What type of search for beneficiaries is sufficient to satisfy a trustee’s obligation to do so? In Stoyan v. Johnson, the Ontario Superior Court of Justice had the opportunity to decide just that on an application by a trustee of a testator whose named beneficiaries had pre-testator him.
Though Mr. Stoyan had named two beneficiaries in his will, unfortunately, by his passing, both had predeceased him, and he had not updated his will. As he had not named any other beneficiaries, the trustee was obligated to ascertain whether any other beneficiaries may have an interest in the estate.
Trustees are subject to several common law and statutory obligations in discharging their duties to an estate’s beneficiaries. In 2018, the Supreme Court of Canada confirmed that estate trustees have to disclose the existence of trust to its beneficiaries. In its decision, the SCC guided courts to review whether a trustee has discharged that duty properly. The SCC cautioned that the court should not review a trustee’s actions with the benefit of hindsight and determine what could have “ideally been done”; rather, a court should look to the “particular circumstances” of the case and what an “honest and reasonably skillful and prudent trustee” would have done under similar circumstances. Types of circumstances that can be considered making that determination include:
- trust terms,
- the identity of the trustee and the beneficiaries,
- the size of the class of potential beneficiaries; and
- pertinent industrial practices.
Adding to the common law obligations is the obligation imposed on Ontario trustees under the province’s Estates Administration Act which requires trustees to ascertain whether there are any beneficiaries by virtue of a relationship traced through birth outside marriage.
Suppose a trustee believes that they have done everything that an honest, reasonably skilful, and prudent trustee would have done under similar circumstances. In that case, that trustee can apply to the court seeking what is known as a Benjamin Order.
A Benjamin Order has a long-standing in common law. The name derives from a 1902 decision of the Chancery Court in Neville v. Benjamin,  1 Ch. 723, in which the court examined a situation where a trustee could not locate a beneficiary. The testator was survived by twelve living children and one missing child who had disappeared while on vacation after he was suspected of having defrauded his employer. The court determined that the missing child, Philip, would have come forward under the circumstances and granted what is now known as a Benjamin Order.
A Benjamin Order allows the trust property to be distributed while leaving open the possibility of the lost beneficiary coming forward and claiming what is rightfully his or hers if any property remains undistributed. Such an order absolves the trustee and protects the trustee from any claims of breach of trust brought by a beneficiary that comes forward after such an order is granted.
In Steele v. Smith, the Ontario Superior Court outlined the type of questions that a court can ask to determine if a trustee had discharged his duty sufficiently to justify the grant of a Benjamin Order. Examples include:
- Why is the question being asked? Is there specific evidence that there is or may be a missing beneficiary, or does the question arise as a result of the circumstances?
- How much time has elapsed since the death of the testator?
- What are the specific steps that have been taken, and over what period of time, to answer the question?
- Who has conducted the enquiries? Were they appropriately qualified to investigate the matters at issue?
- Do the enquiries take due account of matters such as the possible location of the beneficiary or of potential evidence as to the matter at issue?
- It is possible that pursuing further avenues of enquiry, or deferring the decision, might result in a claim or generate further information? What is the cost and delay associated with pursuing those avenues, and what is the likelihood they may succeed?
- What is the amount at stake?
In Stoyan, the court found that the trustee’s application for a Benjamin Order was premature, as there were still a number of unanswered questions and steps that the trustee could reasonably take to ascertain if the testator had any other beneficiaries, including:
- proper tracing of the testator’s genealogy
- reasonable efforts will need to be made to ascertain whether the testator’s son died leaving any children who survived him;
- whether the testator’s father survived him;
- who the Testator’s aunts and uncles are and whether any of them survived the Testator; and
- who the children of the Testator’s aunts and uncles are and whether any of them survived the Testator
In formulating the above questions, the court in Stoyan relied in part on the Succession Law Reform Act (“SLRA”), specifically sections 47(6) and 47(8) which outline the guidelines for how an estate is to be distributed if there is no valid will, or the beneficiaries named predecease the testator, as was the case here.
These sections reproduced below outline the line of succession that courts must follow:
S. 47(6): Next of Kin
Where a person dies intestate in respect of property and there is no surviving spouse, issue, parent, brother, sister, nephew or niece, the property shall be distributed among the next of kin of equal degree of consanguinity to the intestate equally without representation.
S. 47 (8): Degrees of Kindred
For subsection (6), degrees of kindred shall be computed by counting upward from the deceased to the nearest common ancestor and then down to the relative. The kindred of the half-blood shall inherit equally with those of the whole-blood in the same degree.
In finding that the above questions, formulated in reliance on legislative requirements, were still outstanding, the court refused to grant the trustee the requested Benjamin Order.
Trustees dealing with situations where beneficiaries are not immediately ascertainable would be well advised to work with an experienced legal team to avoid unnecessarily wasted resources filling premature applications or conducting searches that may not satisfy trustee common law and legislative obligations.
At Derfel Estate Law, our experienced team of estate lawyers is always up to date on estate administration requirements and can assist in acting as an Estate Trustee. Contact us by phone at 416-847-3580 or reach us online to discuss your estate needs.