee had investment expertise. The estate trustees therefore retained a specialist private investment counsellor to provide investment counsel and manage the estate's investments. They obtained the written consent of all of the sui juris beneficiaries to the appointment, and negotiated a discount on the manager's usual fees.

The Children's Lawyer argued that management of assets is a core function of a corporate trustee. It asserted that the estate should not have to bear the additional expense that was necessitated by a unilateral business decision to discontinue the Common Funds. The trust company, for its part, pointed to the great sophistication and complexity of the investment world, and also noted that if the fees were deducted from its compensation it would be left with nothing for all of its other services.

The Court disagreed with the Children's Lawyer's position.  It held that on the evidence, neither trustee had the necessary investment expertise to prudently manage the estate, and that the trust company's decision to engage private investment counsel and manager was reasonable and prudent.  The Court also agreed, based on prior authority, that trustees are entitled to be fully indemnified for all costs and expenses properly incurred during the course of administering the estate:

"In my view, in today's complex and sophisticated investment market executors should be entitled to hire investment counsel to assist them in making investment decisions and the fees for doing so should not be deducted from their compensation."

The Court's conclusion was reinforced by reference to s. 27.1(1) of the Trustee Act, which contemplates that an executor may engage an investment advisor in order to manage the estate's assets as would a prudent investor.

The Court concluded that courts are willing to allow payment of investment consulting fees as a proper expense of the estate where the services rendered are clearly beyond the expertise of the trustee and the fees are otherwise reasonable and proper.


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