Executor Conflict of Interest and Self-Dealing in Ontario

It is common for an executor to also be a beneficiary, a family member or someone who lived in the deceased's home. That overlap is not wrong in itself. Problems arise when the executor's personal interest pulls against the interests of the other beneficiaries.

This article explains in plain terms where conflicts tend to appear, what the law says about an executor's duties, and the tools available if you are worried.

Why an executor's role creates conflict risk

The deceased's property, other than property passing by survivorship, vests in the personal representative as trustee, subject to payment of the deceased's debts. As a trustee, the executor manages assets for others. The general principle in trust law is that a trustee must not put themselves in a position where their personal interest conflicts with their duty to the people they serve.

This principle comes from court decisions rather than a single section of a statute, so how it applies depends on the facts.

Common situations that raise concern

• Buying estate property, such as the family home, at a price the other beneficiaries have not accepted.
• Paying themselves compensation without explaining the amount.
• Using estate money for personal purposes or mixing it with their own accounts.
• Favouring one beneficiary, perhaps themselves, over the others.
• Moving into or using estate property without paying rent or telling anyone.
• Making risky investments with estate funds.

Not all of these are improper. Estate trustees who believe an expense is properly incurred in carrying out the trust may pay it from the estate, or pay it personally and recover it from the estate. Examples include a funeral paid personally, or insurance and utilities on a vacant house. The court may later disallow the payment or recovery.

Where an executor wants to sell real property only to distribute the estate, the sale needs the approval of the majority of the persons beneficially entitled. For minors, the Children's Lawyer gives approval, and for mentally incapable persons, the Public Guardian and Trustee does. A judge may dispense with the beneficiaries' concurrence.

Compensation and investment: two areas to watch

An estate trustee is entitled to a fair and reasonable allowance for their care, pains and trouble and time spent, as allowed by a judge of the Superior Court of Justice. The statute sets no percentage or formula. The amount can be settled even when the estate is not before the court in an action.

There are exceptions. Where the will itself fixes the allowance, the Trustee Act provision does not apply. Where the executor is a lawyer who has provided necessary professional services to the estate, the allowance may be increased.

On investing, a trustee must exercise the care, skill, diligence and judgment of a prudent investor. An executor who invests carelessly, or in a way that benefits themselves, may face questions on a passing of accounts.

What a beneficiary can do

Estate trustees must keep accurate records of the estate's assets and transactions. Accounts filed with the court must include assets at the date of death, all money received, all liabilities, and a statement of the compensation the estate trustee claims. On an application to pass accounts, the notice and draft judgment must be served on every person with a contingent or vested interest at least 60 days before the hearing date, or 75 days if served outside Ontario. If no one objects and the required record is filed, the court may grant judgment without a hearing.

A breach of trust can expose a trustee to personal liability, subject to an exception. The court may relieve a trustee wholly or partly of personal liability if they acted honestly and reasonably and ought fairly to be excused. The Office of the Children's Lawyer may act on behalf of children under 18 in estate matters.

What to do next

• Write down what concerns you, with dates and amounts where you know them.
• Ask the executor in writing for an explanation or an accounting.
• Keep copies of the will, correspondence and any statements you receive.
• Do not confront the executor with accusations before you understand the facts.
• See an Ontario estates lawyer early, because objection deadlines before a hearing are short.

Frequently asked questions