In a recent decision, an estate trustee went to court for help when issues between a testator’s charitable and family beneficiaries resulted in stalling the estate’s distribution for over four years.
Testator Leaves Money to Family Members and Charities
The testator died on March 10, 2016. In her will, she made no provision for the distribution of the residue of her estate following payment of specific bequests and debts of the estate. The estate had a value of just over $600,000.
The estate’s trustee brought an application for directions in 2017. The ensuing court order, issued on July 7, 2017, directed that the residue was to be distributed equally to eight family members and the ten charities to whom testator had made specific bequests in her will. The court order also provided that the family members were to execute a release in a form to be drafted by the lawyer for the charitable beneficiaries and approved by the lawyer for the trustee.
However, in the three years following the court order, the lawyers for the charitable beneficiaries and the trustee repeatedly failed to reach an agreement on the wording of the release. As a result, no interim distribution had been made.
On July 19, 2019, the trustee applied to the court for a passing of accounts. The charitable beneficiaries submitted a notice of objection on October 22, 2019. In the notice, they took the position that the accounts presented did not conform to the required standards or provide sufficient information. They also took issue with the proposed compensation to the trustee.
In December 2019, pursuant to an order by the court, the charitable beneficiaries and the trustee participated in mediation, but it did not result in a binding settlement agreement.
The trustee therefore asked the court to determine the wording of the release for the interim distribution of the assets of the estate.
Charitable Beneficiaries and Family Members at Odds
The trustee contended that the charitable beneficiaries had unreasonably refused to accept a release in a form acceptable to the trustee. He therefore sought an order from the court setting the terms for a release, so that he might proceed to an interim distribution.
In turn, the charitable beneficiaries argued that the trustee could not make an interim distribution until all of the objections raised in their notice of objection had been adjudicated or settled. As a result, they claimed that the trustee’s motion was misguided and should be dismissed with costs personally against the trustee.
The family members stated that they were frustrated that, more than four years after the testator’s death, no distribution of the estate’s assets has been made to them. They were also upset that they were not given notice of the motion and learned of it only informally.
Court Orders Interim Distribution of Estate
The court noted that there was no actual concern that the proposed interim distribution would leave insufficient funds in the estate to cover its existing and potential liabilities.
As a result, the court found that there was no principled basis on which the charitable beneficiaries could object to the proposed interim distribution or to the court’s approval of a form of release with respect to this interim distribution. It stated that the trustee’s application to pass accounts, and the notice of objection to it, did not need to be litigated as a condition precedent to the proposed distribution. The court agreed with the trustee that the objections raised by the charitable beneficiaries to his interim accounts should not prevent him from proceeding to an interim distribution
However, the court was not satisfied that it should limit itself to approving the form of release, stating:
“Given the time that has already passed since [the testator’s] death, it is in the interests of justice and of all parties concerned that all remaining disputes with respect to the Trustee’s administration be settled as quickly as reasonably possible. Everyone involved in the Estate appears to have been acting in good faith and with a desire to ensure that it is properly administered. Yet, as a result of the delays in this case to date, [the testator’s] last wishes have not yet been fulfilled. Her residual beneficiaries have been deprived of the use of money that she wanted them to have. The Trustee has been unable to wind up his administration. The Trustee and the Charitable Beneficiaries continue to incur legal costs which may further deplete the money available for distribution to all beneficiaries. This cannot continue.”
As a result, the court also provided the parties with timelines and deadlines to resolve all remaining issues.
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