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What are the consequences to Executors for breaching trust?
Post Series: Executorship in BC
- 1.The Slow Executor – A Citation: Forcing the Executor to Apply for Probate
- 2.Subpoenas for Testamentary Documents: Getting a Copy of the Will when the Executor Refuses
- 3.Picking an Executor: Who Should You Choose?
- 4.Executor Passes Away, Who Finishes Administering the Will?
- 5.Executors Quitting: Can an Executor Quit the Job of Administering the Estate?
- 6.Missing Will: Executor Can’t Locate the Will, What Now?
- 7.Estate Planning Tips: Creating the Perfect Estate Plan
- 8.Executor’s Fees: What You Should Know
- 9.What is a Fiduciary?
- 10.Estate Beneficiary Rights: Forcing the Executor to Act
- 11.Removal of a Badly Behaving Executor in BC
- 12.Choosing an Executor: Should You Appoint a Professional?
- 13.6 Tips for Estate Executors for Easy Administration
- 14.Estate Bank Accounts: Why Executors Should Open One
- 15.Are Executors Entitled to Compensation?
- 16.An Executor’s Job: What an Executor of a Will Should Expect
- 17.Dying without a Will (Intestate): Who Acts as Executor?
- 18.What are the consequences to Executors for breaching trust?
- 19.Probate: Getting a Grant of Probate for an Estate
Executors have a duty to act in the best interests of the estate and its beneficiaries. Occasionally, executors act in breach of this trust, often accidentally. However, there are ways in which courts can impose penalties for executors breaching trust. Overall, executors have an obligation to administer the estate in a timely manner, in the interest of the beneficiaries. To summarize, some of the most common ways an executor is found to be in breach of trust include:
- Commingling of estate assets with their own personal assets,
- Fraudulent behaviour,
- Not accurately reporting an estate’s assets in the detailed accounts, or
- Failing to pay an estate’s debts.
Depending on the severity of the breach, courts can choose a consequence to remedy the losses suffered by beneficiaries. Possible consequences that the courts will consider are:
- Reducing or eliminating Executor’s fees;
- Holding Executors personally liable for losses; and/or
- Removing and replacing the executor.
Removing Executor’s Fees
In cases of a minor breach, the courts may simply deny the executor from receiving compensation through executor’s fees. For example, if an executor were to act slowly and fail to administer the estate in a reasonable amount of time. The courts could find the executor failed to fulfill their duty by administering the estate in an untimely manner.
In the case of The Estate of Lilian Lai Lien Lowe (2002), the executor was denied any compensation for her duties. Unfortunately, under the executor’s administration, the estate lost a considerable amount of money which obviously impacted the welfare of the beneficiaries. Further, the executor was looking to charge a fee much greater than the usual 2-3% of the estate’s value. Summing up, the judge stated that the executor “has demonstrably failed to exercise an appropriate level of skill and ability. Because the executor failed to fufill her duty, the fee was distributed to the beneficiaries of the will instead.
Executors Held Personally Liable for Breaching Trust
Occasionally, executors find themselves responsible with selling assets or making investments on behalf of the estate. Undoubtedly, all investments carry a risk of loss. However, if the executor makes an investment that a reasonable person wouldn’t have, the executor can be liable for the losses. If the investment was reasonable and simply happened to result in a loss, the executor will not be liable. To put it another way, the executor must act in a demonstrably irrational manner to be held liable for losses to the estate. The courts will typically only order this if the executor has caused the beneficiaries to suffer a significant loss.
Removing the Executor
Importantly, in extreme cases where executors are found in breach, the courts can order the removal of an executor. According to the judgement in Nieweler Estate (Re) (2019), there are four categories of conduct that will warrant a removal of an executor:
- Endangerment of the trust property (estate);
- Dishonesty;
- Incapacity to execute the duties; and
- Lack of reasonable fidelity (good faith).
In general, executor removal is a last resort for the courts because it inherently contradicts the final wishes of the testator. An executor will only be removed if the courts see no other option to resolve the estate administration issue at hand. If you’re looking for more information, read our past blog post on executor removal here.
Ultimately, it’s at the discretion of the courts to determine how to handle an executor who has breached their trust. In some cases, multiple consequences are ordered against the executor of a will. To avoid this, executors must work quick and with the best interests of the beneficiaries in mind – hiring an estate lawyer can help to ensure that all the proper procedures are followed.
If you’re a beneficiary who has fallen victim to an executor who has breached your trust, contact an experienced estate lawyer today. We can ensure that the proper steps are taken to ensure that you’re compensated for any losses suffered and the estate is administered appropriately.
Have a question about this topic or a different legal topic? Contact us for a free consultation. Reach us via phone at 250-888-0002, or via email at info@leaguelaw.com.