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Monday, July 6, 2015

Courts frown on executors using estate funds to defend their personal interests

I always like to share news stories and case summaries with you readers when I think they'll be of interest to you. In particular, I like to share stories that come from law firms in Canada that have experienced wills and estates lawyers, so that those of you who are looking for lawyers in your area can see the names of local people who might be able to help you.

The following is one of those case summaries, and one of those firms with experienced wills lawyers. This article is about situations in which legal fees for court disputes are paid out of the estate. The article discusses two cases, one from BC and one from Ontario, in which the court said that executors can't use estate money to pay legal fees for work that benefits the executors and not the estate. This situation arises when the executor is also a beneficiary, and the executor charges the estate for a lawyer who acts for him as beneficiary.

The courts have clearly said that when the executor is a beneficiary and there are legal fees being spent on estate issues, the executor must separate the fees for estate work from the fees for him personally. There is no reason why the estate should pay for one beneficiary's lawyer just because that beneficiary is also the executor.

This may sound a bit confusing. The general rule is that when there is an estate dispute, the executor's legal fees are paid by the estate. That's still the case. But that rule only applies when the executor is acting for the estate, not when the executor is acting for himself as a beneficiary.

It's important that executors be aware of this rule. If they use estate funds improperly, executors will most likely be required by the court to repay the estate, or to lose their executor fee instead. Executors might consider using two lawyers - one to represent the estate and another to represent the executor in his capacity as beneficiary.

It's also important for beneficiaries to be aware of this rule, because they stand to lose directly if their inheritance is used up improperly.

If you'd like to read more about the two cases mentioned, and the facts leading to the decisions, click here to read a recent article by Vancouver law firm Alexander Holburn Beaudin & Lang.

3 comments:

  1. Interesting. I am an executor/beneficiary and I follow the rules. What you are suggesting sounds a bit like double dipping. If a disgruntled beneficiary can get her legal fees paid by the Estate than you would think that an Executor having a difficult time getting ie Pass Accounts from that beneficiary could also hire another lawyer and pressure that beneficiary. I had not thought of seeking compensation for that but to me it would not be unreasonable. Perhaps the Executor should seek additional compensation if the disgruntled beneficiary does not have a case? Why should the Estate pay the other side's legal fees?

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    1. I agree. If the executor is forced to pass accounts through the courts because a beneficiary is being unreasonable, that executor should ask the court to award costs against the beneficiary. There is no reason in the world for the estate to pay those costs! The days of people being complete jackasses because they know their lawyers will be paid by the estate are over.

      Lynne

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  2. I will give you the worst case example in Ontario, mine. My brother is the executor, dad in secret severed the joint tenancy on the matrimonial home, including 2 income properties. Mother did not know nor I that the severance was on her home. Mom was married and lived with dad from 1941-2001 when he died. My brother swooped in as executor, refused to probate the will until 2006 when I discovered mother had lost her life savings, so I paid myself to have the will probated. Probably a mistake on my part. I also paid to have an oil tank removed from the ground $3,000.00 which my brother refused to do. Suddenly 2008 mom sobbed to me that the government was going to take her pension to pay for back taxes. Yikes. I discovered she had been paying for 3 trucks my brother and his son drove, 8 years squatting on her cottage property and she paying all the bills was no $88,000.00 in debt. So I had him removed by the sheriff selling the cottage to clear her debts. He retaliated by taking the all the income and used the properties for his personal needs refusing to give mother copies of income taxes, while he files claiming to Ottawa that mother was getting 1/2 the rental profits but in fact she got nothing. 2004 until 2012 I tried to get my brother to co-operate to sell he refused. He terrorized my mother 14 years threatening she'd lose the matrimonial home if he sold the other properties on the land. 2014 the City of Sudbury property Tax dept issued a lien and one year notice they would put the properties up for sale in a public auction. My brother was in arrears on the properties since 2010, but falsified the information at the city tax dept by having all bill mailed to a box no so we did not know he stopped paying the taxes. The parking lot was mine & mothers for which we received no income but my brother and the tenants all used. I emptied my saving to stop the auction on the parking lot paying for taxes and insurance my brother let lapse about $7,000. I paid $15,000.00 to a lawyer to get mother's home into her name but it seems in Ontario what my father did was legal. So I tried to force the sale and my lawyer did nothing so I fired him. Hired another lawyer and tried to convince him and my buyer the only way my brother would ever cooperate is to put him in jail so I contacted our local police. 2008 when my brother stole all the properties the police said this was a civil offense and not a crime in Ontario. 2015 police are not investing him for fraud having given false information to the city to get my mother's name and address removed from their file. No guarantee however, that in Ontario that may also considered legal. Now my brother refused to cooperate to sell anything unless he gets paid for his 'work' and all the money he borrowed while he mismanaged the estate, totaling $55,000.00 mortgage, $70,000 back taxes, interest & penalties, $2,000.00 for appraisals that I could have gotten for free from our top commercial agent in Sudbury, Plus $20,000.00 for his truck which he used for snow removal a few times a year and about another $50,000.00 for god knowS what? And he is suing mom claiming everything is her fault as she refused to cooperate to sell. Mom is 96, does not own her matrimonial home and we both lost all our savings. I sold the parking lot to pay for legal & court costs. I have no chance of ever getting any of our money back. All I want is to sell & get rid of my brother without paying him any more money. However, thanks to the justice and laws in Ontario - I STAND A GOOD CHANCE OF LOSING THE CASE! WELCOME TO MY WORLD.

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