Trevor Todd and Jackson Todd have practiced estate litigation for over 60 combined years, including matters relating to executors.
Re Reagh Estate 2021 BCSC 1807 dealt with the issue of reimbursement to an executor for out of pocket expenses and legal fees.
Out of Pocket Expenses
An executor is entitled to be reimbursed out of the estate for all out-of-pocket expenses properly and reasonably incurred in the administration of the estate: Jackson v. King, 2003 BCSC 328 at para. 12. The threshold is low, so long as they were properly incurred and not improperly incurred, they are to be reimbursed: Royal Trust Corporation of Canada v. Clarke (1989), 1989 CanLII 2692 (BC CA), 35 BCLR (2d) 82 at pp. 86-87. The general principle of indemnification is also encapsulated in section 95 of the Trustee Act, R.S.B.C. 1996, c. 464, which provides that a trustee may reimburse themselves, or pay, or discharge out of the trust, all expenses incurred in the execution of the trust or trust powers.
Legal Fees
In Braich Estate (Re), 2017 BCSC 1140, the Court held that where there is a shortfall between a lawyer’s account and what the court considers proper indemnification, the executor will be personally responsible for the shortfall. At para. 51 the Court states:
The trustee or personal representative of an estate is personally liable for the legal costs incurred based upon the terms of the retainer. If the legal costs incurred are necessary and are proper charges against the estate, the trustee or personal representative of an estate may be reimbursed from the estate. Whether the costs incurred are necessary and are proper charges may be determined on a passing of the accounts. Further, the precise amount owing in legal bills could be determined at a review pursuant to the Legal Profession Act. If there is a difference or shortfall between the lawyer’s account and what the court considers proper indemnification for legal costs payable by the estate, the personal representative will be personally liable for the difference: Feth (Estate of), 2014 BCSC 970 at paras. 65 and 68.
A similar approach was taken in Collette Estate (Re), 2017 BCSC 473, where the Court states:
[5] Recently however, in this estate, assets are being sold, or have been sold, and whatever final distributions are to be made will likely take place about a year from now. The evidence does not show that assets of the estate have diminished in value from Mr. Baird’s delays, but I am satisfied that the substantial legal expenses he has incurred in his executorship would have been smaller had he moved more promptly in getting the assets liquidated.
Generally speaking, an executor is entitled to be indemnified for reasonable legal costs incurred for carrying out the business of the estate. The review of the legal costs will canvass the issues of whether the fees charged are excessive, whether they relate to the administration of the estate, or work done for the executor as beneficiary, and therefore in his personal capacity.
In any of these circumstances, the executor may be held personally responsible for the fees, rather than the estate: Feth (Estate of), 2014 BCSC 970 at para 65.
