Why A Corporate Trustee Is An Important Estate Planning Partner

By Mark Barnicutt on March 10, 2011

This weekend in the Report On Business section of the Globe & Mail, the lead story was about how the $24 Million estate of Paul Penna, the Founder of gold mining company, Agnico-Eagle Mines, had been plundered by trustees.

In 1996, gravely ill with lung cancer, the 73-year old mining promoter hired a respected Bay Street estate lawyer to draft his will in which he then appointed a valued colleague and his long-time banker to be trustees of his estate.

Except for the $1-million he set aside for his wife of 43 years, he left the bulk of the childless couple’s savings to about a dozen Jewish, medical and community causes.

Fifteen years after Mr. Penna’s death, his charitable dream has descended into a legal nightmare. His wife Lorraine received no money from the estate before she died in 2003 from Alzheimer’s complications and the charities have given up hope of ever receiving their bequests.

Although not intimately familiar with the Penna Estate legal situation, in our experience managing family wealth, this type of situation could potentially have been avoided — and most importantly the philanthropic estate wishes of Paul Penna could have been preserved — had a Corporate Trustee been appointed, instead of the Individual Trustees that were appointed.

A Corporate Trustee is typically a regulated financial institution that is established as a trust company whose primary purpose — for family clients — is to provide executor (ie: settlement of wills) and trustee services.  Given the corporate nature of such trust companies, they are not reliant upon the expertise of any one individual but in fact a multi-generational team of estate & trust professionals who can provide a continuity of services for multiple generations of families. As such, these Corporate Trustees are legally obligated (and monitored by federal regulators) to adhere to the wishes of family members wills and trust agreements; in other words, they are NOT going to raid the family trust as occured in the Penna situation but will instead by a defender & protector of the will and trust agreements.

Before the Canadian real estate crash in the early 1990s, Canada was home to some great, long-standing, independent Trust Companies such as Royal Trust (now part of RBC Bank), National Trust (now part of Scotia Bank) and Central Guaranty Trust Company (now part of TD Bank).  Canada Trust was purchased by TD Bank in the late 1990s.  In fact, prior to the 1990s, many affluent Canadian families were clients of such Trust Companies given their abilities through their corporate executor & trustee services, to be the true multi-generational protectors of the family wealth; these trust companies were true Fiduciaries both legally and ethically….in other words, they were obligated to act in the best interest of their clients, which in most cases were the estates & trusts that had been entrusted to their professional care.

Many years ago, Corporate Trustees would also manage the investment assets within the trusts (as they also do today).  Fortunately, in recent years, estate & trust laws have been relaxed on this matter so that corporate trustees — through the powers in a given trust — can also delegate investment management to various investment professionals — subject to the standards of each trust as well as estate and trust legislation.  As such, we believe that it is very important for families to understand that distinction between the role of Trustee and Investment Manager….in a modern day wealth management world, the two can be separate in order that families can obtain best in class service providers.

As many of these historical Canadian trust companies have now become divisions of large financial institutions, there have been a few truly independent, objective and highly competent, fiduciary based, family-oriented trust companies that have developed successful businesses for the domestic (ie: Canadian) and international (ie: offshore) estate needs of affluent Canadian families such as Legacy Private Trust (domestic trust services), Cidel Trust Company (domestic & international) and J&T Bank and Trust (international).

If you are an affluent Canadian family and you are looking to provide truly independent & objective, inter-generational protection of your family assets, the use of corporate trustees — in our opinion – should be seriously considered.  With the rising affluence of Canadian families, we believe that these types of estate & trustee considerations will increasingly become central decisions for many Canadian families.

To read the Globe & Mail article in full, please click here.

Mark Barnicutt

As HighView’s President, CEO, and Co-Founder, Mark Barnicutt has thirty years of experience as a Bay Street executive and entrepreneur, with an expertise in the stewardship of family wealth as a mentor to both affluent families and wealth management businesses.
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