A recent Ontario Superior Court of Justice decision illustrates some of the frustrations executors can face — as well as the costs and aggravation that result from serving in that role.
However, the executor in the case did gain some monetary relief as the court ordered the hostile beneficiaries to pay the executor more than $17,000 to cover his costs of defending the actions against him. The beneficiaries’ claim that the executor owed costs to them was unsuccessful.
An irony of the case is that the testator appears to have taken special care to avoid disputes following his death, notably by passing almost all of his assets outside of the estate.
Kenneth Pochopsky died in 2011, having already transferred most of his assets to his four children. This included his residence, his RRSP savings and his vehicles. His children were also named as beneficiaries on two insurance policies. The total of the assets transferred outside of the estate was about $850,000.
Pochopsky had also created a joint account with his sister, with the right of survivorship, apparently to deal with expenses that arose after his death. According to records the court reviewed, that account held about $36,000, with more than $20,000 from mortgage insurance.
Virtually all of that money was paid out, either to the beneficiaries or for expenses related to the death, such as funeral expenses and legal and accounting fees. All of the mortgage insurance went to the children.
After filing the final tax return, Clifford Fairhurst, the testator’s friend and executor, advised the beneficiaries that about $200,000 remained owing in taxes and that the RRSPs they had already received should be used for that purpose. The final value of the estate was about $120.
Nevertheless, the four children apparently believed that Fairhurst should have done more; particularly, that he should have sued the sister to gain more information about the joint account. After they hired a lawyer to pursue their demands against Fairhurst, he did the same. His lawyer informed Fairhurst that his conduct was appropriate and there was no need to take further steps.
The disagreements and rancor then escalated, with Fairhurst willingly giving up control of the estate to one of the children. He then sought an order for an increase in costs owed to him as executor; those costs had escalated sharply after he retained a lawyer in response to the children’s retaining a lawyer.
Fairhurst received advice on the proper administration of the estate and to defend himself from the claims of the children that he had not met his duties as an executor. The children, for their part, claimed their legal and other costs against him, of about $50,000.
“It appears that the beneficiaries fell into a pattern of aggressively criticizing Fairhurst no matter what he did, without thought for how it would advance their cause,” the court’s decision notes. “They became distracted from the major issue. As a consequence, Fairhurst was put to unnecessary expense.”
The executor had little legal knowledge and that he appeared to have been acting in good faith, the decision also says. Some of the irritants that arose between the parties seemed to stem from the handling of the investment accounts by the banks that held them.
In addition, there was no money in the estate to fund the litigation against the sister that the beneficiaries had demanded, and they showed no inclination to fund such litigation.
“In these circumstances, I do not see why Fairhurst should be out of pocket,” concludes Justice James Wilcox in the decision.
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