Sunday, January 05, 2014

Executor Who Distributed Part of an Estate Before the Six-Month's Had Elapsed Since Probate Must Repay Estate or Provide Secutity

In British Columbia, section 12 of the Wills Variation Act prohibits an executor from distributing any portion of an estate until six months from the date of probate has passed, unless the executor either has obtained the consent of all of those who are entitled to apply to vary a will under the Wills Variation Act, or has obtained a court order permitting him or her to do so.

The Wills, Estates and Succession Act contains a similar provision in section 155 (210 days from probate or later if a proceeding to vary the will is commenced).

What happens if the executor distributes before the six-month period elapses? He or she may be required to either repay the funds wrongfully distributed or post security pending resolution of any Wills Variation Act claim.

This is what occurred in a recent decision in Stevens v.Wood Estate, 2013 BCSC 2380. The executor distributed $202,000 to beneficiaries before the six month period had elapsed. One of the deceased will maker’s daughters, Lou-Ann Stevens, brought a Wills Variation Act claim. She brought an application to court to require the executor to repay the funds or post security. The executor argued that the holdback she retained of $28,000 was sufficient to satisfy any successful claim, and if not, she would pay any shortfall. Two of the beneficiaries also said they would indemnify the estate.

Madam Justice Watchuk held that the appropriate remedy was to require the executor to either repay the estate or post security. She wrote:

[29]         The purpose of s. 12(1) is to keep the estate intact to ensure that a successful plaintiff is able to recover that to which they may become entitled. A breach of this statutory provision is a serious matter.  It goes to the heart of the legislative scheme.
 [30]         Until the six-month limitation period has passed, a beneficiary’s entitlement to a share in the estate is not absolute. It is subject to variation if a successful action is brought under the WVA. Unless consents are obtained, the beneficiaries are not entitled to receive and benefit from their share of the estate until the WVA claims have been resolved or a court order has been obtained.
 [31]         Similarly the plaintiff in a WVA action is entitled to have the assets in the estate preserved pending the outcome of their claim. They should not be put in the position of having to pursue after the executor or other beneficiaries to reap the benefits of a successful action.
 [32]         Where there is a breach of the statutory provision and funds are distributed contrary to the legislation, the remedy of a claim against the executor or other beneficiaries, after the completion of the WVAaction, does not sufficiently protect the successful WVA claimant. Those parties may, by then, be without assets or have taken steps that make it difficult to locate their assets.
 [33]         It is the party who has breached the provisions of the statue who must make matters right. This application is not the forum to determine the strength or otherwise of a WVA claim. The WVA claimant is entitled to have the estate reconstituted to its state prior to the wrongful distribution.
 [34]         I find that the appropriate remedy for a breach of s. 12 of the WVA is for the party who has breached the provisions to either repay the estate or to post security in the entire amount which has been wrongfully disbursed.
 [35]         The Executrix in this matter must make matters right. She must, within 30 days of the date of these reasons, repay the estate or post security in the amount of $202,000, being the amount which she has improperly advanced to the beneficiaries. If the security is not posted within 30 days the plaintiff will be at liberty to seek further relief.

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