Uncooperative co-executor passed over by court

The will also granted Sassano a qualified life interest in her mother’s home, but Sassano’s health began preventing her from looking after the property. Sassano decided to sell the house and split the proceeds with her sister, the only other beneficiary of the estate.

However, Sassano was hamstrung by her sister’s refusal to cooperate with either her or the real estate agent Sassano had hired to sell the property.

Ontario Superior Court Justice Andrew Sanfilippo’s judgment granted Sassano’s request to have Iozzo “passed over” as executor, rather than removed, because neither sister had applied for a formal Certificate of Appointment as Estate Trustee.

Joanne Hwang, the lawyer who acted for Sassano, explained that whether Iozzo was removed or passed over made little practical difference, since Ontario’s estates laws set the same high bar for either to occur.

“To remove someone as executor is quite a big step and the court will not do it unless there is really clear evidence that it is necessary,” said Hwang, principal with Toronto firm Hwang Law. “You need to take really good notes and records if you feel like you might want to remove someone.”

In the Sassano case, Justice Sanfilippo said passing over Iozzo was required as a “last resort” for the estate to be administered before the home — its principal asset — slipped further into disrepair.

“Ms. Iozzo is endangering the estate’s principal asset, the property, by not taking any steps in collaboration with Ms. Sassano,” he wrote in the decision, confirming Sassano as the sole executor. “I recognize that the deceased’s wish to have both her daughters as estate trustees should not be lightly interfered with. However, Ms. Sassano has brought the clearest of evidence that Ms. Iozzo is unwilling to take any step as estate trustee, notwithstanding numerous efforts by several people to [elicit] her involvement.”

Hwang said the strength of the evidence presented regarding Iozzo’s abdication of her trustee duties was another key factor in the judge’s ruling regarding the costs of the application, which he ordered be paid out of Iozzo’s share of the property’s sale.

“It was a very favourable award for my client,” she said.

Financial advisors should encourage their clients to think carefully before appointing siblings as co-executors, said Kim Whaley, founding partner with Whaley Estate Litigation Partners (she was not involved in the Sassano case).

“What I like about [having two trustees] is one can act as a check and balance on the other,” Whaley said. “But having said that, if you’re going to appoint two people, it would be foolish to appoint two people who you know don’t get along.”

The Sassano decision indicates the sisters’ relationship deteriorated as a result of disagreements over their mother’s living arrangements as her health declined, long after she had signed the will that named them both executors.

Whaley said testators who appoint multiple executors often account for the possibility of disagreement by naming an odd number and inserting a “majority rules” clause in their will to break any logjam.

Other testators look beyond relations for a suitable co-executor, she added: “A testator might want a family member appointed to make sure everything goes to plan, but they will also get a trust company or professional trustee to act so that there’s some arm’s length involvement.”

Although each province has its own rules and processes regarding the removal or passing over of an estate trustee, Whaley said case law is consistent on the principles across common-law jurisdictions.

“The court always wants to give deference to the testator’s chosen person, even in situations where it wasn’t a good choice,” she said.

With such a high bar to clear, Whaley said a motion for removal is often a high-risk move for applicants, who could be liable for the trustee’s costs if they are unsuccessful: “It’s not a fight you want to have unless there’s clear evidence of a breach.”

In Ontario, Whaley said beneficiaries dealing with an executor who doesn’t respond to repeated requests can look to the province’s Rules of Civil Procedure. In certain circumstances, people with a financial interest in the estate can move for an “order for assistance” under Rule 74.15, compelling a person to accept or reject an appointment as trustee within a certain period.

The mechanism effectively sets a deadline for estate trustees to engage, or they’ll be deemed to have renounced their right to act.

This article appears in the June issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.