Case Comment: -- Pullen (Re), 2016 ABQB 421
This blog post is intended to help executors and beneficiaries appreciate the variety and multitude of issues that can affect a probate application and administration of an estate. This potential for issues is well demonstrated in the recent Court of Queen’s Bench decision in Pullen (Re). The post will analyze three issues featured in the Pullen decision- (1) interpretation of contracts that impact the distribution of the estate, (2) executor compensation and (3) who is responsible for the legal fees of estate litigation- to emphasize the importance of consulting a wills and probate lawyer in Calgary from First West Law LLP when administering an estate.
In Pullen, the beneficiaries under the will were involved in a dispute over a gift given by the testator before her death. The beneficiaries eventually entered into a settlement agreement prior to the death of the testator.
One issue in Pullen was the effect of the settlement agreement on the distribution of the estate. At issue was whether settlement funds payable by a specific beneficiary should be paid before or after the residue was divided between the residual beneficiaries. This specific beneficiary argued these funds should be paid prior to distribution of the estate, whereas the executor argued the funds should be paid after the distribution (meaning the funds would come directly from the specific beneficiary’s share of the residue). The Court ultimately sided with beneficiary, explaining that the distribution advanced by the executor was “contrary to the plain language of the Agreement” and the settlement funds were “to be treated as a debt of the estate payable to [the other two beneficiaries] before distribution of the estate.”
As you can see, a pre-existing agreement can have serious consequences on distribution of the estate. Estates are commonly bound by agreements- e.g. co-habitation agreements, separation agreements, settlement agreements- that are not necessarily mentioned in the will. In fact, sometimes these agreements directly contradict the terms of the will. It is important that the executor gets legal advice from a Calgary probate lawyer at First West Law LLP on any agreement that is binding on an estate.
Another issue in Pullen was executor compensation. The executor in Pullen argued that she was entitled to 5% of the value of the estate for her work, including the probate application. After acknowledging that 5% of the value of the estate “is the upper end of the “rule of thumb” for estate administration fees”, the Court reviewed the Surrogate Rules and the Legal Education Society of Alberta’s “Suggested Fee Guidelines” to determine the appropriate fee. The Court decided that a fee of approximately 2.4% was more appropriate. A wills and probate lawyer in Calgary at First West Law LLP can help you understand the Surrogate Rules and the “Suggested Fee Guidelines” to determine appropriate executor compensation.
Finally, Pullen addressed whether legal fees for estate litigation will be paid for by the executor, the beneficiary, or the estate. The Court explains that legal fees “incurred by beneficiaries to force a personal representative to fulfil his legal duties may be entitled to reimbursement” on a full-indemnity basis. This means that obstructionist executors may be personally liable to pay for the beneficiaries’ lawyer. Here, the Court determined that the executor had already been penalized for her conduct and was only required to partially indemnify the beneficiary for legal fees. However, the Court made it clear that the executor was “not entitled to be reimbursed by the estate for the costs” and “any legal fees incurred by the estate” should be paid personally be the executor.
As you can see, there are many complex issues that can arise when making a probate application and administering an estate. If you are named as the executor in the will, or a close relative has passed away, make sure to contact the Calgary probate lawyers at First West Law LLP to get the right advice.