Executor Must Not Purchase Estate Assets

 Purchase Estate AssetsThere is a strict rule in equity to prevent a trustee from making a profit out of trust property, that it is prohibited for an executor who is selling trust property, to ever purchase the property personally or in the name of another. Any such transaction will be set aside and the executor made liable to account for any profits made in the transaction. It is not necessary to show that the trustee gained some advantage, however fair the transaction may be, it nevertheless should be set aside.
The only way that an executor or trustee may acquire valid title to an estate asset is with approval of the court, upon complete disclosure of the facts and valuations. The court will typically also require the consents of all beneficiaries. Any sale of estate assets that is not in the best interests of the estate, will be set aside, even if all of the beneficiaries have agreed to it.
In Ouellet v. Pelletier (1984) 58 NBR ( 2d) 273        a father died  intestate in 1962 . The Court appointed his  widow as administratrix and his children’s guardian . The  Court conferred  on the  widow a discretionary power to sell the property and  hold the proceeds in trust for the children. The widow instead  conveyed the  children’s interest in the property to herself . The children applied  for a declaration of entitlement to the property and the application was allowed.
The  widow was found to have violated the  common law principles regarding purchase of trust property by a  trustee . In order to do so, the   Consent of the guardian to the sale of trust property was required. The widow being both administratrix and guardian of the children required  Court approval before purchasing the property held in trust. The authorization to sell granted to the widow did not satisfy all of the conditions necessary for the granting of court approval . The widow continued to hold the interest in their father’s property in trust for the children.

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