I recently came across an interesting estate case from the United States.  Art dealer Ileana Sonnebend died in 2007, and at the time of her death possessed an art collage containing a stuffed eagle.  In the United States, it is illegal to sell the art because it contains the eagle; and as a result the estate and the IRS are currently embroiled in a  dispute over the value of the art for tax purposes.  You can read about the dispute here:  http://www.forbes.com/sites/janetnovack/2012/07/22/the-irs-art-advisory-panel-has-its-head-inthe-clouds/

The Sonnebend case is an example of how executors need to be cautious when trying to sell estate assets, to ensure they do not violate any laws when doing so.  It is a wise idea to consult with a reputable and professional appraiser and your lawyer to determine if any specific items are sellable or require specific documentation or authorizations.  For example, licenses are required for the possession of some articles, such as firearms (see the Criminal Code of Canada), and the possession of some flora and fauna is restricted or even  illegal pursuant to the federal Wild Animal and Plant Protection and Regulation of International and Interprovincial Trade Act.  Provinces and municipalities may have further restrictions and requirements.

Caution should be exercised even with ordinary household items.  When someone passes away without giving his or her ordinary household items to someone specific, which may the case when there is no surviving spouse, the executor may be tempted to hold an estate sale or a garage sale to dispose of some of the household effects.    In May 2012,   Health Canada issued an advisory to assist vendors and buyers of second-hand goods, noting that vendors must only sell items that are safe and fit for use, that have not been banned, meet current regulations.  Both vendors and buyers should check the product recall database located at http://cpsr-rspc.hc-sc.gc.ca/PR-RP/home-accueil-eng.jsp to ensure products have not been recalled.  You can find the full Health Canada Advisory here :  http://www.hc-sc.gc.ca/ahc-asc/media/advisories-avis/_2012/2012_72-eng.php

In an earlier post, I wrote about how it is a good idea to get some of the household contents appraised, particularly art, to avoid selling items at prices drastically below value (click here for the post).

Executor Compensation

In British Columbia, unless a will specifically states otherwise, s. 88(1) of the Trustee Act sets out an executor or trustee’s entitlement to remuneration under either of a deed, settlement or will.
It allows a fair and reasonable allowance, not exceeding 5% of the gross aggregate value, including capital and income, of all the assets of the estate.  The Act also provides for an annual care and management fee of 0.4% of the average market value of the estate’s assets.
Remember that 5% is the maximum remuneration that can be claimed. If the administration of an estate is one of average complexity, then an executor is likely entitled to 3% of the income and capital as well as the management fee.
Some of the factors that a court or registrar in British Columbia will consider when reviewing an executor’s accounts include:
• the time taken to administer the estate;
• the degree of care and responsibility required;
• the size or complexity of the estate;
• the nature and value of the assets;
• the skill or ability exercised in the estate’s administration; and
• the success ultimately achieved.

In addition to the capital and income remuneration described above, s. 88(3) provides for a further care and management fee of up to a maximum of 0.4%. The court has the discretion to determine what that amount should be and will consider the same factors described above. The decision in Re Pedlar (1982), 34 BCLR 185, sets out a means to determine the average market value of the estate whereby the market value is determined at the beginning of a 12 month period, the market value at the end of that period is then added and the total amount is then divided in half.  Generally, the estate’s capital will be charged two-thirds of the care and management fee and the income will bear the remaining one-third of the fee.
An executor is also entitled to be reimbursed for any expenses he or she may have properly and reasonably incurred in the administration of the estate. Although an executor may retain the services of professionals such as lawyers or accountants and pay their reasonable fees and disbursements from the estate, those services must be ones that an executor could not reasonably have performed in their personal capacity as executor. The reasonableness of the payment of any professional fees may come under scrutiny when the executor prepares to pass his or her accounts.  If, in the court or the registrar’s opinion, the payment of the fees was not reasonable or proper, the executor may be required to reimburse the estate.

The formal passing of an executor’s accounts can be a complex and lengthy process. Often the services of a lawyer are required to assist in the preparation of those accounts and to appear on behalf of the executor at any subsequent court hearing. If the amount of remuneration claimed by an executor is consented to by all the estate beneficiaries, the process of passing the accounts can be significantly simplified. If that approval or consent is not obtained, approval for the executor’s compensation must be obtained by court order under s. 89 of the Trustee Act or on a passing of accounts under Supreme Court Rule 21-5(70).
Finally, in the event there are minor or incapacitated beneficiaries who are thus incapable of consenting to an executor’s accounts, the Public Guardian and Trustee of British Columbia must be provided with notice of those accounts. The executor is then required, pursuant to s.99 of the Trustee Act, to pass their accounts before the court in order to obtain a discharge and before any remuneration can be paid from the estate.

Last week, the CBC reported a story about a garage sale, a painting by  famous artist Tom Thomson, and a sketch painted by one of Canada famous “Group of Seven” artists, Frederick Varley.  Someone purchased the two pieces of art at a garage sale for only one hundred dollars, and after having the art appraised and examined by experts, has discovered that his or her garage sale find is now likely to be worth in the six-figures- a “very conservative” estimate being at least $150,000 for the Thomson painting alone: see http://www.cbc.ca/news/canada/british-columbia/story/2012/04/12/bc-group-of-seven-garage-sale.html  

The news report does not give any details as to the shopper or the seller in this case, but executors do often sell the contents of a home, and I frequently see signs for “estate garage sales” in my neighbourhood.    These found paintings are a good example why a wise executor may have articles in the  home of the deceased appraised or valued by a professional appraiser, especially if there is substantial art or collectibles, and little is known about the origins of the items.     The appraisal values may also be used to ensure the property of the deceased is fully insured, and to ensure proper division of assets, such as where the will includes a power to distribute in specie (in its actual form) and there are multiple beneficiaries. Appraisal information is also disclosed on the Statement of Assets and Liabilities, which is attached to the Executor or Administrator’s affidavit and filed with the Court.