Tag: Executor

Executor’s power and constraints in disposing human remains

At issue

A Will enables a person to name an executor to carry out the Will’s terms.  The executor becomes legal owner of the property for the purpose of maintaining and eventually distributing assets to the estate beneficiaries.

Generally, the executor also has the authority and obligation to deal with the body or ‘human remains’ of the deceased.  However, this is not the same as ownership interest over property, and depending on province, the executor’s powers may be affected by the deceased’s statements or actions prior to death.  Here are some examples.

Trillium Gift of Life Network Act, RSO 1990, c H.20

In Ontario, a person may give consent to the use of his or her body after death for “therapeutic purposes, medical education or scientific research”.  The person must be at least 16 years of age to give consent.  The consent must either be in writing, or have been uttered in the presence of two witnesses at the time of the person’s last illness.

Upon the person’s death the consent is binding, though there can be an exception if it is there is reason to believe that the consent was withdrawn.  By implication, the withdrawal of consent can only come from that person.

Cremation, Interment and Funeral Services Act, SBC 2004, c 35, s. 6

In British Columbia, an executor will be bound by instructions that a deceased person has given with respect to disposition of human remains or cremated remains, so long as:

“(a) the preference is stated in a will or pre-need cemetery or funeral services contract,

(b) compliance with the preference is consistent with the Human Tissue Gift Act, and

(c) compliance with the preference would not be unreasonable or impracticable or cause hardship.”

Civil Code of Québec, LRQ, c C-1991, article 42

Quebec allows a person to provide direction as to both funeral and final remains.  In fact, even a minor may do so.  Per article 42 of the Civil Code (produced in part here),

“A person of full age may determine the nature of his funeral and the disposal of his body; a minor may also do so with the written consent of the person having parental authority or his tutor.”

In Re: Estate of Freddy Todd Loucks, 451 MDA 2013

Of interest, this Pennsylvania case shows the extent to which some people may go to maintain control over human remains.

Fred Loucks died in a vehicle crash at age 43.  His son Cameron was named estate administrator.  Disputes with the father’s “paramour” Monica Miller brought the estate to the courts a number of times.  This included claims to the deceased’s ashes, with Ms. Miller eventually being ordered to deliver the urn to the funeral home to be divided in half.

It was later suspected and confirmed that the contents were not human ashes.  Ms. Miller was found in contempt of court, and imprisoned for six months.

Practice points

Though the executor may have broad authority pursuant to provincial law, this is not absolute in nature.  There remain a number of obligations under common law that an executor must bear in mind when exercising the authority, the nuances of which can be discussed with a lawyer if problems appear to be arising:

  1. Disposal of the remains must be in a dignified manner.  Generally burial or cremation would satisfy this requirement, despite that some religions may be against cremation.
  2. Funeral/memorial services and disposition of the remains should take into consideration the deceased’s station in life, and consider the proportionality to the estate assets, particularly where this materially affects estate creditor claims.
  3. The executor is expected to provide reasonable information about these matters to next of kin, and to do so in a timely manner.

Whether a gift to an executor is taxable compensation

At issue

Compensation received by an executor is income from an office, and thereby taxable.   

Where an individual is both named as executor and provided a legacy or bequest in the Will, there is a presumption that that gift is in lieu of compensation.  For distinction, a legacy is a dollar amount, whereas a bequest is an item of property.  Either way, the amount of compensation would be the fair market value of the gift.  Ironically in the case of a large single property bequest, an executor who lacks cash liquidity may have to dispose of the item in order to pay the corresponding tax bill.

The executor may rebut the presumption that a gift is compensation by offering evidence of the testator’s contrary intention, either through the Will or by surrounding circumstances.  

Boisvert v. The Queen, 2011 TCC 290

Guy Boisvert and a notary were named as liquidators (the proper term for executor in Quebec) of the estate of Marcel Sauvé.  The Will provided that as a “token of gratitude” for the services as liquidator, Mr. Boisvert would be bequeathed the deceased’s residence and contents.  In time, Mr. Boisvert was assessed for income from an office in the amount of $68,080, as quoted in the estate’s declaration of transmission.

On appeal, Mr.Boisvert testified that, despite the words in the Will, he had a very small role in the estate administration, deferring much to the notary.  In turn, the value of the property should be seen as disproportionately large to be characterized as remuneration.  

The court held that even if he played a small role, he “had accepted the office and the responsibilities that came with it” and therefore the presumption of compensation was not rebutted, and the tax assessment was upheld.

Re Hayes (Estate of), 2006 ABQB 427

This matter came before the court as a contested passing of accounts, opposed in part by the Public Trustee on behalf of minor beneficiaries who were grandchildren of the deceased.  Among the arguments offered, it was asserted that the gift of a residence to one of the executors constituted compensation, and therefore there should be no further claim for personal expenses of the executors.

After summarizing the arguments, the judge simply stated the view that “the gift to Delwin Hayes as Bert’s son was personal and therefore the presumption has been rebutted.”  Though this was not a tax case, the opposite finding would certainly not have been helpful to Mr. Hayes in dealing with his subsequent tax return. 

Capital Trust Corpn. Ltd. v. The Minister of National Revenue, [1937] S.C.R. 192

Joseph Mackenzie was one of a number of executors of the estate of his father, who died in 1923.  A Codicil to the Will provided that Mr. Mackenzie should be paid $500 monthly, which was to be in addition to any entitlement that “courts or other authorities may allow him in common with the other executors.”

For reasons unexplained, the monthly amount was not paid until a catch-up payment of $19,500 was made in 1927.  

Mr. Mackenzie’s argument that this constituted a gift was not successful as he would not have been entitled to it had he not accepted the appointment.  Furthermore, he was taxed on the full amount as received in 1927, and specifically was not allowed to allocate the amounts proportionately across the intervening years.

Practice points

  1. A testator should understand that where a gift is closely tied to an absence of compensation, it is likely that the executor will be taxed on that amount.  Bear in mind as well that it is often the case, especially with small and quickly administered estates, that there is little or no corresponding tax deduction to the estate, effectively resulting in a gratuitous windfall to the government.
  2. An executor who is a beneficiary of a bequest or legacy may wish to review the Will before accepting the appointment.  Depending on phrasing, this could bring a gift under tax scrutiny that might not have occurred had the individual been strictly a beneficiary.  On the other hand, if there is a direct connection between accepting executorship and the gift, a taxable gift is likely better than nothing at all.

You only die once – Choose your executor wisely

Back when I ran my estate law practice, clients often asked me, “Who do you think should be my executor?” My response was never to name names, but rather to suggest principles that might guide the decision process. 

Principle number one: your executor must be someone you trust. After all, the nominee will not only execute your will instructions, but as trustee will become legal owner of everything you own at the point when you graduate to the great beyond.

At the same time, there should be adequate controls in place. In other words, you should not trust your trustee absolutely. Here’s a painful example illustrating why.

A $24-million estate devolves 

Unless you are in the mining industry, you may not recognize the name Paul Penna. Born in 1922, he was a bucket-shop mining stock promoter and millionaire by the time he was 24, and went broke shortly thereafter. By 1972 his respectability and fortunes had risen once more, such that he was able to merge two mining companies into Agnico-Eagle Mines.

At the time of his death in 1996, he had an empire and fortune worth about $24 million — more than adequate, one would think, to fund a life estate for his wife Lorraine, and a charitable trust to boot. 

The estate executors were two of Mr. Penna’s business colleagues and Lorraine herself. After Lorraine died in 2003, Mr. Penna’s nephew took her place in 2004. 

A $24-million estate dissolves 

By early 2005, a Mareva injunction had been ordered, freezing the assets of Barry Landen, one of the two business colleagues named as estate executors. A 2006 order replaced all three trustees with a court-ordered trustee. 

According to the judge who oversaw the matter for much of the five and a half years it was before the court, “The Estate was neither properly nor honestly administered from the outset. The executors and trustees never probated the deceased’s will. Landen completely controlled all of the administration, including banking and cheque-writing. He never followed the terms of the will.”

Lorraine was entitled to a $1-million specific legacy in addition to payments as part of the life estate. She received neither. Instead, funds were fraudulently converted to Landen’s use, including:

  • A $2-million Forest Hill home purchased with estate funds, and registered to his wife
  • Four luxury car leases and season tickets for the Toronto Maple Leafs and Toronto Raptors
  • Over $2-million of itemized misappropriations or misdirections
  • Many millions of dollars more that remain unaccounted for

While Landen was the principal actor, the judge commented that had the co-trustees properly taken on the role entrusted to them, Landen could not have committed such a massive fraud over so many years. Eventually, the other two executors paid settlements to the estate.

In October 2010, Mr. Landen was found in contempt of court for breaching four court orders, and a sanction/punishment hearing occurred in November 2010.

An executor called to answer

Contempt of court attracts a range of possible sanctions, from orders to act or refrain from acting, to payment of court costs or fines, all the way to the potential for imprisonment. 

Owing to Landen’s latent pennilessness, the judge ruled a fine to be pointless, and that there could be no positive act he could perform to purge his contempt. So, it’s prison for Landen — specifically, 14 months. 

What’s more, there is no parole provision in civil contempt matters, so it will be a full 14 months. After that, the order requires him to appear before the court once more to account for what he did with the balance of the estate assets. Presumably, a failure to respond to that order could lead to a further finding of contempt, so this may not be over yet.

So, who do you think should be your executor?