You are a beneficiary of someone’s will. You expect to receive a sizeable sum of money. How long do you have to wait before you can expect that payment? What can you do if the executor seems to be taking an inordinately long period of time?
Ordinarily, the more complicated the affairs of an estate, the longer the process will take. An executor has a duty to settle the affairs of the estate and to distribute it in accordance with the terms of the will. An executor must gather in and account for all the estate’s assets, in whatever form and wherever they exist. They must pay all the estate liabilities and deal with final tax matters. Prudent executors will not make any distribution to beneficiaries until they have done all this and paid all the outstanding expenses of the estate. If they do not do this but instead pay out all the funds in an estate, then they face the risk of personal liability for any unpaid liabilities or costs.
But what can be done if the executors seem to be dragging their feet and nothing is happening. Until recently, about the only proactive step a frustrated beneficiary could take was to seek a court order replacing the executors. However, a recent B.C. Supreme Court case has added another quiver to the arsenal of remedies available to a beneficiary. In what is a first in B.C., and likely across Canada, the court ordered an executor to make an interim distribution of funds to the residuary beneficiaries of a will. As is generally the case with estate litigation, the case had rather unique facts. However, the decision clearly raises the prospect that a trustee can be compelled by court order to make payments to beneficiaries where the estate administration is taking too long.
In Reznik v. Matty, there were four residuary beneficiaries, all siblings. One was the executor of their deceased father’s estate. The father had passed away in December 2000. His estate was modestly significant and not overly complicated. It consisted of some unsold land valued at $560,000, cash of about $96,000 and shares in a private company. Other than a small distribution in 2009, the executor had not concluded the estate by January 2013. One of the beneficiaries was by then in dire financial straits. He applied to court seeking an order that the executor make a distribution to all the beneficiaries. The executor opposed and argued that the will allowed him to deal with the administration of the estate and its assets as he saw fit. He would make a distribution only when he deemed it appropriate. The executor noted that no other case had ever compelled an executor to make a distribution. He further argued that until he had concluded the affairs of the estate and paid all its liabilities and costs, it would be improper to make a distribution. To do so might expose the executor to personal liability for future estate costs.
In overruling these arguments, the Court noted several important principles that govern an executor’s duties:
- An executor has a duty to settle the affairs of the estate and to distribute in accordance with the terms of the will;
- The executor must not unreasonably delay doing this; and
- The power to retain the estate assets does not override this duty to settle the estate’s affairs.
In ordering the executor to make a distribution, the court relied on the law of assent. Assent exists where there is an acknowledgement that an asset is no longer required for the payment of debts, funeral expenses or general legacies. Assent may be compelled by a court where it is otherwise withheld without just cause. Assent may be given to part of a residuary gift without assenting to a distribution of the whole. In other words, it is not an all or nothing proposition.
In this case, the court found that the significant value and liquidity of the estate and that its administration had already taken over a decade warranted compelling the executor’s assent to a distribution of part of the estate. This was particularly so where the executor provided no evidence of possible future costs of any significance. In the circumstances, a distribution of $40,000 among the four beneficiaries would not compromise the estate, nor risk any personal liability for the executor. Interestingly, and of note to dilatory executors, the court also ordered the executor personally to bear the costs of the court application, not the estate.
The case is under appeal. However, if you are an executor, this case is a reminder that you should administer the estate in a timely way. If you are a beneficiary, this case provides authority for the legal ability to compel an executor to make a distribution to you if they are taking too long to wrap up the estate without good reason.