When are Estate Litigation Costs also Administration Expenses?

As a general matter, the expenses of estate administration form a first charge on an estate before the claim of creditors, dependants or beneficiaries.  When though, does this charge include litigation expenses?  That was the issue in the recent Ontario Superior Court of Justice case of Kazarian v. Fraser.  In that case, the estate administrator of an intestate estate was required to retain counsel to locate offshore assets of the deceased which he and his common law spouse had hidden from the deceased’s former spouse.  Thereafter, proceedings were brought by the estate to determine the status of certain assets and to determine the contested dependant’s relief claim of the common law spouse.  She was impecunious so the estate had no realistic means of recovering any costs against her if successful.  After a review of the law, the Court found that, in these circumstances, the legal fees incurred in locating assets and in litigation involving the common law spouse form expenses of administration and are payable first out of the estate.  In these circumstances, the payment of these expenses left the estate without further assets.

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