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.