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Alternatives to litigation during estate disputes

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Fred did a will before he died that appointed a friend to act as his executor. The will directed that his estate was to be divided between his two children. They were adults, but Fred thought he would do them a favour by letting his friend, Max, do the job. Max had already served as executor for two other people. Max knew the ropes.

That did not mean things went well. The children thought Max worked too slowly. They were eager to get their inhertances and called him and emailed frequently. He thought they were being ungrateful. They thought he was being high-handed. He sat on emails and did not respond immediately -- trying to let them know they could not order him around like a lapdog. The children threatened to hire a lawyer -- trying to let Max know that they would not sit idly by while he dithered. Frustrations escalated. Everyone was surprised at how quickly things became uncivil.

What happens when an estate comes off of the rails? Legally, the beneficiaries have rights. During the 12 months of the estate administration, called the "executor's year," they are supposed to leave the executor alone and let him or her get about the job, free of interference. As the executor's year draws to a close, the beneficiaries have the right to call upon the executor to render accounts and release assets, if they are ready, to the heirs. At that stage, the executor should be prepared, at a minimum, to share financial information and make a progress report relating to the administration of the estate.

If the executor refuses to share that information, the beneficiaries can demand an accounting from the executor and go to court if it is not forthcoming. The executor is then generally expected to render written accounts and file them at the courthouse detailing where things stand. An executor who does a bad job, or who steadfastly refuses to share financial details, can be removed by the court and replaced with another executor more likely to get things done.

The courts, however, tend to look at that as a last resort. Beneficiaries can spend a lot of money on lawyers while trying to force the executor's hand, only to see the executor be given extensions and latitude from the court. That is a huge frustration.

The beneficiaries have a final card they can play. If the executor has made mistakes and been guilty of serious heel-dragging, the beneficiaries can refuse to agree to any fee proposed by the executor. The court has the final say in any fee dispute. If the court agrees the executor did a bad job, the court can reduce the fee to a pittance or refuse a fee at all. It is hard to remove an executor, but relatively easy to reduce the executor's fee.

Fighting in court over an estate makes little sense. There are other options.

First, hire lawyers but ask them to take a collaborative approach. Rather than making demands and filing court papers, a meeting can be scheduled to review the status of the estate and agree on the steps necessary to bring it to a conclusion. The executor agrees to follow the steps. The beneficiaries promise to back off. Everyone shares information and concerns. Done with a soft touch, it can defuse what might otherwise be a powder keg.

Second, if that fails, everyone might consider arbitration instead of litigation. Arbitration takes place informally. An arbitrator (typically a lawyer with training in this area) is appointed by consensus. The parties agree to be bound by the result. How does it compare to court? Litigation typically takes years. Arbitration, takes months. Litigation is hugely expensive. Arbitration tends to be significantly cheaper, even though the arbitrator has to be paid.

Arbitration is not appropriate for all estate disputes -- some things have to go to a judge -- but it can work for many.

What happened with Fred's estate? It dragged out over 31/2 years. No one sued. No one tried any of the alternatives suggested here. The estate took far longer than it should, but everything basically worked out. A fee was grudgingly worked out. In the aftermath, the kids hate Max and Max hates the kids. That is not what Fred would have wanted.

While this story is a real one, names and details have been changed to preserve confidentiality and save everyone embarrassment.


Republished from the Winnipeg Free Press print edition December 19, 2012 B5

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