Record keeping requirements for estates applies to all lawyers who have control of estate assets, whether as estate trustee or as solicitor managing the funds on behalf of the estate trustee. You should decide at the very beginning of the administration of an estate how you are going to prepare the estate accounts and who is going to prepare them. If the will designates separate income and capital beneficiaries, you may be required to keep the estate records in court passing form according to Rule 74 of the Rules of Civil Procedure.
There is a duty at common law and under the Trustee Act for estate trustees, executors, administrators, and guardians to keep complete and accurate accounts of the assets under their administration. A beneficiary is entitled, on notice, to inspect the accounts and any of the supporting documentation. All trustees, and especially lawyers who hold trust funds, should maintain accurate, up to date estate accounts, and organize and keep all source documents such as bank statements, duplicate deposit slips, cancelled cheques, receipt confirmations and vouchers to support the records. While maintaining estate accounts in court passing form is preferred, spot auditors expect to see, as a minimum, the same information in records for estate assets controlled by lawyers as is required for trust records in section 18 of By-Law 9.
You should distribute estate assets in a timely manner, including filing income tax returns and paying any taxes due.
If there is no compensation for the estate trustee set out in the will, the Trustee Act states that the compensation is based on "fair and reasonable allowance for [the trustee's] care, pains and trouble, and [the] time expended in or about the estate". The Court has applied "tariff guidelines". For an estate of average complexity the allowance is usually set at 2.5% for capital receipts, 2.5% for revenue receipts, 2.5% for capital disbursements, and 2.5% for revenue disbursements. If the will sets up a trust, the compensation may include 2/5 of 1% of the assets under administration. For uncomplicated estates the compensation should be less. For complicated estates an executor can apply to the court for compensation in excess of the guidelines. Transfers between the estate accounts and payment of executor’s compensation itself are deducted from the calculation and in specie transfers of estate assets are usually compensated at a reduced rate.
These amounts are the total compensation for all estate trustees as well as for anyone (e.g. estate solicitor) who claims fees for performing estate trustee duties. Those lawyers who act as estate trustee as well as solicitor for an estate, or just assume some of the estate trustee duties, must be careful to distinguish between these two roles. If your legal fees include services which are properly the responsibility of the estate trustee, (such as accumulating, evaluating, and distributing estate assets; paying debts, preparing estate accounts and income tax returns; and notifying and reporting to beneficiaries), then the amount of your legal fees which relate to the performance of executor’s duties must be deducted from the amount of executor’s compensation claimed; otherwise the estate would be charged twice for the same service. Legal work and estate trustee work are compensated differently, and the remedies for the estate trustee and beneficiaries to dispute the legal fees and executor’s compensation are different. You should consider maintaining separate dockets for executor’s duties and solicitor’s duties in order to avoid double billing the estate and as supporting documentation for fees charged. Also, your fee bills for legal services should detail the services provided.
If you are the estate trustee and compensation is not set out in the will, once you have completed the estate administration, you can take executor’s compensation if all the residual beneficiaries are legally competent adults and they specifically consent in writing to your claim for compensation, which should be in accordance with the court guidelines. Beneficiaries should be fully informed, preferably by independent legal advice, of the appropriate procedure for billing for estate work. Otherwise, you must apply to the Court to pass the estate accounts and obtain judicial approval for any executor’s compensation. (See Re: Knoch (1982), 12 E.T.R. 162 (Surr. Ct.))
The case of Rooney Estate v. Stewart Estate (2007), Carswell Ont 6560 has some interesting comments on the role of lawyers in estates; the court held inter alia:
- The roles of the estate trustee [funeral arrangements; locating the will and instructing the solicitor; locating, securing, preserving, and disposing of estate assets in accordance with the will; advertising for creditors and paying the debts including filing tax returns; preparing estate accounts for the approval of the beneficiaries or the court; distributing estate assets] and the estate solicitor [apply for certificate of appointment for the estate trustee and attend on a passing of accounts if required] are distinct but complementary.
- The solicitor's client is the trustee, not the estate. Therefore, the solicitor takes instructions from the trustee and reports to her. With respect to the solicitor's account, the solicitor is entitled to be paid for these legal services from the estate.
- The trustee cannot expect to receive compensation for services performed by others whose services are charged to the estate. In other words, the trustee cannot claim compensation for time she did not expend; rather, she must pay the accounts for services of others out of her compensation.
- The solicitor should not perform trustee's work unless instructed to do so by the trustee. If such a request is made, the solicitor should advise the trustee that he will render an account to the trustee personally for doing her work. Generally, the estate is not liable to pay this account; rather, it falls to the trustee to pay out of her compensation.
- It follows that a solicitor is not entitled to charge a solicitor's rate for doing work that could have been done by the estate trustee.
- While it is proper to render an account for trustee's work done by the solicitor, the account must be rendered to the trustee, to be paid out of her compensation.
- [T]he solicitor is not entitled to charge for the performance of trustee's work at the solicitor's rate, since he is not rendering legal advice or performing legal services.
- It is not an answer to say that the beneficiary approved of the accounts and gave a release. One of the obligations of the solicitor acting for the trustee is to ensure that all beneficiaries have competent, independent advice in reviewing the accounts.
- Where there is no special agreement between solicitor and estate trustee, the proper measure of the solicitor's account for legal services to the estate and for doing trustee's work is on quantum meruit basis.
- The practice of holding a beneficiary’s cheque until the beneficiary sends the signed release to the estate trustee implies that the beneficiary's entitlement was conditional upon forwarding the release. This practice was criticized by the court in Brighter v. Brighter Estate 1998 CarswellOnt 3113  O.J. No. 3144, (Ont. Gen. Div.).
- An executor’s duty is to carry out the instructions contained in the will ... The executor has no right to hold any portion of the distributable assets until a beneficiary provides an approval or release of the executor's performance of duties as trustee, or the executor's compensation or fee. It is quite proper for an executor … to accompany payment with a release which the beneficiary is requested to execute. But it is quite another matter for the trustee to require execution of the release before making payment; that is manifestly improper.
- [T]he solicitor owes a fiduciary duty to the beneficiary in respect of her beneficial interest.
Whenever you do estate trustee work on behalf of an estate trustee, you should properly advise the estate trustee that he/she, and not the estate, is responsible for your fees for doing estate administration work on behalf of the estate trustee, how this would affect his/her claim to executor’s compensation, and also affect the amount of the distribution to the beneficiaries, for which the estate trustee is accountable to the beneficiaries.
Powers of Attorney
When exercising a power of attorney you should be maintaining proper accounts as required by the Substitute Decisions Act. As with estate work, you must be aware of the distinction between your role as a solicitor and as an attorney. Most, if not all, of your services will be as an attorney, and you should consult the Substitute Decisions Act for the appropriate compensation procedure.