Estate Planning

Trustees and the Duty to Consult

By Hull & Hull LLP

Surprisingly, there is very little case law on point when it comes to trustees and their duty to consult with one another.

Where there is harmony and open communication between the trustees, consultation comes naturally and is often routine. Decisions are essentially reached by consensus.  However, with a passive trustee, the passive trustee simply fades into the woodwork and is forgotten.  Obviously, very little consultation takes place.  Moreover, where there is outright discord and suspicion between trustees, trustees simply stop talking to one another.  In that situation, one of the trustees essentially takes the lead in administering the trust.  Where there is a majority rule clause, the majority often believe that they can ignore the minority or dissenting trustee without consequence.  However, in my opinion, trustees who disregard their duty to consult do so at their own peril.

Simply put, a majority rules clause in a trust agreement does not give the majority of trustees the right to blithely ignore the minority trustee.  What is clear from the case law is that a trustee is required to be fully informed and active in terms of managing a trust.  The courts generally frown upon a passive trustee.  Moreover, the duty of a trustee to be fully informed and active can be used as a springboard to argue that there is a duty to consult amongst trustees and that the majority of trustees cannot simply ignore the minority and his/her dissenting opinion.  Whether there is a majority rule clause or not, trustees should consult with one another and share pertinent information prior to any decisions being made.

Thanks for reading.

Justin

Full post as published by Toronto Estate Law Blog on April 09, 2008 (boomark / email).