An executor, absent consent or a court order, must not make any distribution of estate assets to beneficiaries of a will for six months following the grant of probate. This is a statutory prohibition in section 12 of the Wills Variation Act (the “WVA”). There is a serious risk to executors who make early distribution.
This six month prohibition is intended to balance competing interests. Where a will does not make any or adequate provision, the WVA is intended to allow claims for the “adequate, just and equitable provision for the spouses and children of testators.” If there were no time limit for such claims, then there would always be a danger that the distribution of estate assets would be subject to challenge. An executor would be reluctant to make any distribution for risk of a subsequent WVA claim. Thus, the legislature imposed the six month limitation period within which any challenge to the will (being a claim to the estate’s assets) must be made. If no such claim is made, the executor can distribute the estate assets to the beneficiaries without fear of personal liability to a WVA claimant.
However, without a rule against immediate distribution, there is also a danger that a legitimate WVA claim could be defeated by the dissipation of the estate assets before the case was decided or even commenced. If the estate assets are gone, there is no remedy for a successful WVA claimant. That would cause injustice. Section 12 of the WVA ensures the estate remains intact for at least six months within which period a WVA claim can be commenced. If such a claim is made, then the estate will be preserved so that a successful WVA claimant is able to recover their fair share once their claim is decided.
What the courts in B.C. have not decided is what happens if an executor makes an early distribution in contravention of the WVA. A recent case was the first to consider the issue. It is a warning to executors.
In Stevens v. Wood Estate (Re)), an adult daughter was disinherited by her mother. The will gave as reasons estrangement between the two, the daughter’s receipt of significant financial assistance during her mother’s lifetime and that the daughter had withdrawn an unknown amount of “money from (the deceased’s) bank account without (her) consent.” Presumably confident the daughter would not make a claim after the mother’s death, the Executrix distributed all but $28,000 of the estate assets two weeks after the grant of probate. Two days later, the disinherited daughter commenced a WVA claim. The Executrix counterclaimed against for the money stolen by the daughter from her mother’s bank account.
The daughter then applied to court for an order that the Executrix repay into the estate all the money disbursed to the beneficiaries. The Executrix’s evidence was that she was unaware of the requirement to wait six months before making a distribution. She argued she should not be compelled to repay the funds because, if the WVA claim succeeded, then:
- the $28,000 holdback was sufficient to cover any award to the daughter;
- the counterclaim would eliminate or offset any WVA award;
- the Executrix admitted personal liability for any award made and would pay it personally; and
- two of the beneficiaries agreed to indemnify the daughter for any award in her favour in excess of $28,000.
The court dismissed all these arguments and commented that it was the “party who has breached the provisions of the statute who must make matters right.” The application was not the forum to determine the strength of the WVA claim or the counterclaim. The WVA claimant was entitled “to have the estate reconstituted to its state prior to the wrongful distribution.” As a result, the Court held that “the appropriate remedy for a breach of s. 12 of the WVA is for the party who has breached the provisions to either repay the estate or to post security in the entire amount which has been wrongfully disbursed.” The Executrix was given 30 days to repay $202,000 to the estate or post security. She also had to pay the costs of the application.
This case serves as a stern illustration of the consequence of failing to abide by the time prohibition on the distribution of estate assets. Such a distribution can only be made with the consent of all who may have a WVA claim or a court order. Otherwise an executor risks personal liability to the estate and disappointed beneficiaries.
On March 31, 2014, it is expected that the Wills, Estates and Succession Act (“WESA”) will replace the WVA. WESA (s. 155) retains the prohibition on distribution of the estate, but for a period of 210 days rather than six months. WESA also requires that a claim to vary a will be commenced within 180 days (s. 61) of the “representation grant,” a term that covers a variety of different grants of authority by the Court giving a personal representative authority to deal with the estate.
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