Executor Purchasing Estate Property

An executor or administrator of an estate or a trustee is in a fiduciary position, which means that they owe certain fiduciary duties to the beneficiaries, including a duty of loyalty. There is a general rule that a trustee cannot purchase trust property, which is referred to as the rule against self-dealing. This would put the trustee in an obvious conflict of interest, contrary to their duty of loyalty.

If all beneficiaries are of full capacity, they can give fully informed consent to the self-dealing. The Court also has the jurisdiction to approve self-dealing by a fiduciary.

The burden is on the trustee seeking permission to sell property to herself to establish that a sale is necessary and that no other purchaser has been forthcoming or seems likely to come forward within a reasonable time, and that his or her own offer in the circumstances is a favourable one. The cases suggest that approval by the court will only be given where it is truly in the interest of the beneficiaries.

The B.C. Supreme Court was recently asked to approve self-dealing in Dewberry Estate (Re) 2023 BCSC 1325. The applicant obtained a grant of administration of an intestate estate. She was the daughter of the deceased. The estate was to be divided equally between the applicant and her two sisters. The only remaining significant assets were a two-acre property and the manufactured home on it.

These assets were recently appraised at $284,000. The applicant sought to buy the property for $179,600.

One sister opposed the application, arguing there was no basis to reduce the purchase price below current market value. The third sister did not respond, but her position mirrored that of the sister opposing the application.

The applicant took the position that her sisters would be unjustly enriched if she was forced to pay market value for the property. However, the Court was not aware of any authority that would allow it to approve a sale of trust property to a trustee at below market value on the basis of contributions by the trustee to the preservation of the value of the property.

The Court held that it could not be said that a proposed sale at more than $100,000 below the recent estimate of market value was “clearly to the advantage of the beneficiaries.” In light of the appraisal, the applicant could not show that no other purchaser is likely to come forward.

However, the applicant was given ten days to decide whether she was interested in purchasing the property for $284,000, the appraised value, as her siblings were prepared to consent to a sale at that price.