Duties of an executor when a claim is made against the estate; Legal Practice Director Jeff Garrett discusses this issue and provides some guidance to executors in this position.
If you are an executor or a co-executor in the Will of a family member or friend, you could be thrown into the hot seat if a claim is made against the estate or there is a dispute concerning the validity of the Will itself. Many executors are also residuary beneficiaries in the Will and sometimes their entitlements as a beneficiary can conflict with their duties as the personal representative or executor in the estate. Although the primary duty of an executor is to uphold the terms and conditions of the Will of the deceased, it is not a commonly known fact that an executor must also act reasonably whenever a claim is made against the estate or they are involved in some form of litigation concerning the validity of the Will. It is also possible you could face a personal award of costs against you if you have conducted yourself unreasonably!
The Courts have consistently made adverse findings against executors who have not acted reasonably and conducted themselves in a manner which is inconsistent with the duties owed by executors to the beneficiaries of the estate to preserve the estate assets. This is particularly relevant where the executor or executors are also residuary beneficiaries in the estate. By opposing any claim made by a beneficiary, they are also benefiting themselves by defending any claims made against the estate, at all cost. Sometimes they have the available resources and assets of the estate to fight any claim whereas the person bringing the claim is usually financially strapped and unable to afford the cost of going to Court. Executors are usually indemnified by the assets of the estate in any litigation they are involved in, but this is not always the case.
The case of Collett v Knox  QSC 132 involved a claim by a de facto spouse of the deceased who had lived with her for many years and had been granted a life tenancy in relation to the family home. The executors (being the children of the deceased) fought the claim all the way to a trial and ran up legal costs in the estate with the intention that the family home would have to be sold and the de facto partner would not be able to live out his life tenancy in the property. The Trial Judge found that the actions of the executors were unreasonable and had been designed to have the effect of effectively throwing the de facto partner out of the home, arguing it would have to be sold to pay for the legal costs. The legal costs of the parties were in excess of a hundred thousand dollars and the main asset was the family home. The case sets out the duties of executors and the ability of the Courts to intervene and make costs capping orders in order to give effect to the wishes of the deceased.
Quite often in cases involving claims against the estate by family members who have not been adequately provided for in the Will, the executors fight the claims brought against the estate ‘tooth and nail’. There are usually many unpleasant facts and history brought up in the evidence of the case which can often further inflame the issues between the parties and make settlement of the matter impossible. It is a salient reminder to all executors that they have a duty to:-
- preserve the assets of the estate on behalf of the beneficiaries;
- act reasonably in relation to any claims against the estate, including obtaining any reasonable legal advice or other professional advice from accountants or financial planners so that their decisions are informed and take into account all relevant issues;
- when a claim or application is made or notified, the executor’s obligation is to objectively assess the evidence, impartially assess the merits of that application and if necessary, compromise that suit.
It is also noted that the various Practice Directions applicable in this area of law in both Queensland and New South Wales encourage the early resolution of claims by way of alternative dispute resolution (i.e. holding a settlement conference or mediation).
Accordingly, it is well settled that executors must deal with claims brought against the estate reasonably and they cannot just decide to defend claims without taking all circumstances into consideration (including the size of the estate and its ability to withstand several sets of legal costs). Executors should be very careful to protect their position and obtain the right advice from professionals who are skilled in this complicated area of law.
Executors should ensure that they obtain proper advice from lawyers who regularly act in this area of law. Most executors feel obliged to utilise the firm of solicitors who prepared the Will for the deceased. Whilst this is a normal reaction, sometimes the firm who prepared the Will is a smaller firm or a sole practitioner who may not necessarily be experienced in conducting estate litigation matters. Executors should ensure that in any matter where a claim is likely to be brought against the estate, they “do their homework” with respect to the appropriate lawyers that they engage in the matter.
We have a dedicated Estate Litigation team that practice exclusively in this complicated area. You are welcome to contact our office any time with enquiries concerning estate litigation claims. Please contact Estate Litigation Department Manager, Amanda Heather on direct line 07 5506 8245, email firstname.lastname@example.org or free call 1800 621 071.