Karrow v. Boghosian, 2026 ONSC 2425
Estate trustees are often given considerable discretion under a Will. But how far does that discretion actually extend?
A recent decision of the Ontario Superior Court of Justice provides an important reminder that even where a Will gives trustees “absolute discretion,” that discretion remains subject to their fiduciary obligations.
In Karrow v. Boghosian, the Court found that Estate Trustees had breached their fiduciary duties by approving substantial payments to one beneficiary without properly considering the interests of the other beneficiaries.
The Estate
Elizabeth Joan Karrow died in 2016. Her Will divided the residue of her estate into four equal shares for her grandchildren.
One $375,000 share was established for the benefit of two grandchildren, Jordan and Sarah. Until Sarah, the younger grandchild, reached age 30, the Trustees were permitted to use income and capital in specified circumstances.
The Trustees could make payments for the children’s medical needs and could also make payments to their father, Niel, where they considered the payments necessary to maintain his standard of living.
The Will stated that the Trustees had “absolute discretion” in making these decisions.
The Trustees subsequently authorized two payments to Niel:
- $50,000 to pay off a line of credit; and
- $95,000 in connection with his family litigation and other financial obligations.
The combined payments amounted to $145,000, almost 40% of the $375,000 trust established for Jordan and Sarah.
The Objection
Jordan objected to the passing of the estate accounts.
She argued that the trustees had failed to act with an “even hand” between the beneficiaries. In particular, she argued that the Trustees had focused on Niel’s interests without properly considering the effect of the payments on Jordan and Sarah’s eventual inheritance.
The Trustees took a different position.
They argued that the Will gave them absolute discretion and specifically permitted them to make payments to Niel, even if doing so resulted in unequal treatment between the beneficiaries.
The Court rejected that argument.
Absolute Discretion Is Not Unlimited
Justice Smith held that the words “absolute discretion” do not, by themselves, remove the trustee’s common-law obligations.
A Testator can expressly modify or remove the duty to act with an even hand, but much clearer language is required.
The Court therefore concluded that the Trustees were still required to consider the interests of Jordan and Sarah when deciding whether to make payments to Niel.
The fact that the Will permitted an unequal result did not mean that the Trustees could simply ignore the beneficiaries who would bear the cost of that decision.
The Even Hand Principle
The “even hand” principle requires Trustees to act impartially between beneficiaries.
This does not necessarily mean that every beneficiary must receive the same amount at every point in time.
A Will can deliberately give one beneficiary a greater benefit than another.
The important point is that:
- the Trustees must follow the terms and purposes of the Will and consider the competing interests of the beneficiaries when exercising their discretion.
In this case, the Court found that there was little evidence that the Trustees had actually considered Jordan and Sarah’s interests when approving the payments.
The Trustees Also Failed to Make Proper Inquiries
The Court identified another significant problem.
Before exercising a discretionary power, trustees must have sufficient information to make an informed decision.
Here, the Trustees had not adequately investigated Niel’s financial circumstances or determined whether the amounts requested were actually necessary to maintain his standard of living.
The Court noted that the decision should not have been treated as an “all or nothing” proposition.
The Trustees should have considered whether a smaller payment would have been sufficient.
That is an important practical lesson for Trustees. A request for $95,000 does not necessarily mean that the Trustee’s choice is simply to approve or reject $95,000. The Trustee should consider the purpose of the request, the financial circumstances, the needs of the beneficiaries and whether a lesser amount would accomplish the legitimate objective.
A Particularly Difficult Issue: Child Support
The Court was also concerned that some of the money paid to Niel was used in connection with obligations he owed to his daughters.
The second payment of $95,000 was connected to the settlement of Niel’s family litigation. That settlement included amounts for child support and post-secondary education expenses for Jordan and Sarah.
The Court considered it particularly problematic that trust capital being held for the children’s benefit was being used by their father to satisfy obligations that he personally owed to those same children.
The Court’s Decision
The Court concluded that the Trustees had failed to act even-handedly.
That failure amounted to a breach of fiduciary duty, an absence of good faith and an abuse of their discretionary power.
The Court therefore refused to approve the accounts.
The Trustees were ordered to repay the $145,000 paid to Niel, together with interest.
Considerations for Estate Trustees
This decision provides an important warning for anyone acting as an Estate Trustee.
When a Will gives a Trustee discretionary authority, the trustee should not simply assume that the words “absolute discretion” provide complete protection.
Before making a significant distribution, Trustees should consider:
- What was the Testator’s intention?
- What is the purpose of the discretionary power?
- Who are the beneficiaries whose interests may be affected?
- Have the interests of all beneficiaries been considered?
- Is the payment actually necessary under the terms of the Will?
- What financial information should be obtained before making the decision?
- Would a smaller payment accomplish the same purpose?
- Has the decision and the reasoning behind it been properly documented?
The Trustees should also be cautious about relying solely on general legal advice that they possess “absolute discretion.” The existence of discretion does not eliminate the Trustee’s fiduciary obligations.
Conclusion
Karrow v. Boghosian reinforces a fundamental principle of trust law:
Discretion is not the same as freedom from fiduciary responsibility.
An estate trustee may have broad authority to make decisions, but that authority must still be exercised for the purpose intended by the Will, in good faith, after proper consideration of the relevant circumstances and with appropriate regard for the interests of the beneficiaries.
For anyone acting as an Estate Trustee, substantial discretionary payments should therefore be approached carefully. The question is not simply, “Does the Will give me discretion?”
The better question is:
- “Have I exercised that discretion in the manner required by my fiduciary obligations and the intentions of the Testator?”
Brian Madigan LL.B., Broker