Heirs & Omissions Bulletin
March 15, 2021
By Harry Case, Law Student, Cambridge LLP
GO-KARTS AND ELVIS IMPERSONATORS – THE NEXT GOOGLE OR AMAZON STOCK?: WHY YOU SHOULD BUILD PROTECTION INTO FIDUCIARY APPOINTMENTS
There is probably no decision in your estate plan that is more important than who to nominate as your fiduciary. In law, a fiduciary is someone, who is under one of the strictest duties – a duty to act in the best interest of the person whose money or assets they have been entrusted with.
Your substitute decision maker named in your power of attorney is a fiduciary. The executor of your estate and the trustee you name to manage your daughter’s inheritance is a fiduciary. Once someone accepts the appointment as a fiduciary, they must not use the position to enhance their own economic position. They must be fully transparent in their dealings, and
they must keep accurate and up to date records of all transactions and be ready to display those records when certain persons with the proper legal authority request them. They must also act reasonably and prudently when making decisions.
In the case of McMaster v McMaster, a mother, Mary, designated her two sons, Graeme and Malcolm, as her Powers of Attorney for Property who would act “joint and severally”. A “joint and several” designation means that both may act together, however, one also has the power to act alone. This type of appointment is not uncommon, but it is not one – as you will learn from this next case - that is highly recommended.
In McMaster v McMaster, Malcolm abused his fiduciary position and used his mother’s money to make poor and personally motivated investments, including an investment into a go-kart track without consulting his brother, Graeme, who was the other power of attorney. By the time Graeme discovered Malcolm’s misdeeds, it was too late. The money was gone. So, what could Mary have done to mitigate the risk of this tragedy? First, she should have named her sons “jointly” so two signatures
would have been required on all major transactions involving her assets. For more convenience, her power of attorney document could have authorized a chequing bank account to be opened with just one son needed to sign and the sons could have agreed to have that account only hold a three-month supply of the funds to look after Mary. Mary could also have also named an experienced professional fiduciary with fiduciary insurance to protect against financial loss due to negligence.
There is also the case of the poor mother who never thought of naming a fiduciary to look after her daughter, Diane. In the case of Public Guardian and Trustee v MacFarlane, Diane inherited a sizeable estate, including a valuable condominium. At the time of the hearing Diane was 73 years old and had become incapable of making financial decisions in respect of her assets, which for the most part were
inherited. It was discovered that Diane was using her inheritance to help fund the career of an Elvis impersonator in Tennessee. Unfortunately, it appeared that Diane was the victim of a fraudulent scheme which resulted in her inherited condo being sold for significantly under its listed sale price, and an attempt to transfer a majority of her investments to the Elvis impersonator. It is usually the case that scam artists look for vulnerable and unsophisticated people to prey
upon.
If mom had anticipated the perils of the aging mind and the tricks it could play on her innocent daughter, she would have named a fiduciary to look after her daughter’s inheritance.
Choosing a fiduciary is the most important decision you will make, or fail to make. Choose wisely. Choose an estate & trust lawyer who can help with the right decision and to draft the appropriate safeguards into your estate planning documents to minimize the risk of mismanagement, abuse and family breakdown.
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