Can an executor (estate trustee) be personally liable for selling too low?

The duty: fair market value, provable

Ontario courts define fair market value as the highest price available in an open and unrestricted market, between informed and prudent parties acting at arm’s length and under no compulsion. Two things follow for an executor (estate trustee) selling a home. First, the traditional way to establish that price is to actually expose the property to the open market. Second, the duty is not just to get the price but to be able to show how you got it. The standard the courts apply is the Supreme Court’s formulation in Fales v. Canada Permanent Trust: the prudence of an ordinary person managing their own affairs, and the measure of damages for breach is the loss caused to the estate.

What going wrong looks like: Baer v. Baer

The leading Ontario cautionary tale is the estate of Norma Baer, decided in 2014. The estate’s main asset was a 98-acre family farm. The trustees, two of five sibling beneficiaries, sold it to another sibling’s family for $300,000, despite holding a professional appraisal at $450,000 and an unsolicited third-party offer of $375,000, and they kept the deal from two beneficiaries until after closing. The court found breaches of fiduciary duty, including the even-hand rule that forbids favouring one beneficiary over another, observing that no person of ordinary prudence would readily part with such an asset at that price. The trustees’ claimed compensation of about $36,000 was cut to $15,000, expenses were disallowed, and the farm ultimately sold on the open market for the appraised $450,000. One detail worth noticing: the real estate commission on the corrective open-market sale was upheld as a necessary cost of achieving fair market value. The court treated professional marketing as part of doing the job right, not as an expense to avoid.

The audit behind the lawsuit risk

Beneficiaries are not the only ones checking the number. Estate Administration Tax is calculated on fair market value at death, declared through the estate’s filings, and the Estate Information Return is auditable for four years. The Ministry of Finance compares declared values against other records, including MPAC assessments, and MPAC figures often sit below true market value, which is exactly why a real valuation matters: it defends the estate in both directions, against under-declaring to the Ministry and against underselling to the market.

The protection: a record, built as you go

Courts defer to trustees who can show their work. The record that protects an executor selling a Durham home looks like this: an independent, documented valuation before listing, ideally covering both the as-is value and the value after any preparation work, so the decision between them is itself documented. Full open-market exposure with professional marketing. Offers recorded and responded to on advice. A sale price explainable against the valuation. And beneficiaries kept informed throughout, because in Baer the concealment compounded the underselling. This record is why we build a written as-is and after-renovation projection at the start of every estate file, and why the comparison of selling as-is, renovating first or taking a cash offer matters more for an executor than for an ordinary seller: a private cash sale at a discount produces exactly the kind of record, which is to say none, that Baer punishes.

This is general information about Ontario law, not legal advice, and case outcomes always turn on their facts. An executor facing a valuation dispute or a beneficiary challenge should speak with an estate litigation lawyer.