Generally speaking, when a person who dies leaves a will, the person named in the will as executor (a term used interchangeably with “personal representative”) will be expected to enact the bequests of the deceased following the wishes expressed in the will. Often, this process becomes fraught, particularly when the person appointed as executor is one of several children of the deceased (or is otherwise related to many of the beneficiaries), and the siblings (or other relatives, as the case may be) disagree as to the true intentions of the deceased in the will.
In circumstances where it is unclear whether the executor is acting in the best interests of the estate or themselves, it may become necessary to bring the matter before a court to ascertain whether the deceased’s wishes are being carried out by the terms of the will, which gives rise to a larger issue concerning what, precisely, are the rights and responsibilities of executors.
Dispute About Executor Rights Arises in Wake of Matriarch’s Death
The recent case of Barbieri Estate v White illustrates what may happen when an executor oversteps their bounds in distributing the will’s assets. The case involved an application by a sister to have her brother removed as the executor and trustee of their mother’s estate. The mother, who died in November of 2018, had left a will which had been executed in December of 2007. That will dictated that the sister and brother were to act as joint executors of her estate. The will further states that the third sibling, who was not named as an executor, was granted a life estate for a property upon which he ran a business unless and until he decided to discontinue his business, at which point the property would devolve to the estate, and that the residue of the estate was to be divided equally amongst the three siblings. The mother owned three different properties at the time of her death.
Two months after being jointly appointed as executors of the mother’s estate, the brother applied with the court to have the sister removed as executor and trustee of the estate because the sister transferred ownership of a property (“property A”) that had been jointly held by both the sister and mother before the mother’s death, to her own name alone. The brother’s application was granted by consent order, such that as of September 2019, the brother was the sole executor of the mother’s estate.
Several weeks later, the brother, in his capacity as executor, initiated an action before the court in which he sought a declaration that the estate owned 75% of the value of property A; as a result of his application, a certificate of pending litigation was registered against property A. Although initially purchased as an investment property intended to be rented out to tenants to generate income, the sister resided at property A at the time of these proceedings.
In February 2020, the brother incorporated a numbered company of which he is the sole director and then transferred ownership of property B to the numbered company; he did not advise the sister of the transfer, and she discovered it of her own accord upon conducting a title search of the property. Approximately one year later, the brother transferred the title of property C to the other brother; this sale was also enacted without notice to the sister.
The Parties’ Respective Positions and Arguments
The sister commenced an application seeking to have the brother removed as the executor of the mother’s estate. She claimed that the brother had, amongst other things, engaged in self-dealing with the estate for his own personal financial benefit in that he had sold himself property B at an amount far below market value. In addition, he had demonstrated a preference for himself and the other brother as beneficiaries over the other beneficiary, their sister, and “has not acted with honesty and fidelity required of a fiduciary.”
The brother defended the attempt to have him removed as executor by asserting that, amongst other things, he, as executor, had been accorded “a very broad discretion to retain or convert assets, and to assign valuations to them” and that an executor should be removed only if they have acted either unfairly or in bad faith, and he had done neither. Furthermore, he contended that the transfers of properties B and C to himself and their other brother should be considered interim distributions of the estate, in that each child now owned one of the three properties belonging to the mother’s estate.
For his part, the other brother, who had not been appointed as executor of the estate and who had had no involvement in executing his mother’s post-death wishes, provided a statement to the court that he had no issue with his brother continuing to act as executor and “had no concerns about [his brother’s] impartiality and ability to continue to administer the estate.”
Rights and Responsibilities of Executors
British Columbia’s Wills, Estates and Succession Act (“WESA”) operates to provide guidance and instruction to all British Columbians in respect of the resolution of an estate. Section 155 governs the distribution of estates, and subsection 155(2)(c) thereof dictates that no distribution from an estate may be enacted while there is ongoing litigation concerning the estate. Overall, “s. 155 is intended to forestall the paying out of money from an estate if there is an ongoing dispute about who is entitled to what under the will at issue”.
Subsection 157 of WESA governs self-removal from the role of executor (i.e., a person who has been appointed as executor who no longer wishes to act as such) and section 158 governs the removal of an executor of an estate by a party other than the executor. By section 158, an executor may be removed from their position if they are “unwilling or unable to or unreasonably refuses to carry out the duties of a personal representative.”
In respect of self-dealing by an executor (meaning, selling or otherwise transferring assets of the estate to themselves), the issue has been described by the British Columbia Supreme Court in the following manner:
“Can the Court authorize a trustee who is also a beneficiary of the trust to buy trust property at an independently appraised value without exposing the property to sale on the open market and over the objection of the other beneficiary? In my view, the answer is no.
It is well settled as a general rule that a trustee, who owes a fiduciary duty of loyalty to the beneficiaries, cannot purchase trust property as doing so would put the trustee in a conflict of interest […] An exception may be made to this general rule where all beneficiaries of full capacity give their informed consent to the proposed transaction”.
The courts have also determined that “the onus is on the trustee to satisfy the Court that the self-dealing is in the best interests of the beneficiaries, and that the burden is ‘substantial.’ In the case of a proposed sale below market value, absent consent of all beneficiaries, the application would almost certainly fail.”
Should the Brother be Removed as Executor?
The court began its assessment of whether the brother should be removed from his role as executor by first examining the brother’s contention that he was afforded extremely broad discretion as executor to make decisions concerning the disposition of the estate. In this respect, the court was satisfied that
“[d]espite the broad language and seemingly vast discretion vested in the executor, unless I am persuaded that the transfer to himself was an in specie interim distribution, [the brother] cannot be relieved from his obligation not to purchase estate property. Such self-dealing would not be ‘permitted by law’”. Furthermore, the court noted that the mother had originally included both her son and daughter as joint executors, which the court identified as “a built-in check and balance to [the mother’s] testamentary wishes”.
As a result, the court was satisfied that the brother’s purchase of property B was inappropriate and did, in fact, constitute self-dealing such that he had violated his duties as an executor to act in the best interests of the entire estate, including all beneficiaries thereof, rather than himself:
“[64] From the totality of [the brother’s] evidence on the critical issue there can be no doubt that he was engaged in self-dealing, acting in his dual capacity of executor and beneficiary, purchasing estate property. He did so without obtaining consent from the other beneficiaries, indeed in the case of [the sister], without notifying her about the property transfer. [The brother] now concedes that he did not pay fair market value for the property, and in my view that would have been apparent to him at the time. Importantly, [the brother] acknowledges that his plan to purchase estate property began to take shape after [the sister] was removed as co-trustee.”
Moreover, the brother had registered a certificate of pending litigation against property A, in which his sister resided, and had maintained the position throughout all legal proceedings that property A should be partitioned and sold in order to satisfy the equal distribution of the estate amongst the siblings. However, he had also asserted that his transfers of properties B and C had been undertaken in an effort to ensure that each of the siblings gained ownership of one of their deceased mother’s properties; had this truly been his intention, the court noted, then “[t]here would be no principled reason that the CPL could not be removed, and his pleadings amended to omit the reference to partition and sale”.
Although the court was satisfied that the brother’s actions did not amount to bad faith, nevertheless he had “clearly favoured certain beneficiaries over others, himself and [other brother] over [sister]”, as a result of which his “overall course of conduct cannot be said to be in the best interests of all the beneficiaries”. For all of those reasons, and “also taking past conduct as a reliable predictor of future conduct”, the court was “satisfied that there is at least a moderate risk to the remaining assets of the estate if [the brother] remains as executor”, which weighed in favour of his removal from the position. As such, the brother was ordered removed from the position of executor of the mother’s estate.
Vancouver Estate Litigation Lawyers Assisting Clients with Problem Executors
If you find yourself in a situation in which you have been designated as an executor of an estate and are uncertain of your rights and responsibilities in this role, or are designated as a beneficiary of an estate and seek to understand whether the executor is satisfying all obligations of the role, then you are in need of competent legal advice to help guide you through the legal process.
Fortunately, Meridian Law Group is here to help. From our offices in downtown Vancouver, Meridian Law Group is pleased to provide knowledgeable, capable legal assistance with respect to all estate matters. Contacts us today, either online or by telephone at (604) 687-2277, and one of our friendly staff will be pleased to provide you a consultation to ensure that your rights are asserted and protected throughout any legal process.
