When Should an Estate Trustee Be Removed? Legal Grounds in Ontario

The role of an estate trustee comes with significant responsibilities, including the duty to act impartially and in the best interests of all beneficiaries. But what happens when a trustee is alleged to have breached their duties? Can they be removed?

Ontario courts have repeatedly emphasized that removing a trustee is not a decision taken lightly. However, where misconduct or conflicts of interest arise, the court has the authority to intervene. This blog explores key legal principles governing the removal of estate trustees in Ontario.

Legal Framework: When Can a Trustee Be Removed?

The removal of an estate trustee is governed by both statute and common law. Under section 37(1) of the Trustee Act, R.S.O. 1990, c. T.23, the court may remove a trustee and appoint a replacement where necessary. Courts have generally held that removal is justified in cases where:

• The trustee has a conflict of interest that compromises their ability to act impartially.

• There is misconduct or mismanagement of estate assets.

• The trustee fails to properly account for the administration of the estate.

• The trustee’s actions create deadlock or hostility that prevents the estate from being properly administered.

Key Case Law on Trustee Removal

Ontario courts have addressed trustee removal in various contexts, highlighting that a mere disagreement between beneficiaries and the trustee is insufficient for removal. Instead, there must be a clear necessity to protect the estate and beneficiaries.

1. Chambers Estate v. Chambers, 2013 ONCA 511

In this case, the Ontario Court of Appeal reinforced that while courts have the authority to remove an estate trustee, they should not interfere lightly with the testator’s choice. The court held that friction between trustees and beneficiaries alone is not enough to justify removal. Instead, it must be shown that the trustee’s actions endanger the estate or demonstrate a lack of honesty, capacity, or fidelity.

2. Deziel v. Deziel, 2024 ONSC 5279

A more recent case, Deziel v. Deziel, dealt with the alleged breach of fiduciary duty by estate trustees. In this matter, the estate trustees (who were also beneficiaries) facilitated the sale of estate property to one of themselves at a price below fair market value. The court found that this conduct constituted a breach of fiduciary duty, as the trustees prioritized their personal interests over those of other beneficiaries.

However, despite the breach, the court declined to remove the trustees, emphasizing that their actions were not malicious but rather stemmed from a misunderstanding of their legal duties. Instead, the court ordered financial restitution to remedy the breach. This case highlights that courts prefer targeted remedies over removal unless the trustee’s conduct renders them unfit to continue in their role.

Practical Takeaways for Trustees and Beneficiaries

1. Fiduciary Duties Must Be Taken Seriously

   Trustees are legally obligated to act in the best interests of all beneficiaries, even when they themselves are also beneficiaries. Any actions that appear self-serving can lead to legal challenges.

2. Removal is a Last Resort

   Courts will typically seek alternatives—such as requiring an accounting, appointing a co-trustee, or ordering financial remedies—before resorting to removal.

3. Transparency is Key

   Trustees should ensure clear communication with beneficiaries and maintain detailed records of estate administration to avoid disputes.

4. Seek Legal Advice When Uncertain

   Given the complexities of estate law, trustees should consult legal counsel when handling estate assets, particularly in transactions that may raise conflicts of interest.

Conclusion

Removing an estate trustee is a significant step, reserved for cases where the trustee’s actions fundamentally undermine the proper administration of the estate. While breaches of fiduciary duty may lead to financial remedies, removal is generally ordered only when it is necessary to protect the estate and its beneficiaries. As seen in Ontario case law, courts weigh the impact of a trustee’s conduct carefully before intervening.

If you are involved in an estate dispute or have concerns about an estate trustee’s conduct, seeking early legal advice can help navigate the situation effectively.