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Sunday, November 22, 2020

Can a beneficiary who paid legal fees to force an executor to take action be reimbursed from the estate?

I receive numerous comments and questions from readers that really deserve to have full threads of their own, if only there were more hours in the day! The following is another good question from a reader that I thought would be of interest to many of you, as I know you are working your way through estates either as executors or beneficiaries. Here is the question, followed by my comments:

"I'm not the executor but I had to pay legal fees as a beneficiary to get the executor to take action. Can I be reimbursed from the estate?"

It's possible that you could be reimbursed from the estate, or even by the executor himself. but there is no single answer that can be given in all cases. It all depends on the circumstances. In the old days (such as when I started practicing law), it was very common for all parties to get their legal fees paid out of the estate. Those days are gone. Nobody should assume their fees will be paid by the estate.

The time for determining whether you can be reimbursed for legal fees is at the end of the court hearing (assuming it went that far). At the end of any trial or any court application, the party who won the hearing can ask the judge to award costs against the other party. It's not a given; the judge will decide whether it is appropriate for costs to be awarded at all, and if so, at what rate. If you applied to force the executor to take action and the judge agreed with you, then you can ask for costs.

It's not that unusual for a beneficiary who has to force an executor to do his job to be awarded costs. Getting costs is a way of acknowledging that you should not have had to go to the time and expense of hiring a lawyer to force the executor to do what he already was supposed to be doing in order to fulfill his legal obligation. Keep in mind, though, that getting costs almost never means being reimbursed in full. It is only a small part of what you probably paid to the lawyer.

If a matter such as this doesn't get all the way to court but is settled along the way by the parties and their lawyers, the question of costs should be rolled into that settlement. Usually both parties start off by asking for costs against the other one, but during the settlement process it becomes clear as to who is succeeding. If your action is to make the executor get off his backside and take action, and he agrees to take action, then in essence you have "won" and should ask for costs. 

In my experience, the question of costs is pretty touchy and people who are quite willing to figure out the issues in the case and settle them get pretty angry when asked for costs. It doesn't stop me from asking when it's appropriate to do so, but you should know that it isn't something that people agree to easily.

I mentioned that sometimes costs end up being paid by an executor himself and not from the estate. This is pretty rare but it does happen. When it does, it is often a punishment of sorts against parties who are dragging out an estate for no good reason. A judge may feel that it's unfair for the beneficiaries to inherit less from an estate because parties were involved in pointless litigation. As I said, it's rare, but depending on how long you've been waiting for your inheritance, the size of the estate, the reasons for the executor's delay, and the steps you've had to take to get him moving, it could be possible. As a general rule, the executor's behaviour must be "egregious" before you'll get costs against him personally.

1 comment:

  1. Lynn,

    Prior to my mothers passing we were 50% tenants in common on an Ontario investment property in which she also resided. Mortgage life insurance paid out the remaining debt on the property after her passing. The property was sold after her death and the funds held in trust of the Estates law firm. The Estate Executor (Sibling) refuses to release the funds from sale claiming that the Estate is entitled to the value of the mortgage life insurance. Does the Estate have any grounds to do such in light of the legal 50% ownership? This has been ongoing for over 5 years, with all offers to settle from the estate in favour of my siblings (beneficiaries) and legal costs for myself growing despite little action or any time in court. What recourse do I have as my only options seems to be awaiting a court date (high cost) or forced into accepting an offer to settle in favour of my siblings?



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