Weilers LLP

Beneficiaries: Protecting Your Benefits

Beneficiaries: Protecting Your Benefits

[vc_row][vc_column][vc_column_text]July 2, 2014

By Paul Jasiura

Beneficiaries under the Will of a friend or relative often anticipate that they will receive their inheritance very shortly after the death, and are disappointed or annoyed by how long it is taking for the estate trustee to send the cheque. They then ask us what they can do to speed things along.

It is a good idea for a beneficiary not to let the administration of the estate languish unduly. Beneficiaries should ensure that good solid progress is being reported to them as to the administration from time to time. But beneficiaries should not become pests. Some reasonable time frame should be established with the estate trustee for reports as to his/her progress. This is true even if the estate trustee is a family member.

The Ontario Court of Appeal case of Di Michele illustrates how estate trustees, even family members, can sometimes put the beneficiaries’ inheritance at risk. In that case a son of the deceased was named as her estate trustee. He had the title to the property transmitted from her name into his name. This is a normal part of the steps of an estate administration. However he did not proceed with administering the estate. Instead, he used the property to grant security for his own personal loan. He could do this because the title was in his name. He defaulted on the loan. The court case was about which of two innocents – the lender or the beneficiaries – suffered the loss. The court determined that the lender was entitled to enforce against the property. The beneficiaries lost the value of the property.

In reading the case, we wondered why the beneficiaries allowed the estate administration to drag on. That gave the estate trustee the time to engage in his improper activities. Perhaps it was because the estate trustee was a family member. The lesson to be learned is to be diligent to reduce the risk of loss.

What could those beneficiaries or the beneficiaries in other estates do to cause an estate trustee to complete the administration of the estate and distribute their share of the inheritance to them?

Here are some potential responses to that question:

  1. If the beneficiaries are unhappy with the way the estate is being handled, they may apply to remove that person as estate trustee. This unhappiness can stem from the speed at which the estate activity is being carried on, or the quality of the decision-making by the estate trustee. The onus would be on the applicant to persuade the court that the estate trustee should be removed and replaced with a proposed substitute.
  2. The beneficiaries can force the passing of accounts, compelling the estate trustee to appear before a Judge and explain all of the activity to date on the estate administration. This is an expensive process, with the cost generally being deducted from the value of the estate. Beneficiaries are sometimes reluctant to pursue this remedy if they see that there is going to be the reduction in their ultimate inheritance.
  3. As part of the passing of accounts, the beneficiaries could seek a reduction in the estate trustee’s level of compensation. Such reduction can be viewed as a way to compensate the beneficiaries for the delays, or for the improper handling of the estate assets.
  4. In situations such as Di Michele the beneficiaries could launch a court action against the estate trustee in his personal capacity, claiming damages caused by his extravagant spending or misapplication of the assets of the estate. The activity complained of could be either deliberate or reckless, and could include negligence.
  5. Generally, courts do not force the distribution of an inheritance until after the expiry of the Executor’s Year, which is one year from the date of death if there is a will, or one year from the date of the court appointment of the estate trustee if there is no will. After that time, the beneficiaries can bring a court application for directions of the court to compel activity to occur, for example the sale of estate assets or the distribution of assets in the estate to the beneficiaries.
  6. At common law the beneficiaries can also seek interest calculated on the amount of their inheritance.

Being an estate trustee can be time consuming and troublesome. We encourage our beneficiary clients to allow a reasonable amount of leeway for the estate trustee to undertake and complete his duties. Where the estate trustee is not performing his duties in a timely and proper manner, beneficiaries should be vigilant to protect their own interests.