The performance of duties by an executor of an estate can sometimes be a difficult task. Difficulties may arise when there is more than one class of beneficiaries under the will governing the estate. Two classes of beneficiaries that are sometimes found in a will are income or life beneficiaries and capital or residual beneficiaries. In general terms, an income beneficiary receives income generated from the capital of the estate during that beneficiary’s lifetime and the capital beneficiary is a successive beneficiary who receives the remainder of the estate upon the decease of the income beneficiary.
An executor of an estate acts as a trustee. If the will is silent as to how to treat the beneficiaries, the rule of even-handedness applies to the trustee. The basic rule is that a trustee must exercise trustee powers in the best interests of all beneficiaries, holding an even hand between different classes of beneficiaries and not acting in a manner that is prejudicial to the interests of any class of beneficiaries. In other words, the trustee must not give an advantage to or impose a burden on a class of beneficiaries when that advantage or burden is not to be found in the terms of the will. The difficulty, therefore, facing the executor of an estate is to generate sufficient income for the income beneficiary while, at the same time, preserving as much of the capital of the estate for distribution to the capital beneficiary later on. There can be no resort to the Court for this decision-making. As one judge has stated: “Executors cannot come to Court and ask whether the present is a good time or a bad time to sell stock or anything else or whether a price offered is sufficient or insufficient. The advice that the Court is authorized to give is not of that kind; it is advice as to legal matters or legal difficulties arising in the discharge of the duties of executors, not advice with regard to matters concerning which the executor’s judgment and discretion must govern.”
If the will has clear and unambiguous language that sets aside the rule of even-handedness required of a trustee towards the beneficiaries, it bestows upon the trustee the power to discriminate between classes of beneficiaries. The trustee may, for example, pay to a capital or residual beneficiary all or any part of the capital of the estate giving advantage to this beneficiary at the expense of an income beneficiary. This absolute and unfettered power will not be interfered with by the Courts simply because the other class of beneficiaries does not agree with the decision. Before a Court will intervene, it must be shown that the trustee did not discharge the trustee’s duty with honesty, intelligence, objectivity, and care. So long as the trustee’s conduct is bona fide, the Court will not interfere.