February 28, 2014

Estate Trustees are often under pressure to distribute estate funds to beneficiaries as soon as possible.  Beneficiaries may express frustration about having to wait for an estate trustee to receive a tax clearance certificate or respond to other administrative issues, such as collecting assets.  When probate has not been granted to an estate trustee because a notice of objection has been filed, beneficiaries’ frustrations can intensify.  However, an estate trustee who makes an improper distribution may be liable to return funds to the estate.

In a British Columbia case, Stevens v. Wood Estate, Woods, the testator’s granddaughter and estate trustee of the estate, was ordered to repay to the estate all funds she distributed to the beneficiaries.  Stevens, one of the deceased’s disinherited daughters, filed a caveat (similar to a notice of objection) shorty after her mother’s death. She also brought a claim under the Wills Variation Act against her mother’s estate.  After having an opportunity to review medical evidence, Stevens withdrew the caveat but not her claim.  Woods applied for probate to administer the estate.  Within two weeks of obtaining a probate certificate, Woods distributed her grandmother’s estate to the beneficiaries except for a holdback amount.

In British Columbia, the Wills Variation Act prohibits an estate trustee from distributing any estate funds or property until six months from the date of probate.  The only exception to that rule is if the estate trustee obtains a court order or the consent of all parties with an interest in the estate. Stevens brought an application seeking that Woods pay back to the estate the funds she distributed or post security for that amount until her claim could be heard.  Woods told the court that she was unaware of the six month provision in the Wills Variation Act.  She argued that the holdback amount was sufficient to satisfy Stevens’ claim and pledged that if that amount was insufficient, she and two other beneficiaries would return funds to the estate to satisfy Stevens’ claim.

The court found Woods’ statutory breach to be serious.  Woods was ordered to make the estate whole and return all the funds she had improperly paid out back to the estate or post security in that amount, pending resolution of Stevens’ claim and Woods’ counterclaim against Stevens.  The court noted that beneficiaries should not have to incur costs chasing funds from an estate trustee to remedy situations created by the estate trustee’s improper actions.  Stevens’ costs were ordered to be paid by the estate trustee.

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