It is well established law that an estate trustee is entitled to indemnity for all costs and expenses properly incurred by him or her in the due administration of the Estate. Reasonable expenses of an estate trustee that are subject to reimbursement can even include the costs of an action or application reasonably defended. In fact, the court has taken the view that “an estate trustee does not require the consent of the beneficiaries or a court order prior to having litigation expenses, reasonably incurred by the estate trustee, paid from estate funds.¹

However, at times, the court might find it necessary to limit the estate trustee’s access to estate funds for the purpose of covering their legal fees. The facts in Santos et al v Coghlan et al, 2023 ONSC 4862 are simple: Hans and Colleen Luettge married in 1987. Both were previously married and had children from previous relationships. In 2005, they created wills stating that upon their passing, the surviving partner would inherit the deceased’s estate for the remainder of their life. After the surviving spouse’s passing, the estate would be equally shared among their seven children.

Colleen Luettge passed away in 2011, while Hans passed away in May 2021. After his death, Colleen’s children learned that Hans made changes to his Will in 2020, where he instead designated his four children as primary beneficiaries, giving only $30,000 each to two of Colleen’s children (the Respondents).

The Applicants initiated an Application for a Certificate of Appointment of Estate Trustee with a Will. The respondents filed a Notice of Objection in response, claiming that Hans lacked the requisite capacity to create the 2020 Will. Subsequently, the Respondents presented the subject motion for directions, seeking an order preventing the Applicants from using estate assets to cover their legal expenses.

Interestingly, the court found that the Applicants should not be using the estate funds to fund the litigation. The reasoning was based on the fact that a prior Order for Directions precluded the Estate Trustees from paying legal fees from the estate funds. Specifically, the order stated that the Estate Trustees “may not distribute or disburse any estate assets, unless such distribution is approved under this Order or agreed upon in writing by the parties involved in this proceeding”.

The court also considered the circumstances that allowed the Applicants to have access to these significant funds. Without considering the merits of the Respondents’ claims, the court found that Colleen transferred over 1 million dollars worth of assets to Hans, assuming that upon Hans’ death the assets would eventually be distributed to her children. This created a situation where the Applicants had access to substantial funds, and the court saw it necessary to intervene in order to “level the playing field” for the Respondents.

Ultimately, the court concluded that the parties are to cover their own legal fees, at least until the matter is resolved. While this case does not alter the presumption that estate trustees are entitled to indemnification, it does provide some guidelines for other cases where similar circumstances may limit the estate trustees’ access to estate funds.

Thank you for reading.

Margarita Grup.

1. Furtney Estate v Furtney, 2014 ONSC 3774 at para. 44. ↩︎