Bad Legal Advice Costs Executors Plenty

You’re the estate executor under a relative’s will. You found your uncle’s will and you need legal advice. You look for free advice online. You’re thinking all lawyers are the same. Any lawyer can give you estate advice. Well, let me explain how this thinking can cost you dearly.

You need to get the right lawyer to get the right advice. The wrong lawyer can give you bad advice. Bad advice can cost you plenty of money. You can also end up paying for your lawyer’s mistakes.

That’s what happened in a recent case in Ontario. The judge said the estate trustees made bad decisions. They could not blame their mistakes on bad legal advice. This surprised the executors. They had to pay for their lawyer’s bad advice out of their own pocket.

Not every lawyer has estate experience. Administering an estate is a complex area of the law. Common sense will not keep you out of trouble.

I remember the wise words of one judge who said:

“Doing what you think is right may not make it legal.”

Let me tell you Blake’s story. He was an executor of his Uncle Jerry’s estate.

In 2010, before he died, Jerry called his nephew Paul.

“I’m going to see my lawyer today to change my will. I’ll make sure that you get the cottage. Don’t worry,” Jerry said.

Uncle Jerry made his will but, for income tax reasons, did not gift the cottage to Paul. Instead, the executor, Blake, was to sell the cottage. Then Blake was to divide the sale proceeds with Paul and his sister Carol.

Uncle Jerry had not been at the cottage for a number of years. Jerry gave up his driver’s license in 2010. Paul drove Jerry to the cottage for five years.

Paul also opened and closed the cottage for the past 5 seasons.

Paul said to Blake, “I can go up and close the cottage this Thanksgiving. But I must say how disappointed I am. Uncle Jerry promised to leave me the cottage.”

Blake sympathized with Paul. “Yes I understand how you feel. I wonder perhaps if I can pay you…you know, for all your time, travel and trouble. I could use the estate bank account. You had to open and close the cottage. I’ll have to get some legal advice before I do that, though.”

“I have a better idea,” said Paul, “What if I bought the cottage from the estate? I have $50,000 in the bank. I can use that as a down payment. Perhaps the estate can give me a mortgage for the balance. After all, my share of the estate has to be about $200,000.”

Blake said, “I wonder what the price should be?”

“That’s easy,” Paul said.

Jerry had the cottage appraised by his lawyer for income tax purposes. “You can use that appraisal to set the price. How about that?”

Paul was excited and continued explaining his idea in detail to Blake.

“This is a sure win-win situation. The estate wins because you can stop paying expenses for the cottage. No more property taxes and insurance. The estate also gets interest on the mortgage payments I make.”

Blake said. “Sounds like a good idea. Why don’t you have a lawyer prepare an agreement of purchase and sale. I’ll sign the agreement. How quickly can you do this?”

Next: How the win-win deal goes sour.

About Ed Olkovich

I am a Toronto lawyer and Certified Specialist in Estates and Trusts Law. I edit Carswell’s legal publication, Compensation and Duties of Estate Trustees, Guardians and Attorneys. I have handled estate disputes and probate problems since 1978. © 2014