This week, the New York Times reported that billionaire Harry Macklow and his soon-to-be ex-wife are fighting over their art collection in a highly contentious divorce case. Their art collection includes multiple works by Pablo Picasso and Jeff Koons and is valued…at almost one billion dollars!
Similar issues may arise in estate cases where the deceased owned a substantial amount of artwork. A recent Ontario case dealt with this exact issue, where the beneficiaries of an estate could not agree on how to distribute the art collection of a deceased artist.
What Happened?
The deceased was a renowned Canadian figure skater and artist. He died on January 23, 2015, in Mexico where he resided for some 23 years. He died without leaving a will.
His three siblings were declared the sole heirs of the estate by a Mexican court in 2015.
One of his two sisters was first appointed “executor” of the estate by the court in Mexico and was subsequently appointed the estate trustee by an Ontario court.
The assets of the estate were situated both in Canada and in Mexico and included approximately 20,000 pieces of original artwork, chattels, bank accounts and properties. The original value of the estate was approximately $6,258,520.
According to the estate trustee, the remaining estate assets consist of $429,958 in cash and approximately $1,577,371 in original art work. The deceased’s original artwork was on consignment to several galleries and a significant amount was stored in a warehouse.
Initially the parties worked together cooperatively to administer the affairs of the estate.
However, the remaining two siblings (the “siblings”) became concerned about the estate trustee’s administration of the estate. It was their position that she had mismanaged the estate and they were concerned about the disposition of the remaining estate assets; specifically, they were concerned about the disposition of the balance of the original artwork in the estate.
In part, their concern was that they had repeatedly asked that their share of the artwork be distributed to them in specie and not sold, but the estate trustee refused their request and continued to sell the artwork through galleries. Additionally, the siblings had not been able to obtain an accounting of which pieces of art were for sale, had been sold or were stored. They also had concerns about the future rights to the artwork.
Finally, the siblings submitted that they were alarmed by the evidence that the estate trustee had reimbursed herself the sum of $528,228 from the estate and that she had spent $315,774 in legal fees on behalf of the estate.
The siblings brought a motion for directions and sought an order appointing a third party as Estate Trustee During Litigation (“ETDL”) and removing the estate trustee.
Decision
At the outset, the court stated that, in its view, the only issue requiring resolution was whether to appoint an ETDL and not whether the beneficiaries had a right to seek distribution in kind of the artwork.
The court acknowledged that the distribution question was not a simple one, because there was no will and therefore no direction from the deceased as to what he wanted done with the artwork. The court then stated:
“In my opinion, [the estate trustee]’s handling of the remaining artwork in either selling the artwork over the objections of the [siblings] or in making plans with regards to the future rights of the artwork without informing or consulting [the siblings] is unreasonable and runs contrary to her obligations as an estate trustee to act only in the interests of the beneficiaries. In my view [the estate trustee] is in a position of conflict in this litigation.”
The court then stated that neither side should be able to use their control over the estate to benefit themselves or to prejudice the other and that a trustee who is in an adversarial position towards a beneficiary should not be left in charge of trust property.
As a result, the court ordered the appointment of an ETDL to ensure the transparent, neutral and orderly administration of the estate and granted the removal of the estate trustee.
It further directed the ETDL to investigate and develop a plan for the distribution and/or liquidation of the remaining artwork, based on consultation with all three siblings.
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The highly-experienced and strategic Calgary estate lawyers at DBH Law can help you draft or update your will to reflect the needs of your family and your estate, no matter its size or complexity. Our responsive and concise approach to our work makes the process of will and estate planning easy for our clients.
We take pride in the relationships we have built with our clients, and the opportunities we have to represent their legal needs as they grow and evolve. We understand your need to provide for your family and loved ones while also minimizing the taxation and chances of litigation your estate may face. We can be reached by phone at 403.252.9937 or online and look forward to the chance to learn about what is important to you, and how we can help you achieve that.