Guide to executor disputes

Introduction

When preparing a Will, one of the decisions to be taken is who you want to appoint to implement the terms of your Will after your death. The person or people you choose are known as your executors. If you do not make a Will and die ‘intestate’ this person is known as an administrator. The term ‘personal representative’ is used to cover both executors and administrators.

 

The role of an executor (whilst we refer to executor, the contents are applicable to both executors and administrators) is to collect in the deceased’s assets and distribute these to his or her beneficiaries.

 

It is not uncommon, however, for disagreements to occur between executors and beneficiaries or between beneficiaries. Whilst these ‘Executor Disputes’ arise in many circumstances, based on our experience representing both executors and beneficiaries, there are certain common themes.

 

We have prepared a Guide to Executor Disputes which looks at a number of key Executor Disputes from the perspective of both the executors and beneficiaries. 

 

Please sell  below our Guide to Executor Disputes:

A common theme in Executor Disputes is delay. This can occur at the outset – the first task of an executor is to obtain authority to administer the estate. This authority is provided through a formal document called a Grant and it is not uncommon to find cases where an executor delays in submitting the papers needed to obtain a Grant. Delay can also occur once a Grant has been issued.

Beneficiaries should understand that there is no time limit within which an executor must complete the administration process. There is the concept of the ‘executor’s year’ (under which an executor is not bound to distribute an estate within one year of death) but this does not mean a Court will consider an executor to have delayed if he or she does not distribute an estate immediately after this period has elapsed.

Each estate will contain different asset types and values and owe different levels of debt. If an executor can show they have acted honestly and with due diligence, a Court is unlikely to intervene.

In our experience, in most cases, it is reasonable to expect an executor to have applied for the Grant within 6 months of the date of death and to have completed the administration within 12 month of receiving the Grant. It can take a few months for the Probate Registry to issue the Grant following receipt of the paperwork.

With these general points in mind, beneficiaries should consider any delay in light of all the circumstances. For example:

  • If the delay occurs before the Grant is issued, has the executor made it clear that they intend to obtain the Grant?
  • Is the executor keeping you informed of progress and the reasons for any delay?
  • Has there been repeated periods of delay?
  • Is the executor a professional, such as a solicitor, or someone unqualified?
  • Does the executor stand to benefit personally from any delay?
  • Does delay expose the estate to the risk of sustaining a loss, for example by assets reducing in value?

Whatever the circumstances, if a point has been reached where beneficiaries are concerned about the delay and/or the potential impact of the delay there are steps that can be taken to advance the administration.

If the delay is before a grant has been obtained, notice can be served on the executor requiring them to obtain the grant. If this is not complied with, someone else can apply for the grant instead.

If the delay is after the grant has been issued, an application can be made to Court for directions to advance the administration or, in certain cases, asking for the executor to be replaced.

If executors are experiencing delays, they are well advised to keep beneficiaries informed of these and the steps they are taking to break any deadlock. In our experience, beneficiaries want to be kept updated on developments. In addition, the more an executor proactively keeps beneficiaries informed, the less likely that they will face criticism from the Court.

A common cause of Executor Disputes involves disagreements over the releasing information to beneficiaries.

Beneficiaries are entitled to receive disclosure of certain information. The starting point is that an executor must keep estate accounts and make these available for inspection. In addition, beneficiaries can request additional information from an executor. Whilst there is no automatic entitlement to disclosure, executors should consider and comply with reasonable requests to disclose information concerning the administration of an estate.

If an Executor Dispute concerning a request for information arises, there are options open to both beneficiaries and executors to resolve these. Beneficiaries can submit an application requiring the executor to provide an ‘inventory and account’. The inventory provided must include certain specified information including a list of assets and their values. Beneficiaries separately have the right to apply to Court for a direction that the executors provide more extensive disclosure, for example of a document or a class of documents.

An executor facing what they consider to be unreasonable or constant requests for disclosure, faces a difficult situation. On the one hand, not providing disclosure exposes them to the risk of criticism if an application is made by the disappointed party. However, depending on the extent of the information requested, it takes time, and often expense, to reply to requests and an executor cannot be expected to be at the beck and call of a beneficiary. If this situation arises, an executor should take legal advice on how to deal with these requests and balance these competing interests.

Executors are commonly also beneficiaries.

In their capacity as an executor they owe duties to beneficiaries and must act in the interests of the beneficiaries. In their capacity as a beneficiary, they need only consider their own interests.

Whilst it will frequently be the case that what is in the interests of one beneficiary will be in the interests of all of them, so there is no conflict of interests, it is not always the case and disputes can arise. An example we regular encounter is where the executor occupies a property belonging the Estate and is reluctant to sell this. In this case the interests of the executor beneficiary are in conflict with the interests of the remaining beneficiaries.

If you are concerned that an executor’s actions are being driven by their personal interests, you should seek legal advice. Depending on the facts, beneficiaries can seek Court directions or the replacement of the executor. If an executor causes loss to the other beneficiaries by placing personal interests ahead of their wider duties, they can be held liable for those losses.

Disagreements commonly arise over the sale of estate assets. Frequently this involves the sale of a property, with executors and beneficiaries often having different opinions on what is the value of property and how to achieve the best sale price. The scope for dispute is understandable, frequently estate agents will suggest different marketing strategies or offer different opinions on when to accept an offer or hold out in the hope of an increased bid. Estate properties are often vacant pending sale and considerations must be given to whether the extra costs of maintaining the asset could negate any increased sale price.

Unless the Will directs otherwise, an executor is not normally required to have the consent of beneficiaries to sell estate property to third parties. In cases where different beneficiaries hold different opinions, having to have agreement could block progress.

However, an executor has a duty to act in the best interests of the beneficiaries and could be liable to the beneficiaries for selling an asset at an undervalue. Executors must not be guided by personal feelings or desires for personal gain.

In order to protect themselves, executors should consult with the beneficiaries and follow expert advice before disposing of assets. In circumstances where there is a dispute and an Executor is concerned that their decision may be challenged, they should obtain legal advice before proceeding.

A beneficiary concerned that an executor has or is proposing to sell an asset at an undervalue, should immediately notify the executor of their concerns and obtain legal advice. In appropriate circumstances, urgent directions can be sought from the Court or you can apply to remove the executor.

Part of an executor’s role requires the investigation of debts owed to the estate, which would need to be collected in on behalf of the beneficiaries, and gifts made by the Deceased in the 7 years before their death.

Lifetime transaction between families are common, either from natural love and affection or in an attempt to save Inheritance Tax.

It is also common for disputes to arise about these transfers, especially over the status of them. For example:

  • Allegations that the sums transferred were loans not gifts and therefore need to be repaid;
  • Disputes over whether sums originally advanced as loans were subsequently converted into gifts;
  • Questions about whether sums loaned have been repaid.

Executors must also settle debts owed by the estate – this may be debts owed by the Deceased at the time of death or expenditure incurred post death that the estate is liable to reimburse.

These claims are often disputed by one or more of the beneficiaries, whose inheritance will be reduced by any payments made from estate funds.

If an executor faces a situation where there is a dispute about a gift, loan or any debts, legal advice shod be sought before any decision is taken. An executor can face personal liability for incorrectly paying debts or writing off outstanding loans.

There are a number of ways to resolve Executor Disputes and disputes between beneficiaries. These include:

  • Through correspondence: in many cases instructing a solicitor to advise upon the issues and addressing these through correspondence can resolve the issue in dispute and allow progress with the administration of the Estate. In cases where the beneficiaries are in dispute, correspondence from the Executor may allow them to reach an agreement;
  • Mediation: where the issues in dispute are complex or views are entrenched, in our experience mediation is often capable of breaking down barriers and allowing agreement to be reached. Mediation is a form of Alternative Dispute Resolution where a trained mediator acts as an independent facilitator to work with the parties to support them achieve their objectives;
  • Litigation: if the issues require urgent action or cannot be resolved by correspondence or through mediation, Court action will be required. This may be an application for directions on how to resolve an issue in dispute, an application to remove an executor, or an application between beneficiaries or between executors and beneficiaries over financial matters, such as loans or gifts.

It is important for executors to understand that they should not engage in litigation on behalf of the estate without first obtaining expert legal advice. Executors who engage in litigation on behalf of an estate without proper advice and, in most cases, the authority of the Court (under what is known as a Beddoe Order) are at real risk of being personally liable for costs that are incurred.

Claims can be brought against executors where they are in breach of duty. Claims can arise where:

  • An executor has caused a loss to the estate;
  • An executor has made an unauthorised profit from the estate;
  • An executor has incorrectly administered the estate, for example by paying out incorrect amounts or incorrectly settling a claim against the estate;
  • An executor has been negligent, for example failing to collect in an asset or causing loss by delaying the administration;
  • There has been a breach of a fiduciary duty, for example buying property from the estate without authority or selling estate assets at an undervalue.

In such circumstances, a claim can be brought by the beneficiaries or creditors of an estate against the executors.

In many cases the only solution to an Executor Dispute will be to seek the removal of the executor.

In any of the situations outlined above, for example if a beneficiary believes that an estate is not being properly administered or there is a conflict of interests, the they can approach the Court for an order to remove an executor.

An application to remove an executor can be made before a grant of probate has been issued. This is under section 116 of the Senior Courts Act 1981.

In our experience, most applications are made after the executor has been appointed. In this case, an application is made under section 50 Administration of Justice Act 1985.

In applying for the removal of an executor under section 50, there is a high bar to be met before a Court will order removal. An executor is someone that has been chosen for this role by the Deceased and their wishes will not be overridden by the Court without good reason.

Each case will be decided on its own facts and the Court will be concerned with the interests of the beneficiaries and ensuring the proper administration of the estate. The more serious the concerns, the more likely it is that the Court will act to remove. The presence of friction or hostility between the executors and beneficiaries will not normally be sufficient except in the most serious of cases, for example where it is prejudicing the administration of the Estate. An Executor acting where there is a conflict of interests or committing a breach of duty is much more vulnerable to a removal application.