Court Orders Trustee Removed

Court Orders Trustee Removed | Disinherited Vancouver

Sheppe v Harlingten 2018 BCSC 1460 involved a court ordered removal of a trustee pursuant to the beneficiaries of the Harlingten trust which was established when they were children.

Two beneficiaries of the trust lived in a residential property owned by the trust. The trustee wanted the trust to sell the property and invest the proceeds in real estate development that his own company is developing. the two children wished to continue to live in the trust property that had been established for their benefit.

The trustee held the property in trust pursuant to a trust settlement document that also names him as protector, with the power to replace the trustee.

Under the terms of the trust the trustee has broad discretionary powers that include selling, investing or borrowing against the property, favoring one beneficiary over another, and naming additional beneficiaries. Of particular importance to the petition, the trustee is permitted to enter into transactions, on behalf of the trust, with himself for companies in which he has an interest.

The trustee failed to pay taxes on a property owned by the trust, and that property was forfeited to the crown for nonpayment of property taxes.

The petitioners blocked the sale of property, and the trustee responded with scathing and abusive letters to them, as well as naming six additional trust beneficiaries, all members of his extended family.

The court removed the trustee and substituted another.

The trustee did not meet his statutory obligation to act as a prudent investor of trust property. Although the terms of the trust allowed them to enter into a transaction with his own company, the court found that he had done so in terms that he arranged to clearly prefer his own interest, failed to adequately protect those of the trust, and put the assets of the trust at risk.

The Law

A trustee’s powers, however broadly they may be stated, must still be exercised for the benefit of the trust. In Miles v Vince 2014 BC CA 289, the Court of Appeal set at paragraph 54:

In Fales v Canada Permanent Trust Co.(1977 2 SCR 302 the Supreme Court of Canada held that the primary duty of a trustee is to preserve trust assets. This principle applies despite broad discretionary powers given to the trustee in the trust document. Justice Dickson as he then was articulated the standard:

“The standard, of course, may be relaxed or modified up to a point by the terms of the will and, in the present case, there can be no doubt that the co trustees were given wide latitude. But, however wide the discretionary powers contained in the will, the trustees primary duty is preservation of the trust assets, and the enlargement of recognize powers does not relieve him of the duty of using ordinary skill in prudence, nor from the application of common sense.

The Court of Appeal in Miles referred to guidelines to be applied in considering whether to remove a trustee. Those guidelines come from Letterstedt v Broers (1884) LR Cas. 371 (JCPC)

1. If the court is satisfied that the continuance of the trustee would prevent the trust being properly executed, the trustee might be removed. It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate
2. the acts or omissions must be such as to endanger the trust property or to show all want of honesty, or a want of proper capacity to execute the duties, or want of reasonable fidelity
3. in exercising the delicate jurisdiction of removing trustees, the court’s main guide must be the welfare of the beneficiaries. It is not possible to lay down any more definite rule in the matter that is so essentially dependent on details often of great nicety. The court must proceed to look carefully into the circumstances of the case
4. when a trustee is asked to resign, and if it appears clear that the continuance of the trustee would be detrimental to the execution of the trusts, even if for no other reason than that human infirmity would prevent those beneficiary and interested, or those who act for them, from working in harmony with the trustee, if there is no reason to the contrary from the intentions of the framer of the trust to give this trustee of benefit or otherwise, the trustee is always advised by his own counsel to resign.
5. The lack of jurisprudence in respect of the removal of a trustee reflects the trustee when asked to do so, will resign
6. if, without any reasonable ground, the trustee refuses to do so the court might think it proper to remove him
7. friction or hostility between trustees and the beneficiary is not of itself a reason for the removal of the trustees. But were the hostility is grounded on the mode in which the trust is being administered, where it has been caused wholly or partially by substantial overcharges against the trust estate, it is not to be disregarded.

Not every neglect of duty or mistake will result in removal of the trustee. The key question is whether there is or has been endangerment of trust property, whether through a lack of honesty, lack of capacity or lack of reasonable fidelity. Conroy v Stokes (1952) 4 DLR 124 BCCA

Dissension between the trustee in beneficiaries is not necessary a reason to remove the trustee. The questions is whether it would become difficult for the trustee to act with impartiality or whether the friction is of a nature or degree that it prevents, or is likely to prevent, the proper administration of the trust. Radford v Radford estate (2008) 169 ACWS (3d) 688 at paragraphs 112 – 113

Duties and Liabilities of Executors / Trustees

Duties and Liabilities of an Executor / Trustee | Disinherited Estate Litigation

The duties and potential liabilities for executor/trustees can be onerous and personally risky if not properly carried out.

It is extremely important that the testator’s choice of his or her executor be given serious consideration. The attending notary or solicitor must remember that most clients have very little understanding as to the tasks and requirements that a personal representative must perform and the responsibilities that must be assumed. The appointment of the wrong person can be a costly and emotionally draining experience for all concerned. Accordingly it is important that the will’s draftsperson investigate the desired appointment and provide prudent legal advice as to who should be chosen to be the executor and trustee. Very often that choice cannot properly be made until the attending notary or solicitor firstly enquires as to the nature of the assets and the intentions to be carried out in the will.

It is very important that the prospective personal representative be made aware of the onerous duties associated with acting in such capacity. An executor who does not wish to act, or who has not intermeddled in the estate, can renounce the appointment.

11 considerations to make before naming your executor

There are many questions that the testator should consider prior to naming his or her executor, some of which are:

(i) will the executor be willing to act;
(ii) is the executor sufficiently sophisticated to carry out the job;
(iii) is the person trustworthy;
(iv) is the person young enough or healthy enough to carry out the job;
(v) will the executor be biased;
(vi) will the executor be able to work well with the beneficiaries;
(vii) does the executor have the time to do the job;
(viii) can the executor afford to do the job;
(ix) is there any conflict of interest or potential conflict of interest;
(x) should there be more than one executor;
(xi) the distance between where the testator and the executor reside.

The nature of the client’s affairs must be thoroughly examined to determine the type of active business interests, assets in foreign jurisdictions, loans or gifts to beneficiaries and the complexity of the various personal property and investments in the estate.

Duties of a personal representative

An executor/trustee derives his or her title from the will of the deceased while an administrator on the other hand derives his or her power by appointment from the court. Whether executor, trustee or administrator, both are referred to as the personal representative of the deceased.

A personal representative has a duty to act solely and exclusively for the benefit of the beneficiaries. This duty is construed strictly and forbids a personal representative from making a profit that is not authorized or occupying a position where the personal representative’s self interests would conflict with the duty to the beneficiaries. The Courts of Equity have required personal representatives to ensure that each beneficiary receives exactly what he or she is entitled to receive under the will or the estate. The personal representative must maintain an “even hand” when dealing with all beneficiaries.
Where there is no will, section 130 of WESA sets priorities for persons applying for grants of administration. It is prudent to have each person entitled to an interest in the estate and each person with an equal or prior right to apply for letters of administration, provide written consent to the application. This eliminates the risk of competing applications and minimizes the risk of the court requiring an administrator to provide a bond or other security.

The personal representative has a duty in exercising all of his or her powers, whether discretionary or administrative, to maintain the standard of care of a reasonably prudent businessperson managing someone else’s property. Generally speaking, the personal representative cannot delegate his or her duties. The Courts in recent years however have permitted delegation of administrative duties that a reasonable and prudent businessperson would delegate in the management of his or her own business affairs. This would include the use of brokers, real estate agents, accountants, lawyers, and appraisers.

 

The personal representative’s general duties are as follows: 

Prior to the introduction of WESA on March 31, 2014 it was far easier for the personal representative to search for and locate the last will of the deceased. There are now a large number of documents and types of information that may be relevant to what is a testamentary instrument as the will itself is not necessarily a single instrument. For example, recent court cases have held that the will may consist of a will and codicils, a will with documents incorporated by reference, or several documents which, when read together, comprise one will. Other documents might be held to be testamentary instruments pursuant to section 58 of WESA so the lawyer must ensure that the client is advised to bring any and all documents that appeared to express a testamentary intention to the lawyer for consideration.
Section 58 of WESA also states that data recorded or stored electronically may be a will or a revocation, alteration or revival of a will or stated testamentary intention so that searches of the deceased’s electronic records need to be made in case there is a document that might be determined to be such a record. Even suicide notes have been held to be valid wills while various diary extracts have also beenconsidered by the court to be testamentary in nature.

(1) To dispose of the deceased’s body.

It is the executor and not the testator’s spouse or family, who has the right to determine the place and manner of burial. Section 5 of the Cremation, Internment and Funeral Services act, SBC 2004 sets the hierarchy of persons who are entitled to control the disposition of remains. At the top of the list is the personal representative named in the will of the deceased. The right of the executor takes priority over the right of a spouse or other close relatives. If the person who has the right to control disposition is unavailable or unwilling, the right passes to the next person on the priority list. Proper funeral expenses incurred are payable out of the estate. Generally, the person who instructs the funeral director will be personally liable to pay all expenses incurred, but is entitled to indemnity as a first priority against the estate for the reasonable expenses of a suitable funeral. There are some cases where the executor has been denied reimbursement of the full funeral costs where the costs have been found to be excessive under the circumstances.

(2) Searching For and Taking Possession or Control of the Deceased’s Assets.

The personal representative must take steps to search for any cash, jewelry, and valuables and arrange for their safekeeping. Any personal property must be locked up and properly insured. Other assets that may require insurance coverage must also be checked into. Financial institutions and government agencies must be notified of the death. Mail must be re-directed and the bills, including mortgages, must be paid. Rents must be either collected or paid and businesses must be managed for the interim until distribution of the estate or until the sale of the business. A personal representative must enquire as to whether they have sufficient legal authority to carry on the business, and must also be cognizant of the potential for personal liability for carrying on the business.
Property that does not pass to the personal representative includes joint tenancy with a right of survivorship, property that will pass to a named beneficiary, such as in a pension plan, or RRSP and property held by the deceased as trustee.

(3) Complete a Schedule of all of the Deceased’s Assets and Ascertain Their Value.

After the executor has taken charge of the assets of the estate and has made a full inventory of the assets and a valuation of same, the personal representative should then arrange to have an application made to the court for the issue of a grant of probate. In the case where the deceased dies intestate or without a named beneficiary, there is often a delay experienced in finding some appropriate person to step forward and apply for letters of administration. The Rules of Court assume that in practice, in the absence of special circumstances, the court will usually give priority to appointing as administrator of the estate, the person or persons who have the greatest interest in the estate. In practice, consents will be required from any person entitled to share in the estate who has a greater or equal right to apply. Thus, if two or more persons are equally entitled to apply, they must either apply jointly, consent to the appointment of one of them or have the appointment confirmed by the Court. There is no limitation on the number of administrators who may be appointed.

(4) Advertise for Creditors.

Before any debts of the estate are paid, the executor or administrator should see to the publication of the proper advertisement for creditors, claims and other claims against the estate. From my experience, common sense should prevail in deciding whether or not to advertise for creditors as the costs can be considerable. In the case of a deceased with simple assets and a history of paying his or her bills on time, it may not be necessary to publish such an advertisement. However, if the personal representative is to protect him or herself from liability, then serious consideration should be given to the placement of such an advertisement, as provincial legislation states that the personal representative shall not be personally liable to creditors where notice has been properly given and the assets of the estate have already been distributed.

(5) To Notify Beneficiaries, Possible Beneficiaries Such as a Possible Common Law Spouse and Persons Who Would Inherit On an Intestacy With Respect to an Application For Probate or Grant of Administration;

(6) Enquiries must be made with respect to the Canada Pension plan, obtaining full particulars of any insurance on the deceased’s life, reviewing beneficiary designations, which may be revocable or a revocable, and reviewing RRSPs and RRIF’s

(7) To Ensure That Investments Are Authorized.

There is a duty to examine the assets and investments of the estate and, in general, to convert in a reasonable and timely manner, the assets that do not qualify as authorized investments for the estate. The executor must be concerned with assets that may waste (ie, an unheated greenhouse) or that are too speculative (penny stocks) or reversionary assets;

(8) To complete and file income tax returns and where necessary obtain a Clearance Certificate from Revenue Canada. Previous tax return should be reviewed in order to discover assets of the deceased and an estate tax return must be filed for the year preceding the death of the deceased.

(9) To pay the debts, including funeral, legal, testamentary expenses, succession duties and probate fees.

(10) To claim all debts due to the deceased and generally collect all of the assets that form part of the estate.

(11) To keep accounts:

One of the most important duties of the personal representative is to keep records and to be prepared to account to creditors and to persons who have a beneficial interest in the estate. The personal representative must give to anyone to whom he or she owes a duty such information as that person reasonably requires. The type and amount of information varies but the duty to account is owed to beneficiaries, unpaid legatees, unpaid creditors, successors, trustees, others who may have an interest in the deceased’s assets and others provided for by statutes such as the Public Guardian or Revenue Canada.

(12) To Investigate, Continue or Bring and Maintain Court Actions on Behalf of the Estate:

A personal representative of a deceased claimant may continue or bring and maintain an action for a loss or damage to the person or property of the deceased in the same manner and with the same rights and remedies as the deceased, except for certain actions such as libel and slander, pain and suffering and loss of expectancy of earnings.

The personal representative should remain neutral in any litigation concerning the distribution of estate assets, such as a wills variation action under section 60 WESA, and to assist the parties in determining the net amount of the estate that might be available for distribution. A personal representative, however, cannot maintain his or her own court action where he or she and the estate are on opposite sides. If that situation arises, then the personal representative must resign. The exception is that section 151 WESA now allows a beneficiary to seek leave of the court to prosecute an action without the need to replace the personal representative first.

(13) To distribute the assets in accordance with the will or the laws of intestacy.

Potential liabilities of the personal representative:

In Ketcham v Walton 2012 BCSC 175 at paragraph 10 , the court stated that the basic principle of an executor’s duty to specified potential beneficiaries of the will is neutrality. The court quoted Quirico v Pepper estate (1999) 22 BCTC 82 BCSC : “The primary duty of an executor is to preserve the assets of the estate, pay the debts and distribute the balance to the beneficiaries entitled under the will, or in accordance with any other order made under the wills variation act. An executor should not pick sides between the beneficiaries and use estate funds to finance litigation on their behalf under the former Wills Variation act ( now Section 60 WESA). It is a matter of indifference to the executor as to how the estate should be divided.. He or she need only comply with the terms of the will or any variation of it made by the court.”

14. Debts and Liabilities

A personal representative may be personally liable for the debts of the deceased to the extent of assets coming into the hands of the personal representative. It is therefore extremely important that the debts are properly listed and valued in the inventory of assets and liabilities. Particular care must be given to not distribute the assets to beneficiaries until either a clearance certificate has been issued by the federal tax authorities or more than sufficient assets have been held back from any interim distribution, so that the taxes can be paid. Failure to pay federal and provincial taxes can result in personal liability for the personal representative. Personal representatives are strongly encouraged to use the expertise of a tax accountant, so as to determine capital gains and losses for income tax purposes, to calculate foreign taxes, and to determine what property tax if any, is payable. This list is not exhaustive.
Valuations may often be difficult and complex and again, the personal representative should use a professional appraiser, qualified accountant or other expert for determining such valuations.

15. Failure To Keep Accounts

A trustee has an obligation to keep proper accounts, including a complete record of his or her activities and be in a position at all times to prove that he or she administered the trust prudently and honestly. He or she must have the accounts ready to give full information whenever required- Sandford v Porter (1889) OJ No.43, 16 OAR 565 (CA)

A trustee who fails to retain receipts supporting substantial cash withdrawals of expenses charged against an estate has not adequately carried out his or her duties and may be held personally liable for the unsubstantiated withdrawals.

If a trustee has mixed his or her own funds with the funds being held for another, all of the property must be taken to be the other’s property until the trustee is able to prove what part of it is his or her own Norman estate (1951) OJ 501 CA.

The trustee, not the beneficiaries bears the onus of establishing that the management and disbursement of funds is consistent with the terms of the trust.

16. Using Trust Assets For Personal Gain

It is a basic principle of trust law that a trustee is not entitled to use the trust property for his or her own personal benefit. If the trustee cannot account for or explain disbursements or expenses charged against a trust, he or she is personally liable to the trust for those disbursements and expenses.
A trustee who improperly enjoys the benefit of trust assets without authority and allows non-beneficiaries, such as his family, to also benefit is liable to the trust for the amounts of the value of the benefits received -Langston v Landen 2008 ONCA 321

17. Improper Delegation to Third Parties and improper Charging of Fees

There is authority for the proposition that the fees paid by a trustee in respect of the preparation of accounts must be borne by the trustee and deducted from the amount of compensation payable Eisenstat Estate v O’Hara (1995) OJ 548.

There is also authority for the proposition that where the trustee delegates the care and management of a trust to a professional, the professional fees incurred by the trust are deducted from the compensation paid to the trustee . Holt Estate (1994) 2ETR (2d) 163

18. Reckless and Unreasonable Behavior

An executor/trustee may be personally liable for costs for reckless and unreasonable behavior that amounts to reprehensible conduct for the opposing plaintiff’s action for no other reason than to frustrate the plaintiff’s claim. From my experience this typically arises between competing siblings Craven v Osdacz 2017 ONSC 4396.

19. Losses Due to Actions or Inactions

If an estate suffers any losses as a result of an executor/trustee’s actions or inactions such as failure to rent real property, the executor is obliged to repay the estate for such losses with interest. Re Sangha 2018 BCSC 54. An executor/trustee may be personally liable for interest lost to the estate for failing to invest estate assets. Re Proniuk 1984 CarswellAlta 285.

20. Conflicts of Interest

Moffat v Weststein (1996) 29 O.R. (3d) 371 canvassed the duty of an executor/trustee to avoid conflicts of interest, and at page 390 stated ” subsumed in the fiduciary’s duties of good faith and loyalty is the duty to avoid a conflict of interest. The fiduciary must not only avoided direct conflict of interest, but also must avoid the appearance of a potential or possible conflict. The fiduciary is barred from dividing loyalties between competing interests, including self-interest.

21. Improper Investments

Executors/trustees are only authorized to make investments of estate assets as provided for under the Trustee Act and must not invest any estate assets in speculative or risky types of investments. They must undertake their responsibilities with the ordinary care and prudence of a reasonable investor Stranger v Royal trust Co (1947) 1 WWR 538 and may be found personally liable for losses incurred by the estate for improper investments.

22. Failure to Pay Income Taxes

Under the Income Tax act an executor trustee will be personally liable for any unpaid taxes, interest and penalties that may be payable by an estate if the assets are distributed before obtaining a clearance certificate from the Canada Revenue Agency certifying that all taxes, interest and penalties have been assessed and paid. As such, it is crucial for the personal representative to obtain tax advice from a properly qualified accountant and to withhold substantial monies to ensure sufficient funds to pay taxes, in the event that an interim distribution is made to the beneficiaries.

Conclusion

The duties and liabilities of a personal representative set out in this article are not exhaustive but do give an indication as to the number of factors to not only decide whether a person should be appointed to act as the personal representative, or alternatively agreed to act as the personal representative due to the onerous tasks and potential liabilities that can be imposed on an executor/ trustee.
A personal representative should always retain an estate lawyer and accountant for the purpose of handling the rigours of carrying out the duties imposed by the office of being a personal representative and avoiding the serious liabilities that can be personally imposed on him or her for improperly carrying out the duties associated with such a fiduciary duty.

Executor Denied Remuneration for Critical Behaviour

Executor Denied Remuneration for Critical Behaviour - Disinherited

Re the Estate of Lillian Lowe 2002 BCSC 813 is an example of where the executors claim for fees was denied entirely by the court for inter alia her critical failure to supervise the professionals that she retained.

The general principles relating to remuneration of executors were not disputed. Executors should be fairly compensated for the work that they undertake -Baker v Baker (1995) BCJ 1039.
Executors are required simply to do their best to manage the affairs of the estate as one would expect a person of ordinary prudence to do. Parish v Parish estate (1999) 26 ETR (sd) 276 BCSC.

In the Lowe decision, the matter of the executors fees was referred to the registrar to hold an inquiry, determine the facts, and report them to the judge, so that the judge could hold a hearing and determine what is the appropriate executor’s fees to order, if any, after taking into account the factors set out in the relevant relevant legislation.

The court, however, has authority to interfere with the findings of the registrar and vary the recommendation of the registrar as it sees fit. Larson v Larson (1993) 80 BCLR (2d) 303.

The court is not hearing an appeal from the registrar’s conclusions and recommendations, the report is to be considered, but even if there is no error in law or principle discovered in the report, the discretion as to awarding fees and the imposition of costs is the courts alone- Morgan v Edwards estate (2001) 86 BCLR (3d) 19 BCCA.

In the Lowe decision the executor was a lawyer and the court found that she failed to administer the assets of the estate properly, including:

  1. despite repeated requests by the beneficiaries for a copy of the will, no copy was received for a period of one and a half years;
  2. unacceptable delays were involved in obtaining an order presuming the death of the deceased, that resulted in loss of orphans benefits under the Canada pension plan;
  3. the executor did not provide a proper accounting despite requests that she do so. The court application was required to produce the accounting which resulted in the beneficiaries incurring legal fees;
  4. there was a delay in obtaining bonds in the name of the deceased from the safety deposit box of over three years;
  5. the account of the executor’s first fees does not provide any detail. It only showed fees calculated on a percentage basis, and no time records were ever produced;
  6. the executor charged the maximum 5% on the capital of the estate;
  7. executor refused to produce revenue Canada notices of assessment until she was ordered to do so by the court. There was apparently no valid basis for her refusal and the documents contained relevant information.

The court found that the executor failed to supervise the activities and monitor the work done by the professionals that she employed Wagner v Van Cleeff (1991) 5 OR (3d) 477.

Executor Remuneration

Executor Remuneration | Disinherited Estate Litigation Vancouver

Re Mikaloff 2018 BCSC 756 reviews the criteria relating to the appropriate amount of executor remuneration on a passing of accounts application.

The deceased died in 2015 and directed that her will be distributed among nine beneficiaries equally.

The main asset was a Vancouver home, and following a challenge to the validity of her will and a wills variation application by a beneficiary, the matter came before the registrar to fix the amount of executors remuneration.

The executor claimed 4.5% of the capital and .4% of the average annual value of the assets is a care and management fee.

The register, observe that 5% is the maximum that can be charged for an entire administration of an estate, and in the present case, although the vast majority of the work in administering the estate had been completed, the administration was not complete.

An award of 4.5% at this time would undoubtedly equate with the 5% maximum by the time of the final passing of the accounts.

The value of the estate was $1.7 million, and the fact that the property had to be secured and maintain while the two estate actions render course, with the executor traveling to Vancouver from Victoria each month for 14 months, and the fact that the executor was required to instruct counsel and the two actions but did not appear in court, the registrar awarded the executor C of 3% and a care and management fee of .4%.

 

Legal Principles

The legal principles applicable to determining entitlement of an executor to remuneration is summarized in Re Chau Estate 2016 BCSC 2541 at paragraphs 14 – 16 and 18 – 19:

Section 88 of the Trustee Act governs that a personal representative or administrator is entitled to remuneration to a maximum of 5% of the gross aggregate value, including capital and income of all of the assets of the estate of the date of passing.

Section 88 (3) states that a person is entitled to an allowance under subsection 1, and may apply annually to the Supreme Court for a care and management fee and the court may allow a fee not exceeding .4% of the average market value of the estate assets.

The criteria to be considered in determining the appropriate amount of remuneration are set out in a number of cases, the leading of which is Re Toronto General Trust Corporation v. Central Ontario Railway Company(1905) OWR 350 at 354:

The criteria are:

  • the magnitude of the trust,
  • the care and responsibility involved,
  • the time occupied in administering the trust,
  • the skill and ability displayed,
  • and finally the success achieved

In the final result remuneration does not need to be fixed as a percentage of the gross aggregate value of the estate. It may be calculated as a lump sum, provided it does not exceed 5% of the total value of the estate Re Turley Estate ( 1955) 16 WWR 72 (BCSC)

The factors to be considered in awarding the annual care and  management fee are set out in Re Pedlar (1982) 34 BCLR 185 (SC) at paragraphs 14 and 15:

“each application must be decided upon its own facts. Some of the important factors to be taken into consideration in determining whether any care and management fee should be allowed and, if allowed, the extent of such care and management fee, not exceeding .4% of the average market value of the assets of the estate bracket include the following:

a) The value of the estate assets being administered;
b) the nature of the estate assets being administered – such as an active business, farm, real property held for investment or appreciation, a portfolio investments in the type of such investments
c) the degree of responsibility imposed upon the trustee with the terms of the will or other instrument, including the length or duration of the trust
d) the time expended by the trustee and the care and  management of the estate;
e) the degree of ability exhibited by the trustee in the care and  management of the estate
f) the success or failure of the trustee and the care and  management of the estate
g) whether or not some extraordinary service has been rendered by the trustee in the care and  management of the estate

The foregoing list of factors is not intended to be exhaustive, it has been derive, primarily from a consideration of the Ontario Court of Appeal decisions In re Mortimer 1936 OR 438 and Re Smith (1953) OR 185.

The court recognizes that there may be other factors deserving of consideration depending upon the circumstances involved in a particular application.

Executor/Trustee Removal: The Law Summarized

Executor/Trustee Removal: The Law Summarized

1. Feeney’s The Canadian Law of Wills, 4th ed. (Markham: LexisNexis, 2000) at 8.17 states:

An executor has a duty to settle the affairs of the estate and to distribute in accordance with the terms of the Will. A power granted to an executor exists within the context of the executor’s duty to settle the affairs of the estate and to distribute.

2. A power to retain an asset does not override the executor’s duty to settle the affairs of the estate and to distribute, per Justice Middleton in Sievert, Re (1921), 67 D.L.R. 199 (Ont. C.A.) at p. 200.

3. In Ketcham v. Walton 2012 BCSC 175 at para. 10, Mr. Justice Wong stated: “The basic principle of an executor’s duty to specified potential beneficiaries of the will is neutrality.” He quoted Mr. Justice Bouck in Quirico v. Pepper Estate (1999) 22 BCTC 82 (BCSC) at para. 15, as follows:

The primary duty of an executor is to preserve the assets of the estate, pay the debts and distribute the balance to the beneficiaries entitled under the will, or in accordance with any other order made under the Wills Variation Act. An executor should not pick sides between the beneficiaries and use estate funds to finance litigation on their behalf under the Wills Variation Act. It is a matter of indifference to the executor as to how the estate should be divided. He or she need only comply with the terms of the will or any variation of it made by a court.

4. The statutory authority to remove a trustee and appoint a replacement for that trustee is set out in ss. 30 and 31 of the Trustee Act, R.S.B.C. 1996, c. 464:

30. A trustee or receiver appointed by any court may be removed and a trustee, trustees or receiver substituted in place of him or her, at any time on application to the court by any trust beneficiary who is not under legal disability, with the consent and approval of a majority in interest and number of the trust beneficiaries who are also not under legal disability.

31. If it is expedient to appoint a new trustee and it is found inexpedient, difficult or impractical to do so without the assistance of the court, it is lawful for the court to make an order appointing a new trustee or trustees, whether there is an existing trustee or not at the time of making the order, and either in substitution for, or in addition to any existing trustees.

5. In Miles v. Vince, 2014 BCCA 289 at paras. 84-85, Madam Justice Levine, for the Court, considered the bases upon which a court might remove a trustee, as follows:

[84] What circumstances justify the removal of a trustee? In Letterstedt v. Broers (1884), L.R. App. Cas. 371 (J.C.P.C.), the court established guidelines justifying the removal of a trustee (at 385-389):

“1. If the Court is satisfied that the continuance of the trustee would prevent the trusts being properly executed, the trustee might be removed. It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate.

2. The acts or omissions must be such as to endanger the trust property or to show a want of honesty, or a want of proper capacity to execute the duties, or a want of reasonable fidelity.

3. In exercising the delicate jurisdiction of removing trustees, the Court’s main guide must be the welfare of the beneficiaries. It is not possible to lay down any more definite rule in a matter that is so “essentially dependent on details often of great nicety.” The Court must proceed to look carefully into the circumstances of the case.

4. Where a trustee is asked to resign, and if it appears clear that the continuance of the trustee would be detrimental to the execution of the trusts, even if for no other reason than that human infirmity would prevent those beneficially interested, or those who act for them, from working in harmony with the trustee, and if there is no reason to the contrary from the intentions of the framer of the trust to give this trustee a benefit or otherwise, the trustee is always advised by his own counsel to resign.”

6. In deciding whether to remove an estate trustee, “the court’s main guide should be the welfare of the beneficiaries”: see Crawford v. Jardine, [1997] O.J. No. 5041 (Ont. Ct. (Gen. Div.)), citing Letterstedt v. Broers, ibid, at 385-387, and Anderson, Re, (1928), 35 O.W.N. 7 at 8 (Ont. H.C.).

7. A court may intervene by removing a trustee where it finds that the conduct of the named trustees has endangered the trust property, or has shown a want of honesty, or of proper capacity to execute the duties of the office, or of reasonable fidelity (Conroy v. Stokes, [1952] 4 D.L.R. 124).

8. An executor may be removed where the executor’s actions are not in the best interests of the beneficiaries (McKay v. Howlett et at, 2003 BCCA 555).

9. An executor may be removed where the executor’s duties are found to be in conflict with his or her personal interests or estate assets had been endangered by the executor’s conduct and the executor had benefitted at the expense of the estate (Hall v. Hall, (1983) 45 B.C.L.R. 154 (S.C.); Veitch Estate, 2007 BCSC 952).

10. Even in the absence of misconduct, a trustee may be removed by the Court where the proper administration of a trust is threatened, and where the trustee in question has shown a want of proper capacity to execute the duties. (Re: Consiglio Trusts (No. 1) [1973] 3 O.R. 326; Letterstedt v. Broers, ibid; Conroy v. Stokes, ibid).

11. The principles to be applied in applications for the removal of executors are the same as for those for removal of trustees. (Powers v. Powers Estate, [1988] N.J. No. 19 (S.C.N.T.D.)).

12. A trustee may be removed if he or she fails to communicate promptly with trust beneficiaries or fails to file trust tax returns (Loftus v. Clarke Estate, 2001 BCSC 1136); or if there is a concern that the trustee has not made a proper accounting of business that he or she had conducted on behalf of the trust or evidence that he or she was treating the assets of the trust as his or her own personal assets (Hayne v. Moncrieff, 2012 ABCA 264).

13. In matters involving an executor’s misconduct the beneficiary may obtain an award of special costs against him or her (Loftus v, Clarke Estate, ibid).

14. “Even a ‘perceived’ conflict of interest between an executor’s personal interests and her duty to act in the interests of the beneficiaries of the will can be sufficient to warrant her removal.” Yeh Estate (Re), 2016 BCSC 1550 at para. 17, quoting Ching Estate (Re), 2016 BCSC 1111, at para. 22.

15. In Re Becker (1986), 1986 CanLII 2596 (ON SC), 57 O.R. (2d) 495 (Ont. S.C.), (sub nom. Stadelmier v. Hoffman), the Court found the executor should be passed over because there was a conflict as a result of the fact the executor could not attack the gift and transfer of properties to him while at the same time maintaining in his personal capacity that the transfers were proper. The court summarized the findings at 500:

In considering the fitness of the respondent to act as an executor I have considered also the duties of an executor in a general way. One duty of an executor is to bring in the estate for distribution among the beneficiaries. If it is perceived, on good grounds, that that important duty is compromised by a personal conflict of interest because the executor will be asked to sue himself to recover what may be a large part of the estate property, he must be passed over. That consideration is particularly important when the action against the executor is for a very significant amount in respect to the size of the estate.

BC Estate Lawyer- The Presumption of Undue Influence

When The Presumption of Undue Influence Arises

Trevor Todd and Jackson Todd have over sixty combined years handling contested estates including undue influence.

 

Burkett v Burkett Estate 2018 BCSC 320 held that the presumption of undue influence in gifts arises in circumstances where the relationship between the parties gives rise to the potential domination of one party by another, and once established that the potential for undue influence exists, the onus then shifts to the defendant to rebutt and show that the plaintiff entered into a transaction favoring the dominating party as a result of his own “free, full and informed thought.”

The Burkett decision set aside a transfer of land on the basis of resulting trust and undue influence.

Undue influence is generally not found by the courts unless the transferor had diminished mental capacity, but this is not always required as in the situation of a cult for example, where one person is in a position to dominate others who are not mentally incompetent.

In this decision the elderly mother of three sons in 2010 executed a transfer of her property to son A, and made a codicil to her will removing son C as co-executor.

The mother suffered from dementia in 2010, a condition which she attempted to mask.

The son did not register the transfer until 2013 when the mothers dementia had become apparent and significantly worse.

The court found that the mother lacked capacity to affect changes in her estate, and declared that son a held the property in trust for the mothers estate and removed him as executor.

The mothers previous 1997 will left all of her property to her three sons equally, and the plaintiffs were the children of one son who had predeceased his mother and who were entitled to their late father’s share.

The court found that by the fall of 2011 the deceased was in precipitous and noticeable mental decline and had become paranoid and obsessive. When she was interviewed by a medical doctor in 2012, she did not know that she had executed a transfer of the property the previous year.

The court found that in all likelihood the deceased signed the transfer of land to avoid the payment of probate fees, which under the law of resulting trust would find that her intention was not to gift the property, but alternatively that it was to be held in trust.

The Law of Presumption of Undue Influence

In Loriintt v. Boda 20114 BCCA 354, the BC Court of Appeal explained the presumption of undue influence at paragraph 75 and 76:

75. The presumption of undue influence arises in circumstances where the relationship between the parties gives rise to the potential domination of one party by another. Once a dominant relationship has been established, such that potential for influence exists, the onus moves to the defendant to rebutt and show that the plaintiff entered into the transaction as a result of his own ” free, full and informed thought”.

This law was first pronounced by the Supreme Court of Canada in the decision Geffen v. Goodman (1991) 2 SCR 353 at paragraphs 42 – 45 .

76. As another civil cases, regardless of the legal burden, both sides to the dispute will normally bring evidence to support their position. The trial judge will commence his or her inquiry with the applicable presumption and will weigh all of the evidence in an attempt to ascertain on the balance of probabilities, the transferor’s actual intention. As discussed by Sopinka in the Law of Evidence in Canada, at page 116, the presumption will only determine the result where there is insufficient evidence to rebut on the balance of probabilities.

Some case law has identified relationships between an old and sick parent and a child to be one of dominance and dependency: Petrowski v . Petrowski 2009 A.B.QB 196 at paragraph 382.

After examining the relationship between the transferor and the transferee, the court then examined the transaction in question. The presumption of undue influence can be rebutted by evidence of independent legal advice

In Mondonese v Delac estate 2011 BCSC 82, affirmed at 2011 BCCA 501,at paragraph 122, the court stated: the function of independent legal advice is to remove the taint that, if not removed, might invalidate a transaction. The nature and circumstances will dictate what constitutes adequate independent legal advice for the purposes of a given situation. Cope v Hill 2—5 ABQB 625 at para. 209.

The remedy for an unrebutted finding of undue influence is described in Geffen, at paragraph 23:

“the equitable doctrine of undue influence was developed as was pointed out by the House of Lords in Allcard v. Skinner (1887) , 36Ch. D. 145, not to save people from the consequences of their own folly, but to save them from being victimized by other people. In the context of gifts and other transactions, equity will intervene and set aside such arrangements. If procured by undue influence.”

Executor’s Remuneration

Executor's Remuneration

A beneficiary has the right to challenge a claim by the executor for remuneration by compelling the executor to pass his or her accounts before registrar of the Supreme Court of British Columbia.

The decision in re Sangha 2018 BCSC 54 outlined the various criteria and law relating to same.

The legal principles relevant to a registrar’s passing of accounts, including the calculation of an executive’s remuneration are summarized in Bernhard v. Wist 2011 BCSC, 101 at paragraphs 98 – 108, where the court states:

98. Section 99(1) of the TRUSTEE act, provides as follows:

1) Unless his or her accounts are approved and consented to in writing by all beneficiaries, or the court orders otherwise, an executor, administrator, trustee under a will and judicial trustee must, within two years from the date of the granting of the probate or letters of administration or within two years from the date of his or her appointment, and every other trustee may, at any time obtained from the court an order for passing his or her first accounts, and he or she must pass his or her subsequent accounts at the times the court directs.

99. In order to account to the beneficiaries, the executor must provide:

  1. An account showing of what the original estate consisted;
  2. an account of all monies received; and
  3. an account of all monies remaining on hand

Campbell v. Hogg 39 OWN 85

 

100. Section 88 of the TRUSTEE act governs executors remuneration. The executors entitled to:

a) A maximum of 5% of the gross aggregate value of the estate;
b) a maximum of 5% of the income earned during the administration of the estate; and
c) an annual care and management fee of .4% of the average market value of the assets.

 

101. However, the percentages stipulated in section 88 are not necessary to be applied in every calculation of remuneration. The percentages provide a rough guide to assist in appropriate computation of the executor’s remuneration. Re Turley estate (1955) 16 WWOR 72 BCSC

In the end, the court must be satisfied that the compensation claimed” there’s some reasonable relationship to the work and responsibility involved”

Re La Chance (1955) 15 WWR 141 BCSC

 

102. Various factors are to be considered when determining the appropriate executors fee. Those factors include :

1) the magnitude of the estate,
2) the care and  responsibility involved,
3) the time occupied in the administration,
4) the skill and ability displayed on the success(or lack thereof) achieved in the administration.

Re McColl estate (1967) , 65 WWR 110 BCSC

Similar, but not the same types of considerations apply with respect to a Karen management fee Re Pedlar (1982) 34 BCLR 185 BCSC

 

103. In terms of calculating the capital fee, the gross aggregate value of the estate is the realize the value of the original assets of the estate.

 

104. If the estate suffers any losses as a result of an executor’s actions or inaction the executors obliged to repay the estate, with interest the interest is calculated pursuant to the COURT Order Interest Act 1996, unless there is a finding that the executor has used the state monies for his or her own benefit. (In that circumstance, the executor may be required to pay compounded interest ) . See Waters Law of Trusts in Canada 3d addition, at pages 1228 – 1229.

 

105. An adverse inference may be drawn against an executor’s reliability if he or she fails to produce relevant documents as requested by the beneficiaries or ordered by the court. Booty v. Hutton (1996) BCJ 2286 BCSC.

 

106. The executors entitled to be reimbursed from the estate for a solicitor’s bill for legal services rendered, provided that those legal costs a been reasonably and properly incurred and do not relate to work that could of been performed by the executor. Fees paid for any services that could have been performed by the executor should be deducted from the executors remuneration. Read Lloyd estate ( 1954) , 12 WWR (NS) 445.

107. Furthermore, an executor is not entitled to employ a solicitor to do work that the executor could do, such as ordinary letters, attendances, pain insurance premiums and the like, attending to banking matters. Another ordinary duties that do not require the skill or expertise of a solicitor. Sharp v. Lush (1879) 10 CH 468 and applied in re-Smith (1972) 2 OR 256.

108. As a matter of practice, the solicitors charges may be included in the executors fees if the court finds that the executor could of done the work himself.

What to Expect as an Executor of Estate in BC

What to Expect as an Executor of Estate in BC - Disinherited

Everything to Know About Being an Executor

It is perhaps trite to state that the role of the drafting notary or solicitor is simply not to fill in the blanks and record the testator’s instructions, including his or her choice of executor, but instead to actively advise and draw to the testator’s attention all of the considerations relevant to his or her decision. Frequently the amount of discussion pertaining to the choice of the executor or administrator, is simply a discussion as to “who do you want your executor to be”? Prudent practice would dictate that any discussions pertaining as to who the appropriate executor or administrator might be, should perhaps be left to the end of the consultation, so that the drafting solicitor or notary is aware of all of the necessary personal and financial information relating to the testator’s intentions, or alternatively, to the estate. There is a huge responsibility to be undertaken on the part of the personal representative. Where so far as possible, the potential complexity and responsibility of the executor or administrator’s role should be impressed upon all concerned.

1. In General – The Office of Executor/Administrator

An executor derives the title from the will of the deceased, and does not have to wait for a grant of probate from the court before acting on behalf of the estate. An administrator on the other hand, derives his or her power by appointment from the court. The administrator may be appointed in the situation where the deceased dies intestate (without a will) or alternatively, dies with a will but there is no living named executor. In such instance, it is incumbent on someone to come forth and apply to the court to be appointed administrator.

The executor/administrator is the legal representative of the deceased and is often referred to as the personal representative. The office of the personal representative continues for life, so that if after completing the administration with regard to the assets discovered on the death of the testator, other assets fall into the estate, then the personal representative must reopen the administration and proceed with the distribution of the new assets in accordance with the terms of the will or intestacy.

An executor may be appointed expressly in a will or by implication. Sometimes the deceased fails to expressly name an executor, and upon a reasonable construction of the will being conducted, the court may conclude that the deceased did in fact grant to a named person, the essential duties of an executor. In such a case that person is said to be appointed “according to the tenor of the will”.

2. Should the Executor Agree to Act?

No one can be forced to e an executor, and an executor always has the option of renouncing, but this must be done before the executor “inter-meddles with assets of the estate”. Any prospective personal representative should give serious consideration as to whether or not he or she  is  prepared to act as the personal representative. Under no circumstances should the prospective personal representative deal with the assets or otherwise intermeddle in the estate, until he or she has in fact decided to act as the personal representative.

Some of the preliminary considerations for the prospective personal representative to consider are:

(a) the potential for personal liability which may arise under many circumstances;

(b) the possibility for conflict of interest, such as where the executor is also a business partner of the deceased;

(c) the nature of the deceased’s assets, including the complexity of the estate;

(d) the personal relationship of the prospective personal representative with the beneficiaries or intestate successors;

(e) the time, stress and hassle of being an executor and dealing with lawyers, beneficiaries and the like;

(f) the time involved versus the potential remuneration available;

(g) the actual terms of the will and such factors as whether there will be ongoing lengthy trusts.

Once a personal representative accepts an appointment, he or she becomes a trustee for the estate, and he or she must exercise the powers bestowed upon the office, with diligence and care. A personal representative may become personally liable if their office is carried out in a negligent or improvident manner.

There is a technical difference between the personal representative and the trustee, and that is why in most wills, the personal representative is appointed as the executor and trustee. One important difference is that a trustee can appoint other trustees and can also retire from the trust. An executor however cannot appoint someone to act as co-executor, and nor can he or she retire from the office once the will has been proved.

 

3. Intermeddling

An executor may also be appointed other than by a will, where the executor intermeddles in the assets of the estate, to the extent that the intermeddling makes that person an executor de son tort. This arises where the intermeddler has assumed the authority and office of the personal representative, and has dealt with the assets of the estate. It has arisen in such instances where the executor de son tort has arranged the burial of the deceased, gathered in assets and paid the debts. Once an executor has in fact intermeddled, he or she loses the right to renounce executorship, and may incur personal liability for any loss or damage that has resulted from any improper administration of the estate. However slight acts of intermeddling are not enough to make a person an executor de son tort.

 

4. Who May be Appointed?

Almost anyone can act as an executor, and generally speaking a testator may appoint whoever he or she likes to be his or her executor. Generally speaking the courts are very hesitant to interfere with the appointment of the executor as chosen by the testator.
However, persons of unsound mind are incapable of acting as personal representatives, and when the personal representative is or becomes insane, the court will grant administration to someone else. An infant may be appointed to be a personal representative, but the infant cannot act as personal representative during his or her minority. Accordingly if an infant is named sole executor, administration is granted with the will annexed to the guardian of the infant or to such other person as the court shall think fit, until the infant attains the age of majority.

In many instances, the court will refuse a grant of probate and will pass over an executor, where the court considers it inappropriate that such an appointment be made. These situations are typically where the proposed personal representative has been convicted of a fraudulent offence or has become bankrupt after the date of the will, or in situations where it has been established that a marked hostility existed between the proposed personal representative and the sole beneficiary. However, as previously stated, the court will not likely interfere with the discretion exercised by a testator in naming his or her personal representative. Before any application can be made for the removal of an executor and the appointment of someone else as administrator, probate must first have been granted to the executor whose removal is sought.

 

5. Qualified Appointment

The appointment of a personal representative may be either absolute or qualified. Where the appointment is qualified, it may be either as to time, place or as to purpose or subject matter. When the personal representative is appointed for a fixed period or until a specified event occurs, the authority ceases automatically when the period expires or when the event takes place. When the appointment is subject to a condition precedent, then that condition must be performed and the court has no power to relieve against an inadvertent failure to comply with it. A will may for example appoint one person as the personal representative for certain purposes or property, and another personal representative for general purposes. In that situation, probate will be granted to each personal representative, but will distinguish between their powers.

 

6. Choosing the Executor

It is extremely important that the testator’s choice of his or her executor be given serious consideration. The attending notary or solicitor must remember that most clients have very little understanding as to the tasks and requirements that a personal representative must perform and the responsibilities that must be assumed. The appointment of the wrong person can be a costly and emotionally draining experience for all concerned. Accordingly it is important that the will’s draftsperson investigate the desired appointment and provide prudent legal advice as to who should be chosen to be the executor and trustee. Very often that choice cannot properly be made, until the attending notary or solicitor firstly enquires as to the nature of the assets, and the intentions to be carried out in the will.

There are many questions that the testator should consider prior to naming his or her executor, some of which are:

(i) will the executor be willing to act;

(ii) is the executor sufficiently sophisticated to carry out the job;

(iii) is the person trustworthy;

(iv) is the person young enough or healthy enough to carry out the job;

(v) will the executor be biased;

(vi) will the executor be able to work well with the beneficiaries;

(vii) does the executor have the time to do the job;

(viii) can the executor afford to do the job;

(ix) is there any conflict of interest or potential conflict of interest;

(x) should there be more than one executor;

(xi) the distance between where the testator and the executor reside.

The nature of the client’s affairs must be thoroughly examined to determine the like of active business interests, assets in foreign jurisdictions, loans or gifts to beneficiaries and the complexity of the various personal property and investments in the estate.

Generally speaking the choice for the testator usually comes down to choosing between:

(i) family members;

(ii) friends or acquaintances;

(iii) a corporate trustee.

Testators are often reluctant to talk frankly about the respective capabilities of their family members in choosing an executor. Often it is the notary or the solicitor’s job to tactfully ask the appropriate questions as to each of the respective family member’s strengths and weaknesses. It should be stressed that it should be the most appropriate person in terms of temperament, sophistication and personality that should be selected, rather than for example the oldest child. Certainly the testator should be prodded to speculate as to how the dynamics between his or her children will be after they are no longer alive.
Testators often wish to co-appoint one or more family members and I personally am of the view that this should be discouraged. If the client is adamant that there be a multiple number of family members as executors, then a majority rule clause should be inserted in the Will. If there is a handicapped child or children and discretionary trusts are being established, then careful consideration must be given as to who will be the executor and trustee, particularly as it relates to the possibility of a conflict of interest with respect to any residual funds after the death of the handicapped child.

If there are no appropriate family members, then consideration will then most likely turn to friends or acquaintances Friends or acquaintances are often of the same generation as the testator, and if so may be a bit too old.

The corporate trustee is certainly an appropriate alternative in many instances, particularly where there is a dysfunctional family and/or a complex estate with sizeable assets. The corporate fiduciary is impartial and will have the necessary sophistication and means to handle a sophisticated estate and/or difficult beneficiaries. The corporate trustee will also have a good understanding of the concept of even handedness and the potential for conflict of interest. Certainly the corporate trustee has a wealth of special knowledge and expertise, and this must be weighed against the negative considerations of choosing a corporate trustee, which are typically the expense, and its relative inflexibility and relative lack of personal touch.

 

7. Duties of an Executor

An executor has a duty to act solely and exclusively for the benefit of the beneficiaries. This duty is construed strictly, and forbids a personal representative from making a profit that is not authorized, or occupying a position where the personal representative’s self interests would conflict with the executor fiduciary duty to the beneficiaries. The Courts of Equity have required personal representatives to ensure that each beneficiary receives exactly what he or she is entitled to receive under the will or the estate. The personal representative must maintain an “even hand” when dealing with all beneficiaries the executor  has a duty in exercising all of his or her powers, whether discretionary or administrative, to maintain the standard of care of a reasonably prudent businessperson managing someone else’s property. Generally speaking, the personal representative cannot delegate his or her duties. The Courts in recent years however have permitted delegation of administrative duties that a reasonable and prudent businessperson would delegate in the management of his or her own business affairs. This would include the use of brokers, real estate agents, accountants, lawyers, appraisers and so forth.

 

Executor Duties Checklist:

1. To dispose of the deceased’s body.

It is the executor and not the testator’s spouse or family, who has the right to determine the place and manner of burial. The Cemetery and Funeral Services Act sets up a priority structure as to who has the right to control the disposition of human remains. First priority is given to the executor, then to the spouse, and then to various categories of relatives. If the person who has the right to control disposition is unavailable or unwilling, the right passes to the next person of the priority list. Proper funeral expenses incurred are payable out of the estate. Generally, the person who instructs the funeral director will be personally liable to pay all expenses incurred, but is entitled to indemnity as a first priority against the estate for the reasonable expenses of a suitable funeral. There are some cases where the executor has been denied reimbursement of the full funeral costs, where the costs have been found to be excessive under the circumstances.

2. Take possession or control of the deceased’s assets.

The personal representative must take steps to search for any cash, jewelry, valuables and the like, and arrange for their safekeeping. Any personal property must be locked up and properly insured. Other assets that may require insurance coverage must also be checked into. Financial institutions and government agencies must be notified of the death. Mail must be re-directed and the bills, including mortgages, must be paid. Rents must be either collected or paid and businesses must be managed for the interim until distribution of the estate or until the sale of the business. A personal representative must enquire as to whether they have sufficient legal authority to carry on the business, and must also be cognizant of the potential for personal liability for carrying on the business.

3. Complete a schedule of all of the deceased’s assets and ascertain their value.

After the executor has taken charge of the assets of the estate, and has made a full inventory of the assets and a valuation of same, the personal representative should then arrange to have an application made to the court for the issue of a grant of probate. In the case where the deceased dies intestate or without a named beneficiary, there is often a delay experienced in finding some appropriate person to step forward and apply for letters of administration. Rule 61(20) of the Rules of Court, seems to assume that in practice, in the absence of special circumstances, the court will usually give priority to appointing as administrator of the estate, the person or persons who have the greatest interest in the estate. In practice consents will be required from any person entitled to share in the estate who has a greater or equal right to apply. Thus, if two or more persons are equally entitled to apply, they must either apply jointly, consent to the appointment of one of them, or be served with notice under Rule 61(20). There is no limitation on the number of administrators who may be appointment.

4. Advertise for creditors.

Before any debts of the estate are paid, the executor or administrator should see to the publication of the proper advertisement for creditors, claims and other claims against the estate. From my experience, common sense should prevail in deciding whether or not to advertise for creditors, as the costs can be considerable. In the case of a little old lady with simple assets and a history of paying her bills on time, it may not be necessary to publish such an advertisement. However if the personal representative is to protect him or herself from liability, then serious consideration should be given to the placement of such an advertisement, as Provincial Legislation states that the personal representative shall not be personally liable to creditors, where notice has been properly given and the assets of the estate have already been distributed.

5. To notify beneficiaries, and persons who would take on an intestacy with respect to an application for probate or letters of administration;

6.  To act personally, although as aforesaid, delegation may be allowed in certain administrative circumstances;

7. To ensure that investments are authorized.

There is a duty to examine the assets and investments of the estate, and in general, to convert in a reasonable and timely manner, the assets that do not qualify as authorized investments for the estate. The executor must be concerned with assets that may waste (ie, an unheated greenhouse) or that are to speculative (penny stocks), or reversionary assets;

8. To complete and file income tax returns and where necessary obtain a Clearance Certificate from Revenue Canada;

9. To pay the debts, including funeral, legal, testamentary expenses, succession duties and probate fees;

10. To claim all debts due to the deceased and generally collect all of the assets;

11. To keep accounts:

The executor has a duty to be prepared to account to creditors and to persons who have a beneficial interest in the estate. The personal representative must give to anyone to whom he or she owes a duty such information as that person reasonably requires. The type and amount of information varies, but the duty to account is owed to beneficiaries, unpaid legatees, unpaid creditors, successors, trustees, others who may have an interest in the deceased’s assets, and others provided for by statutes such as the Public Guardian or Revenue Canada.

12. To continue or bring and maintain court actions on behalf of the estate:

Under Section 59 of the Estate Administration Act, a personal representative of a deceased claimant may continue or bring and maintain an action for a loss or damage to the person or property of the deceased in the same manner and with the same rights and remedies as the deceased, except for certain actions such liable and slander, pain and suffering, and loss of expectancy of earnings. A personal representative may continue or bring and maintain an action under the Wills Variation Act, or an action for constructing or resulting trust on behalf of the deceased.

13. To distribute the assets in accordance with the will or the laws of intestacy.

8. The Executor’s Year

Generally speaking the personal representative must not unreasonably delay in calling in the assets and settling the affairs of the estate, and distributing the assets in accordance with the will or the rules of Intestate Succession. There is no hard and fast rule as to what constitutes undue or unreasonable delay, but as a general rule of thumb, there is an executor’s or administrator’s one year to do so. The general rule is that the executor has one year from the testator’s date of death, and in the case of an administration, the administrator has one year from the date of the grant, to settle the affairs of the estate.

There is case law to the effect that in the case of a legacy, the executor is entitled to withhold payment during the one year, even though the will indicates that the testator wishes payment to be made as soon as possible.

I will not deal with the topic of removal of an executor in the paper, but will do so at a later date.

 

9. Renunciation

Where the proposed personal representative has not intermeddled in a substantial way, then he or she can renounce the appointment as executor. Any renunciation must be unconditional and be in writing and properly witnessed. The renunciation takes effect as of the date of execution, but it may be withdrawn prior to filing it with the court. The renunciation is usually filed at the same time that the application for the grant of probate is made.

There are many reasons why an executor may wish to renounce, and this should be canvassed with the proposed personal representative at the initial meeting, and as soon as possible after the death of the deceased. For example I recently had a Provincial Court Judge renounce as executor, when it was likely that he would be named as a defendant as personal representative, in an action brought for an alleged sexual assault. This would be embarrassing to the executor given his job as a Judge.

If the proposed personal representative is one of two or more executors appointed under a will, then he or she may choose not to participate in the administration of the estate initially, and leave it up to the remaining executors to do so. In these circumstances, the remaining executors would apply for probate, and would reserve the right of the prospective personal representative to apply at a later date if he or she should choose to do so. Reserving the right to apply for probate may be appropriate where the prospective personal representative prefers not to act for reasons such as distance, lack of time, age, illness, or other such reasons.

The fact that an executor has not obtained a grant of probate does not mean that person is no longer an executor. Renunciation is generally preferable to a reservation of the right to apply for probate, unless the non-proving executor seriously wishes to reserve the right to apply for probate in the future.

 

10. The Chain Executorship

If two or more executors have proved a will, and one of them dies after the grant, and no alternative executor has been named, then the surviving executor will continue, unless the will requires a minimum number of executors greater than the number of surviving executors.

However if a grant has issued and the sole executor or the survivor of several executors have proved the will, but dies before completing the administration of the estate, and no alternate was named in the will, then the executor of the deceased’s executor will become the executor of the original testator once he or she obtains probate of the deceased executor’s will. The replacement executor will stand in the shoes of the original executor in all respects.

This rule is referred to as the chain of executorship and it applies only in the circumstances where the executor named in the will has taken probate of the will before death, and each will in the chain must have been proved or probated.

 

11. Estate Executor Fees

Unless the will provides otherwise, all executors whether lay or professional, whether experienced or not, are entitled to be paid remuneration in accordance with the provisions of Section 88 of the Trustee Act, R.S.B.C. This section allows the executor to be paid, in the discretion of the court, up to a maximum of 5% of the gross aggregate value of the estate, including capital and income, together with an annual care and management fee of up to .4% of the average market value of the estate.

In most circumstances, the beneficiaries may well approve a 5% fee to the executor. In many instances however the courts will not allow the executor be paid the maximum 5% of the gross aggregate value of the estate. The courts will enquire into a number of factors, including the complexity of the estate, the experience of the executor, the time spent by the executor, the value of the estate, the amount of time spent administering the estate, and the like. However from a perusal of the somewhat limited number of cases on point, and the growing gross amount of estates largely due to inflated real estate, it would appear that the court very often will award fees more in the range of 2 to 3 rather than the maximum.

Conclusion

It is very important that the testator’s choice of an executor or executors be given sufficient scrutiny and discussion. As previously stated, most clients have little or no understanding of the onerous responsibility that an executor or alternatively an administrator, must perform. An inappropriate or improvident appointment can often complicate the administration of the estate unduly, and in certain cases, unnecessarily result in litigation. Accordingly, it is incumbent upon the drafting notary or solicitor to thoroughly investigate the desired appointment and to provide suitable legal advice.

Removal of an Executor Summarized

Removal of an Executor Summarized

I am frequently asked about the removal of an Executor that beneficiaries complain about and the following briefly summarizes when and if the court will act to remove and replace an executor.

Lord Blackburn stated in Letterstedt v. Broers (1884), [1881-85] All E.R. Rep. 882 (South Africa P.C.), at 887 (a case cited consistently by courts in this province) that the court’s “main guide must be the welfare of the beneficiaries”. At paragraphs 10-16 of Fleming v. Fleming, 2006 NLTD 112 (N.L. T.D.), Green, J. discussed the legal principles relating to removal of an executor:

(a) the removal of a trustee or executor will not be lightly undertaken;

(b) the court has to be satisfied that it is in the interests of the beneficiaries generally that removal should occur;

(c) if it is clear that the continuance of the trustee or executor in office would be detrimental to the execution of the trusts or the administration of the Estate, the court may remove him or her;

(d) positive misconduct amounting to abuse of trust; endangerment of the Estate or trust property; want of honesty or reasonable fidelity; lack of proper capacity or ability to execute the duties of office; and conflict of interest can justify removal;

(e) friction or hostility between the executor and one or more of the beneficiaries will not normally be enough, in itself, to ground the removal, nor will mere suspicions that the executor will favour one beneficiary over another;

(f) an isolated mistake or a technical breach of trust may not be enough, if done in good faith with the best interests of the beneficiaries in mind; and

(g) consistent administration of the Estate in a manner than does not maintain an even hand between beneficiaries will often be enough to justify removal.

9      The court has an inherent power to effect removal if the executor is in a conflict of interest. A conflict of interest occurs whenever the personal interest of the personal representative conflicts with the interests of others for whom he or she has a duty to act. This is a potential issue here because the executor is a creditor to the Estate relating to legal services rendered prior to the testator’s death. To address whether the conflict is such as to disqualify the executor, one must examine if the executor has placed himself in a position where his personal interest and his duty conflicted conflict, such that he could no longer be impartial vis-a -vis the beneficiaries

Trustees Breach of Trust Excused

Trustee Act: Trustees Breach of Trust Excused

Section 96 of the Trustee Act allows the court to excuse a trustee for negligence or breach of trust when handling estate assets if the trustee acted honestly and reasonably.

Section 96 states as follows:

96. If it appears to the court that a trustee, however appointed, is or may be personally liable for a breach of trust, whenever the transaction alleged to be a breach of trust occurred, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the court in the matter in which the trustee committed the breach, then the court may relieve the trustee either wholly or partly from that personal liability.

 


 

Like trustees, pursuant to section 96, executors may be excused of liability in appropriate circumstances: see Brown v. Brown, 2011 BCSC 649.

To be excused, a trustee must satisfy all three elements in section 96:

  1. he or she must have acted honestly;
  2. must have acted reasonably;
  3. and the court must find that, in the circumstances, it would be fair to excuse the trustee for the breach and for failing to obtain directions from the court: Langley v. Brownjohn, 2007 BCSC 156 at para. 61.

The burden rests with the trustee who is seeking the protection of section 96 to prove that his or her actions are worthy of the exercise of the court’s discretion to excuse the trustee for the breach: Langley, supra, at para. 63.

In exercising its discretion pursuant to section 96, the court will consider factors including {Langley, supra at para. 66):

In Fales v. Canada Permanent Trust Co., [1977] 2 S.C.R. 302 (“.Fales”), the Court discussed the duties of trustees. The principles in Fales apply to executors: see Madock v. Greater, 2010 BCSC 567 at para. 61 and Re Ili/lis Estate, 2015 BCSC 208 at paras. 76- 77.

As set out in Fales, it in large part it reflects the longstanding principles regarding the duties of a trustee:

Traditionally, the standard of care and diligence required of a trustee in administering a trust is that of a man of ordinary prudence in managing his own affairs (Learoyd v. Whiteley [(1887), 12 App. Cas. 727.], at p. 733; Underhill’s Law of Trusts and Trustees, 12th ed., art. 49; Restatement of the Law on Trusts, 2nd ed., para. 174)