Executor Legal Fees, Estate Disputes and Grave Robbers Part 1

Executors depend on lawyers for legal advice in estate disputes. Can executors continuously sign blank estate cheques to pay lawyers? How long can they sign these cheques, and how much can they spend? What is reasonable? Are you an executor in an estate dispute? Read this post to protect yourself.

Craven v. Osidacz Estate is an unusual 2010 Ontario decision. A father killed his eight-year-old son and attempted to kill his estranged wife, Craven. The police shot and killed the father. Craven then sued the father’s estate.

The executor of the estate was the father’s brother, Michael. He spent over $75,000 fighting with Craven.

Craven claimed the executor, Michael, could not unilaterally pay lawyers with estate money if the estate defence was speculative. She argued Michael must pay these costs up front. He could later get reimbursed for his legal fees. This would happen when Michael did a passing of his executor’s accounts.

Craven claimed she was entitled to the entire estate, which had an estimated worth of $250-$325,000.

The court did not decide if Michael had reasonably incurred his expenses.

However, the court said Michael could not use estate money to fund the dispute.

Would the executor be indemnified for all the legal fees he paid? The court would decide if his conduct was reasonable at the end of the case.

The court said executors have a duty to defend claims. But, here, Michael and his family were the only estate beneficiaries.

Oops! This looks like a conflict of interest.

This conflict clearly affected Michael’s duty. The executor could only use estate assets for legal fees if it was reasonable.

The judge quoted the test from the Supreme Court of Canada decision in Goodman Estate v. Geffen:

[21]…The Courts have long held that trustees are entitled to be indemnified for all costs including legal costs which they have reasonably incurred. Reasonable expenses include the cost of an action reasonably defended…. Insofar as such person [trustee] does not recover his costs from any other person, he is entitled to take his costs out of the fund held by him unless the court orders otherwise; and the court can otherwise order only on the ground that he has acted unreasonably or in substance for his own benefit, rather than for the benefit of the fund.…

Executors must act “prudently” and “reasonably.” The judge in Craven held:

[23] “…it would be inequitable to use the assets of an estate as a kind of ATM machine from which withdrawals automatically flow to fund the litigation whether reasonable or not.”

Executors must know the legal system is a user pays system. You must pay to use it.

Judges must deter useless lawsuits that waste limited resources. The system now requires the “loser to pay”. What does that means if you are an executor? If you lose the case, you can be at risk of paying legal fees personally.

Are you are in an estate lawsuit?

Make sure you assess your personal exposure to costs. Get a second opinion from an experienced estate lawyer. You don’t want to possibly end up like Michael.

An executor legal fee is an important topic, and I’ll be adding more posts about this soon.

Read my free guide on executor duties here.

Edward Olkovich (BA, LLB, TEP, and C.S.) is a nationally recognized author and estate expert. He is a Toronto estate lawyer and Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of seven books. Visit his website, mrwills.com, for more free valuable information.

2013 © MrWills.com. This information is not financial, legal, tax advice or a substitute for professional advice. Always consult with a professional before taking any action.