When an estate has multiple executors, unless the will says otherwise, all of them must make decisions together. This issue often arises when an executor tries to close an investment account and transfer its assets without involving co-executors. It is particularly important for account holding institutions to ensure they have a valid instruction from all acting executors to transfer assets.
A recent Ontario case, Cahill v. Cahill, confirms that executors are ordinarily expected to act together. Mr. Cahill appointed two of his children (“Son A” and “Daughter”) as co-executors. His Will directed that $100,000 be held in trust for Son B, the “investment” of which was to be overseen by Son A alone. Son A arranged, with Sister’s consent, to put $100,000 of the estate’s funds into an investment account in his own name and control. Son A later withdrew the whole fund and invested it in his own business, which he lost. Son B claimed that Sister was liable for the loss of the $100,000 by Son A. Sister argued that she was not liable because by opening the investment account she had set up the trust that Son A alone was obligated to oversee. The Judge disagreed, and held Sister liable for the loss of the $100,000. The investment account was not a trust for Son B and Sister had been inappropriately passive in relying on Son A alone to set the trust up.
The points to take away are:
- Executors must usually act together.
- An executor should not passively rely on his or her co-executors. Rather, executors are to actively discharge their duties, including properly overseeing the conduct of co-executors.
- It is particularly important to be sure that all executors have signed off on decisions to transfer assets.
- Many Wills have a “majority rules” clause. These clauses apply when executors disagree about a particular decision, and do not allow a majority of executors to claim the right to administer an estate without any involvement of their co-executors.