How to Protect Executors and Trustees
On Thursday June 3, 2021, Jordan Atin discussed protecting executors by using specific will provisions.
Motivations to Protect Trustees
There are two main motivations to protect trustees. First, doing so helps alleviate the burden of acting as executor for the friend and/or family member chosen. Second, sometimes the trustee insists on this protection – this is often the case with corporate trustees.
Liability of Executors
An executor incurs the potential of personal liability for obligations. For example, an executor who contracts in relation to the estate is personally liable to the contractor. Indemnification from the estate is available only if the contract is a “proper one in the circumstances”. Negligence by the executor can render the executor personally liable to the beneficiaries and creditors of the estate. Examples of negligence include improperly interpreting or not properly following the terms of the Will or not properly maximizing the value of the estate.
Areas for Protection
Testators should consider providing their executors with the right to invest, the right to purchase, and the right to profit. This can avoid conflict of interest allegations.
A clause may be included to protect executors from negligence, and to indemnify them with respect to certain payments, such as for any fines, penalties, or interest related to estate administration tax.
If the Testator wants to allow their executor to hire agents or professionals to assist them in their role, specific provision to do so and charge the estate for the fees should be considered.
It is very important that Testators include a clause that speaks to the replacement of their trustees, as well as who is to succeed them.
Special areas of concern that a Testator should keep in mind when drafting their Will include:
- Any environmental concerns that may arise from real estate assets;
- Whenever any beneficiaries are minors;
- The possibility that “unknown” children may be beneficiaries; and
- Their executor's decision not to seek probate.
Perhaps most importantly, a testator can help protect her executor by including exculpatory provisions in their Will. These typically provide protection against errors made by the executor in good faith.
To watch the full webinar check out the recording here.
Thanks for reading!