IF you want to know what we as Estate Litigation Lawyers fight about read this blog. Madam Justice Bernadette Dietrich on August 15, 2023, had a chance to decide a very interesting case which came before the Toronto estates section of the Ontario Superior Court. One should note that Justice Dietrich is one of the pillars of the Estate Court bringing her vast experience as a lawyer and teacher in the area. Mr. Williams, a wallpaper hanger and a $16 million dollar lottery winner in 2010, some 11 years before he passed away, was survived by two sons.
By the time he died he had approximately $11 million dollars in assets. A substantial portion of that was in the form of real estate. It appears that he had acquired expensive vehicles, jewelry, and cash, some which had disappeared by the time of his death.
Mr. Williams relied upon his lawyers, Carolyn and James Crate who drafted his Will and he named them his executors as well.
The Will called for significant compensation to be paid to the executors for their work.
Mr. Crate died less than two years after signing the Will. The executors did an efficient job of administering and liquidating the estate within a year. The executors attempted to charge $96,000 in legal fees and $300,000 in accordance to the terms of the Will as their compensation for acting as executors. The two sons signed releases confirming the fees being charged and deducted by the estate trustees.
However, upon second thought, the sons changed their mind and objected to the fees.
In another blog article, How are Executors Fees Calculated we have discussed how executor’s fees are determined. We have also examined how an estate is completed in our blog titled, How Does An Estate End. In this particular case, the executors simply deducted their executor’s and legal fees, after giving some moderate warning of those fees, prepared basic releases and asked for the beneficiaries to sign those releases before the estate assets were to be distributed. The sons signed the releases, but later objected. Was it too late? In this particular case Justice Dietrich said it was not too late to object and for various reasons severely discounted the executor’s compensation from $300,000 to $195,000 and took a very sharp knife to the legal fees reducing them from $96,000 to $20,000.
The judge felt the executors had not made it crystal clear to the beneficiaries that they had every right to receive independent legal advice and to receive a highly detailed description of how the estate had been administered. The judge rejecting the traditional five percent starting point calculated executor’s fees based on three percent of the Estate’s value. The judge applied the various rules governing how executors fees are calculated, which are described in greater detail in our blog article, How Are Executor Fees Calculated. As Estate Lawyers the Crates should have attended to this detail.
The critical point that all of this turned on was the failure of the executors to urge the beneficiary sons to receive independent legal advice before they signed any document. They should have been told that they had every right to do so. They did not need to simply accept what was proposed by the executors, and the alternative of a formal passing of accounts and explaining what it meant should have been pointed out to them.
The lawyers while wearing the hat of executor had a fiduciary duty to the beneficiaries. That duty is ensuring that an estate is administered properly for the maximum benefit of the beneficiaries. That is the executors’ prime directive. In this case, they were clearly in a conflict of interest in which the executors, even though they have done a very efficient job, failed to observe all of their fiduciary requirements, which accordingly cost them the better part of $200,000. To use an American phrase, this is all part of the job of an Estate litigation attorney.
