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Saturday, June 15, 2019

How does an executor defend an accusation of breach of duties?

There are many articles on this blog that discuss the duties and responsibilities of an executor. There are also several articles that talk about the fact that an executor may be removed by the court for breaching his or her duties to the estate. What we have not covered very often is how an executor can defend himself or herself against an accusation of a breach.

Keep in mind that when we are talking about an executor committing a breach of duty, that topic covers dozens of sorts of mistakes by the executor. Some examples would be misusing the estate funds, taking too long to distribute the estate, giving the estate to the wrong people, favouring one beneficiary over another, or not following the will. Basically, a breach of duty is pretty much anything an executor is accused of doing wrong.

There are 3 ways in which an executor can defend his or her actions.

1. First - The executor can rely on statutes of limitation. If the beneficiary (or other complainant) has taken too long to bring the lawsuit, the executor can rely on the deadlines set out by law. The deadlines vary from province to province, but usually have a maximum of 15 years. However, where it can be shown that the executor deliberately concealed information or actions that would have let the beneficiaries know of the breach, the court can extend the deadline.

2. Second - The executor can show that the beneficiaries knew of the breach and went along with it, or, even worse, were the ones who instigated it. The term for this is "beneficiary acquiescence". This is one reason I tell beneficiaries not to wait for years before raising their complaint; if they take too long, it appears they are okay with the problem.

When a beneficiary signs a Release, it means the beneficiary agrees with and approves of the actions of the executor up to the date of the Release. If there have been breaches (e.g. funds missing) but the beneficiary signs the Release anyway, the beneficiary cannot later come back and complain about the breach.

3. Third - The executor can try to persuade the court that his or her actions were reasonable in the circumstances. For example, the beneficiaries might complain (by way of lawsuit to remove the executor) that the executor has taken five years so far and there is still no distribution of the estate. By most standards, this is much too long. But what if the executor can show that there was a dependent's relief application that took 3 years to resolve, followed by a dispute with CRA that took another year and a half to resolve? Sometimes the facts support the executor and if the court agrees, the executor may be excused for the breach.

In my experience, the vast majority of executors choose the third option, that of showing that his or her actions were reasonable in the circumstances. An executor who is not strongly supported by one of these three methods of defending himself should consider other actions, such as negotiation or mediation to get himself out of the mess. He or she should also consider giving up the executorship if that is being demanded and if he really cannot manage the estate.

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