We are often contacted by beneficiaries who have become aware of actions taken by the person managing the deceased’s affairs under a power of attorney which have diminished the value of the deceased’s estate. The attorney may have transferred some of the deceased’s assets into their own name (solely or jointly with the deceased) or into the names of others. The attorney may have spent the deceased’s monies or property for their own benefit. This has occurred without the knowledge of the beneficiaries, and only comes to light after the deceased’s death, when the deceased’s estate is much less than expected or is missing certain assets. What options are available to a beneficiary who seeks to investigate or commence an action against the attorney of a deceased person?
There is often a further complicating factor: the attorney under suspicion may also be the person named as the executor of the estate. An executor has a duty to shepherd estate property and commence appropriate claims against any third parties in possession of estate property. If the executor was also the attorney, this would require an executor to investigate their own conduct as attorney. This is an obvious conflict of interest.
Even if the executor is not the attorney, the executor may still refuse to take action against the attorney. The executor may believe that the claim against the attorney has no merit, or the expense to pursue the claim is unreasonable or an unnecessary risk. What happens when a beneficiary wants a claim to be pursued against the attorney, but the executor, on behalf of the estate, refuses to pursue that claim?
In Mortimer v. Bender 2020 BCSC 483, a beneficiary sought to solve this problem by arguing that an attorney of a now-deceased person owes fiduciary duties to the beneficiaries of that deceased’s person’s estate. As a result, it was argued that the beneficiary had standing to bring her own claim against the attorney. The court did not agree. An attorney is obliged to account only to the donor who gave the power of attorney while they were alive. Once the donor is dead, the attorney is obliged to account only to the donor’s estate. A beneficiary lacks standing to allege breach of fiduciary duty by the deceased’s attorney or seek a declaration of resulting trust in favor of the estate. The court also did not agree that there was an exception to an executor’s exclusive statutory authority to commence proceedings on behalf of an estate, when the would-be defendant is the personal representative.
As a result, a beneficiary who believes that the estate has a claim against its executor (or some other person) cannot simply bring that claim in their capacity as beneficiary. However, there are options. A beneficiary may seek the removal and replacement of the executor if the executor is in a position of conflict or refuses to take adequate steps to pursue proper claims to recover estate assets. Removal and replacement of executors is considered in a separate post found here.
A beneficiary may also seek leave from the court to bring proceedings to recover property or enforce a right, duty or obligation owed to the deceased person that could be brought by the personal representative, when the personal representative fails to bring that claim, under s. 151 of the Wills, Estates and Succession Act [SBC 2009] Chapter 13. The beneficiary must show that they have made reasonable efforts to cause the personal representative to commence the proceeding, and that they are acting in good faith, and it must appear to the court that it is necessary or expedient for the protection of the estate or the interests of the beneficiary that the proceeding to be brought.