By Mr Lee Chiwi
Excerpt from PreceptsGroup Succession and Trusts in Wealth Management (4th edition) Book
The spouse, children or immediate family members are often the logical choice for the appointment as executors and trustees. But today, many decide that an independent professional trust company may be preferred as an alternative to the appointment of a family member. This has often proven on hindsight to be the preferred solution. Another reason is the newly imposed regulations on individual trustees as discussed at 11.13 (Transparency and Effective Control Regulations). In any case, the newspapers are full of articles reporting cases where family members ended up taking each other to Court. Often, the disputes revolve around family members who act as joint executor and trustees.
Where joint executors and trustees are appointed, they must act unanimously in the discharge of their office responsibilities. Sometimes, they cannot agree and this can lead to delays in estate administration, potential litigation and other issues. See 4.9, the example in Lau Tyng Tyng v Lau Boon Wee, where a sister and her brother were appointed as the joint executors and trustees in the Will of their late father.
It is possible that a professional trust company be appointed as the default executor and trustee in the event that the family member who is appointed may himself be deceased or unwilling or incapable of acting as such.
Some criteria in selecting a suitable executor of will and trustee are as follows:
• Is the person responsible and trustworthy? Assess his character as manifested by his living habits and lifestyle.
• Is he in good health and likely to outlive the testator?
• The organizational skills of the person.
• His experience in managing and investing assets and also consider the types of assets to be managed.
• Does he get along with his family members?
• Would he be biased against certain beneficiaries?
• Is he likely to accept the job as it means taking up his personal time in administering the estate?
• Is he likely to expect a fee or remuneration as this is a voluntary role?
Lay Executor and Trustee of a Will
He agreed to be executor of an estate — it cost him seven years of his life and $100,000
Toronto accountant Terry Dooley’s seven-years ordeal as executor of a client’s multimillion-dollar estate involved a protracted court battle, which began in 2011 (when the deceased’s daughter contested the will) and ended in 2018. It left him and the estate trustee on the hook for a combined $1 million in legal costs.
Dooley, 73, says he didn’t receive “one nickel” of the $375,000 in compensation he was entitled to as executor. And “false allegations” of wrongdoing during the trial tarnished his reputation even though he was exonerated, he says.
The case is an example of the contentious and onerous nature of the job as executor.
Source: By Carola Vyhnak Special to the Star, June 1, 2020
Not many people will want to assume the role of executor and trustee of his friend’s will if he realizes the legal implications and responsibilities that are associated with such an office. Typically, a person appointed under a will as executor is also appointed as the trustee as the provisions of the Trustees Act apply to a trust which is embedded in a person’s will. With the statutory duty of care now made law, a lay trustee under a will has to consider whether he can suitably discharge his responsibilities without getting himself sued for negligence. After all, he is a mere volunteer.
The office of trustee is also an onerous office as it imposes upon the trustee a fiduciary relationship with the beneficiaries. This requires the utmost diligence, good faith and loyalty in the trustee’s discharge of his duties. If the trustee acts without care and causes loss or detriment to the estate, he will be liable to be sued. The testator should also consider carefully the person he wants to carry out the trusteeship role.
Two women, who agreed to be joint executors and trustees of woman’s will in 2003 were found to be liable to the woman’s beneficiary, namely her son for around
$87,000. The figure was derived after deducting the son’s maintenance and education expenses. The son who is now 29 had sued the two women for breach of their fiduciary duties and for an account of the administration of the estate. His mother’s estate was worth about $148,000, which included a HDB flat then priced at about
$120,000 and bank accounts. Income from the deceased’s estate included rent from her HDB flat totalling $98,000 over the years.
Remarkably, one of the executors, a cousin of the testator was also the appointed guardian for the son under the will when the testator died in 2003 of cancer. The boy, then 14, had lived with the guardian. The other joint executor was a social worker at a welfare centre and had agreed to be the other executor but had left the administration to the other executor as the latter was also guardian. The flat was handed to the son after he turned 21.
It is to be noted that as both women were jointly responsible for administering the estate and to hold assets on a trust for the son, they were each individually liable to pay the $87,000 to him. The judge said the responsibilities of executors were onerous and even if the motive was out of benevolence, they should not have accepted the appointments if they were not able to perform them. (See Straits Times dated 29 May 2020 by K.C. Vijayan & Tan Tam Mei Executors of woman’s will liable to pay son $87k)
In another case, a not so honest individual trustee was tempted and abused his office as trustee. In 2012, a businessman Abu Bakar Said Ahmad Alhabsi, 72, who was a trustee of charitable trust, pleaded guilty to misappropriating $176,470 between 2004 and 2007 for his own pocket. He did not keep accounts. He could not explain what happened to the missing rental income that came from four properties that were held in the trust.
Engaging Professional Trustees and Singapore Trust Companies
There are merits for the appointment of professional executors of wills and trustees over a lay-trustee, at least where a person’s estate may be complex or where the testator cannot find anyone suitable to discharge such office. Individuals will die and it could be cumbersome when the individual executor dies in the midst of administering the deceased’s estate. A trust company being a corporate entity that is appointed as executor will not face this problem.
Greater professionalism is demanded of a trust company compared to a lay-trustee as the trust company is required to have officers who have the necessary qualifications and track records, requirements to have in place proper internal controls, audit and professional indemnity insurance etc. There are severe fines and in serious cases, even imprisonment of the officer concerned for breaches under the Trust Companies Act. This can only be positive for clients because there is recourse for the client and his beneficiaries against the trust company should there be the need to enforce rights or to pursue remedies for loss or negligence.
Provisions under the Trust Companies Act in Probate and Administration
Under the Trust Companies Act, where a trust company is appointed executor of the will of any testator, it shall be lawful for the company to apply to the court for probate of the will and if probate is granted, to exercise and discharge all the powers and duties of an executor. A person who is entitled to apply for probate or letters of administration may authorize a trust company to apply in his stead.
Where a trust company is empowered to apply for probate or for letters of administration, any petition, declaration, account or affidavit or other necessary document may be made or sworn by a duly authorized officer of the company. Such officer of the company may on behalf of the company sign any petition, account or statement, take any oath, swear any affidavit, make any declaration, verify any act, give personal attendance at any court or place, and do any act or thing whatsoever, which may be required to be signed, taken, sworn, made, verified, given, or done on behalf of the company.
As mentioned elsewhere, a licensed trust company that is granted letters of administration is not required to furnish any security for the due administration of the deceased’s estate.