Tracing and Accounting For Assets

TracingTracing & Accounting For Assets

It is very common in estate litigation that the form of an asset may change substantially over a period of time.

For example a bank account of cash can be converted into a stock portfolio, which in turn can be used to buy a house that is subsequently sold and put into long-term bonds.

As long as those funds can be identified, they can be traced and accounted for, and where appropriate and ordered by the court, transferred into the name of a rightful heir.

 The principals relating to orders for tracing and accounting were articulated by  Pitfield J. in  Ruwenzori Enterprises Ltd. v. Walji, 2004 BCSC 741 at paras. 240-242 and 245, aff’d 2006 BCCA 448:

1]    Neither tracing nor an accounting is a remedy.  Each is a process designed to assist in the perfection of a remedy…

2]    It follows that tracing is the process employed to identify and particularize the manner in which funds have been applied.  The results of the tracing permit a claimant to determine whether it will opt for a proprietary remedy in respect of funds derived from it, or a monetary judgment in respect thereof.

3]    An accounting is directed at the determination of profit, gain or loss derived from assets in respect of which tracing has identified a right to, and the claimant has opted to assert, a proprietary interest.


4]    Upon termination of any part of the tracing process at their option or otherwise, [the plaintiffs] will be entitled to elect to apply to confirm a proprietary interest in respect of assets other than those in respect of which the election to do so has already been made and by virtue of my reasons granted, or to enter judgment for the amounts I have enumerated and to apply for judgment in respect of any additional funds identified by the tracing process.

Administrator Removed For Misconduct With Special Costs

Administrator Removed For Misconduct With Special Costs

Sahota v Sandhu 2012 BCSC 552 is an example of a very straight forward court application to remove and replace a court appointed estate administrator who flagrantly acted in breach of his duties.

His actions were clearly so egregious that there was little surprise or discussion in  the courts removal of him as administrator.

The parties father died in 2008 intestate ( without a will).

The Court appointed the administrator who then breached his duties by transferring title to certain real properties initially to himself.

He then transferred title to his 6 siblings contrary to the terms of a court order.

The Court had little difficulty in ordering the removal of the son as administrator, transferring title to the properties into the petitioners’ names as administrator of the estate, requiring the removed son to pass his accounts , and ordering special costs against him.

Special costs typically means that the losing party must pay the winning side’s entire legal costs, and not just a portion of them, typically around 1/3 of the actual legal fees charged,  as most orders for “costs” provide.

Special costs are usually reserved for situations where one parties conduct is so reprehensible that the court’s need to sanction that form of egregious behavior.

Executor Must Remain Neutral In Estate Litigation

Estate Litigation

Ketcham v Walton 2012 BCSC 175 involved an application by the executor for directions pursuant to section 86 of the Trustee act for an order authorizing the executor to follow the provisions of the deceased’s  last will to defend any wills variation action and gifts as vigorously as possible, even to the extent of depleting the assets of the estate in the defense and appeal of such attack on the will.

In effect the executor was asking the court for directions on how he should govern himself in the face of the disinherited three adult children’s claim for relief under the wills variation act.

The deceased left his estate to friends and charities, and disinherited his three adult children entirely.

It was a most unusual directive to his executor to fight any contests brought against his will by the children, to the extent of depleting the entire assets of the estate.

The judge in fact had no difficulty in dismissing the executors application, and restated the law that the primary duty of an executor is to preserve the assets of the

estate, pay the debts and distribute the balance of the to the beneficiaries entitled under the will, or, in accordance with any order made under wills variation act.

An executor should not take sides between the beneficiaries or use estate funds to finance litigation on their behalf under the wills variation act.

The law anticipates that the executor will remain impartial between the opposing beneficiaries.


The decision in Quirico v Pepper estate (1999) 22 BCTC 32 was followed, as was Doucette v Doucette Estate 2008 BCSC 506, at paragraph 16 where Justice

Metzger states ” The law requires an executor to remain neutral.

How to Calculate the Value of Life Estate Land

How To Value Life Estates Land

Life estates, also known as life interests, are a well-established part of estate planning. The owner of a life estate (“the life tenant”) has the right to occupy, use and deal with real and/or personal property for his or her lifetime. Determining the value of life estate land can be done with the help of a professional, but this post will help you get an idea for yourself.

How Life Estates Work

When the life tenant dies, the remaining interest in the property then passes to the next person entitled, historically named the “remainder man”. The interest remaining after the death of the life tenant is called the “remainder interest”. After the death of the life tenant, the remainder man enjoys full ownership of the life estate land or property.

A life interest in property has a value that can be determined by an actuarial calculation done by a professional actuary.

Calculating the Value of Life Estate Land

The purpose of this commentary is to simply give an overview of the process as well as an example. It should not be followed as any sort of professional opinion as to how to calculate such interests.

The formula consists of taking the date of birth of the life tenant as at the date of the creation of the life estate, rounded off to the nearest year, then comparing the age to an actuarial table to determine the”life tenant factor”. Then multiplying that number by the market value of the life estate land in which the subject life interest is being created to calculate the value of the life interest.

That figure in turn is subtracted from the market value of the land to calculate the value of the remainder interest (The life interest plus the remainder interest must equal the total market value of the land being transferred).

Here’s an example of calculating life estate land value:

Pam aged 77 is the sole registered owner of land valued at $185,000.

Pam decides to transfer this land to her son for $80,000, subject to a reservation of a life interest in it for herself.

Referring to actuarial tables, Pam’s life tenant factor is calculated as a female aged 77 years giving her a life tenant factor of .38603

The value of the life interest is $185,000 x .38603 = $71,415

Therefore, the value of the remainder interest is $185,000 – $71,415, = $113,585

Further reading on life estates

Life Estate Can Be Partitioned

Life Estate Valuation

Life Estates aka Life Interests

Executors Fee Slashed By Court For Mis-Management of Estate

Executors Fee Slashed By Court

Re Stolarchuk Estate 2011 BCSC 1681 discusses the various principles involved in the calculation of an appropriate remuneration for an executor who mismanaged the estate assets.

The deceased died in October 2004 leaving his estate consisting primarily of her house and an adjacent lot.

Her will bequeathed her estate equally to her four children, one of whom was the executrix.

The executrix attempted unsuccessfully to negotiate with her siblings to purchase the property from the estate for several years, and finally ended up selling the property through a realtor in 2009 for $250,000.

The executrix submitted an account for her remuneration at $17,000.

The court fixture remuneration at only $3000.

The registrar found that the executrix failed to realize on the estate assets and to distribute them in a timely fashion. She also acted wastefully in maintaining the phone and cable service to the house.

The court relied upon the following legal principles in assessing executors remuneration:

In Bernhard v. Wist, 2011 BCSC 101,  outlined the legal principles relevant to executors remuneration:

[100]       Section 88 of the Trustee Act governs executor’s remuneration. The executor is entitled to:

a)   a maximum of 5 per cent of the gross aggregrate value of the estate;

b)   a maximum of 5 per cent of the income earned during the administration of the estate; and

c)  an annual “care and management fee” of 0.4% of the average market value of the assets.


[101]       However, the percentages stipulated in s. 88 are not necessarily 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 W.W.R. 72 (B.C.S.C.). In the end, the court must be satisfied that the compensation claimed “bears some reasonable relationship to the work and responsibility involved”: Re La Chance, [1955] 15 W.W.R. 141 (B.C.S.C.).


[102]       Various factors are to be considered when determining the appropriate executor’s fee. Those factors include the magnitude of the estate, the care and responsibility involved, the time occupied in the administration, the skill and ability displayed and the success (or lack thereof) achieved in the administration: Re McColl Estate (1967), 65 W.W.R. 110 (B.C.S.C.). Similar, but not the same, types of considerations apply with respect to a care and management fee: Re Pedlar (1982), 34 B.C.L.R. 185 (S.C.).

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

Co-Executor Trustee Removed for Lack of Co-operation

Co-Executor Trustee Removed for Lack of Co-operation

Levi- Bandel v Talesiesin Estate 2011 CarswellBC 384 is a good example of what perceives as an increased willingness by the courts to remove obstructive and uncooperative executors and trustees in the interests of the beneficiaries.

The deceased estate was managed by 2 co-executrixes who were also the co trustees.

The deceased made a bequest to pay $25,000 to one of the trustees for the care of the deceased’s 2 cats, with any residue of the sum going to an animal organization.

The petitioner who was a trustee but not a beneficiary, brought this application to have the co trustee removed as an estate manager, to have her pass accounts, for a declaration that she was not entitled to remuneration, as well as special costs.

All of that relief was granted by the court.

The co trustee had taken the cats to live with her, and the petitioner successfully argued that any expenses for the care of the cats had to be approved by the estate.

The court found it had jurisdiction to remove a trustee, and determined that the welfare of the beneficiaries was the major factor in possible removal.

The co trustees’ failure to act prevented the estate from being properly administered, so the co executor was removed.

It was not necessary to appoint a new trustee in place of the removed trustee.

Lost Wills and the Presumption of Revocation

lostLost Wills and the Presumption of Revocation

An update to this article is that since the introduction of WESA on April 1, 2014, I anticipate that the courts will be more willing to allow copies of wills as proof of the testator’s intention to more easily admissible into probate

Often when a person dies, his or her original will cannot be found and will never be found.

Frequently years have passed between between the date the will was signed and the testator’s death.

In many circumstances a true copy of the will be accepted for probate in the place of the original will.

However, if the will was last known to be in the custody of the testator, and is not found after the death of the testator, then the presumption is that the testator destroyed the will with the intention of revoking it.

The presumption of revocation may be rebutted by evidence such as the following:

A. The character of the testator;

B. The existence of codicils;

C. Statements made to beneficiaries with respect to provisions made for them; and

D. Words and actions of the testator before and after the execution of the will.

The degree of evidence required by the Courts to rebut this presumption is not usually very high.

If the existence of a valid will is proved then the presumption of revocation is rebutted. The contents of the will must then be proved.

If there is a copy or completed draft, and the solicitor who prepared the will gives evidence as to proof of execution by the testator, there should be sufficient evidence of the contents of the will.

If there is no copy or completed draft, the evidence of the witness as to the contents of the will may be sufficient, even if that witness has an interest in the will.

Such evidence may include statements made by the testator before or after the execution of the will, evidence that the witness with the will, evidence of codicils to a will that reference to the will in written documents.

Compensation For Executors and Trustees in British Columbia

Compensation For Executors and Trustees in BC

Many issues in estate litigation arise that pertain to the appropriate amount of compensation for executors and trustees.

The first place to start for the answer is the Trustee Act of British Columbia.

If the will or trust stipulates the amount of the executor or trustee’s compensation, then that will generally speaking be upheld by the courts.

The Courts are inclined to follow the stipulated direction of the testator in this regard.

If compensation is not stipulated in the testamentary document, then the maximum entitlement for an executor is 5% of the gross aggregate value of the estate, as compensation for their time spent, care, trouble and duties carried out.

In addition, the Trustee Act also provides for a maximum fee of .4% of the average market value of the assets on a yearly basis, for the care and management of the assets.

In the experience of, the overwhelming number of initial compensation disputes between the beneficiaries and the executor are resolved without access to the courts.

Most beneficiaries will often agree on a reasonable amount of compensation, as they both recognize the effort carried out by the executor,as well as they are very often in a hurry for their inheritance and do not want to further delay the distribution.

When beneficiaries cannot resolve the fee dispute, the court uses the following criteria in determining the amount of executor/trustee compensation, namely:

A. The time occupied;
B. The success achieved in the final results;
C. The amount involved in the estate;
D. The skill and ability displayed and required;
E. The care and responsibility involved

One of the feeding decisions that is often referred to is McColl Estate (1967) 65 WWR 110 BCSC where the aforesaid criteria were set out by the court

The type of criteria that the court will look at is whether on the one hand it was simply a bank account with a large amount of money, that involved very little work, or on the other hand ,a small problematic estate to the point that it was a thankless job.

In the experience of is not usual to be paid the maximum 5% in most estates.

The average instead being more in the range of 2 1/2 to 3%. .

It is in fact surprising that very few of the contested compensation matters actually proceed to court and there is in fact a paucity of caselaw on the topic.

In the experience of carrying out the duties of executor or trustee can often amount to being a fire hydrant on a street of dogs

Executor/Trustee Personally Liable To Beneficiary For Unauthorized Payments from Estate Assets

Executors and trustees can be personally liable to beneficiaries for improper or unauthorized payments from estate assets.

The Brown v Brown 2011 BCSC 649 is a good example of that principle of law.Continue reading

Disbarred Lawyer Loses Mother’s BC Estate Case

 Estate of Sophia Ewachniuk v Ewachniuk 2011 BCSC 395 is the fascinating sequel of a disbarred lawyer’s continued litigation with his two sisters.

In a previous trial involving the same parties Hix v Ewachniuk 2008 BCSC 811, affirmed 2010 BCCA 317,the court found that the deceased’s 2000 will was prepared by the defendant lawyer son.

The will purportedly left her entire $2 million estate to her lawyer son.

The court declared that will void, stating it was procured by his undue influence.

This subsequent litigation had to do with the estate suing the defendant son for repayment of a promissory note signed by the defendant, in favour of his parents in 1980, for $750,000.

The promissory note did not contain a date for repayment, but indicated that it was payable one year after demand, without interest.

The estate administrator issued a letter of demand to the defendant after their mother’s death in 2008.

The defendant argued that he owed nothing.

The court held that it was the defendant’s burden to prove that the intention of the parties was not to make the promissory note enforceable against him.

The court held that the promissory note is that delayed- demand promissory note that is not statute barred by far the Limitation act, which provides for an ultimate limitation period of 30 years.

The court recited the principle in Miller v. Miller Estate (1987) 14 BCLR (2d) 42 “the court should require a high standard of proof from a person who claims he is owed money by the deceased person, applies to a claim by a deceased person as represented by her estate for money owed to the estate.”

“The evidence of the payment in these types of situation should examined with the most careful scrutiny and indeed at the outset with some suspicion”

The court ordered the defendant son to pay the estate $750,000 plus costs