Further to yesterday’s blog, in the case of McDougall Estate, the beneficiary complained about the trustee’s compensation on the passing of her accounts. In issue was whether the trustee’s compensation should be reduced because she:
- Made an improper distribution to a charity that was not authorized by the Will.
- Failed to make an inventory of the contents of the deceased’s house and failed to offer the beneficiary any of the deceased’s personal effects.
- Pre-took compensation.
- Paid too much in legal fees out of the estate.
The court found that even though the charitable gift failed because it was not a specified amount or share, the trustee’s interpretation of the Will was not unreasonable and the trustee was not liable for an innocent mistake, made in good faith. She was therefore not required to reimburse the estate and should not have her compensation reduced.
The contents of the house were of little value and had to be cleaned out for sale. The trustee never received any indication from the beneficiary that there was anything of sentimental value that she wished to receive. In the circumstances, the Court found that the compensation should not be reduced for the manner in which the trustee dealt with the personal effects.
The trustee pre-took compensation of 5% of the value of the estate as originally calculated but, after adjustments, she admittedly overpaid herself by $1,163.24. Estate trustees ought not to pre-take compensation unless authorized in the trust document or by approval of the executor’s accounts by the beneficiaries. The proper remedy was payment of interest on the amount pre-taken. Accordingly, the trustee was ordered to repay $1,163.24 plus interest of $360 to the estate.
It was not unreasonable for the trustee to seek legal advice to respond to the inquiries from the beneficiary’s lawyer. While amounts paid to respond to questions about the administration of the estate were not at first instance a proper charge to the estate, such costs were allowed because they were properly incurred by her to respond to the beneficiary’s challenges to her administration of the estate.
The payment of legal fees from the estate that ought to have been paid by the estate trustee is a form of pre-taking of compensation and so the estate trustee was liable for interest on that amount, which was fixed at $70.00.
Sharon Davis – Click here for more information on Sharon Davis.