Many people are unaware of the obligations as an Executor of an estate. Wills & Estates Senior Associate, Lucy McPherson, discusses an Executor’s role, and the removal of an Executor who behaves badly.
What does the role of an Executor entail?
When preparing a Will, one of the most important decisions a person can make is who to appoint as the Executor of their estate. An Executor’s duties are far reaching. They essentially stand in the shoes of the deceased person after their death to administer and distribute their estate in accordance with the law and any terms of the Will.
The Executor will also need to respond to any litigation that arises in relation to the estate. It can be quite an onerous role.
The person appointed as Executor needs to be aware of what is involved and the time it is going to take in their lives to fulfil the role. They need to understand what is going to be expected of them. It is not to be taken lightly.
The duties of an Executor can include:
- Arranging disposal of the deceased’s body
- Arranging the funeral
- Obtaining a grant of probate
- Collecting the assets
- Selling assets (where appropriate)
- Making sure assets are adequately insured
- Attending to the payment of debts and liabilities
- Administering Trusts
- Keeping accounts
- Responding to litigation (which can be one of the most onerous jobs for an Executor)
- Settling any claims that can be bought on an estate
- Distributing the estate pursuant to the terms of the Will
If you have been appointed Executor of someone’s estate, what do you need to do?
The first thing you need to be aware of is that you don’t have to accept the appointment. Many people are under the assumption because they have been appointed as an Executor, that they need to accept the appointment and move on with the role. This is not the case. Executors can renounce their appointment.
If you choose to renounce your position, this needs to be done immediately. You can’t renounce once you have begun intermeddling in the estate. This can be an understandable position to take given what can be involved fulfilling the role of Executor, particularly when dealing with contentious estates. It’s not for everyone. It can take up a lot of time and energy and you can be responsible to third parties for your actions. If you make a mistake during the course of the administration, or don’t act reasonably having regard to your duties, you can be putting your personal assets at risk. Most people are not aware of this risk.
Usually Executors are indemnified for liabilities against the estate assets, but that’s not always the case. You can potentially be opening yourself up to personal liability.
What kind of obligations does an Executor have to the beneficiaries of an estate?
The Executor has a fiduciary obligation to the beneficiaries of the estate to act in their best interests. Fiduciary simply means a relationship of trust.
Unfortunately, not all Executors act appropriately, and beneficiaries are required to seek removal of an Executor from office in this instance.
Some examples where a beneficiary may choose to do this could be if an Executor is:
- not administering the estate properly
- not administering the estate fast enough (causing considerable and unexplained delays)
- acting in his/her own best interests and placing those interests before the beneficiaries of the estate
Proceedings for the removal of an Executor can be taken by any party who has sufficient interest in the estate. This would usually be a beneficiary. The courts aren’t generally in the fashion of removing an Executor for light reasons. Their conduct needs to be sufficiently grave to warrant their removal.
Here are some examples of actions that may warrant an Executor being removed from office:
- An estate has not been administered and it is five years past the date of death
- Where the Executor has placed their interest in front of those of the beneficiaries by moving into the estate property and living in it rent free whilst the other beneficiaries are waiting for the property to be sold and for the proceeds of sale to be distributed according to the Will
What happens if an estate is contested?
If you are an Executor of a Will but also a family member, you could be thrown into the hot-seat if a claim is made against the estate or if there is a dispute concerning the validity of the Will.
We find that many Executors can also be a residuary beneficiary of the Will and sometimes their entitlements as a beneficiary can conflict with their duties as the personal representative or Executor of the estate. Although the primary duty of the Executor is to uphold the terms of the Will, the Court commonly reminds us that an Executor must not vigorously defend a claim. An Executor must consider the merit of all claims and if there is merit, in order to avoid the significant costs that can be incurred in litigation, there is case law that clearly stipulates that an Executor should attempt to settle those claims in order to avoid incurring significant legal costs.
This can be difficult for an Executor who may have an emotional attachment to the deceased and want to uphold the integrity of the Will and do their best to follow through with the deceased’s wishes.
Despite this, the legal interests of a claimant need to be considered, alongside the commercial reality of litigation. Litigation is expensive and if an Executor can avoid that expense for the estate, they should, when a claim has merit.
How can conducting yourself unreasonably as an Executor open you up for personal liability?
Courts are not shy to make adverse findings against Executors who have acted unreasonably and conducted themselves in a manner which is inconsistent with their duties to act in the best interest of the beneficiaries.
These duties include the duty to preserve or maximise the estate assets. This is particularly relevant when the Executor is also a beneficiary in the estate. By opposing a claim made, they are benefiting themselves by defending any claim made against the estate at all cost. Sometimes, those in the role of Executor might think they have the financial resources and assets in the estate available to defend this action, so they fight the claim at whatever cost. The courts may not allow the Executor to take that approach, particularly when they have an interest in the estate themselves.
What we find in those scenarios is that the applicant in the litigation is usually financially strapped which plays a significant role in the court’s findings.
A way a court could penalise the parties is by making a cost order against a litigate on either side of the litigation. So, in a circumstance where an Executor is a party to the litigation and it can be shown that they haven’t acted reasonably and conducted themselves in an appropriate manner, during the course of the litigation, the court can make an adverse cost order against an Executor personally.
What that means, the Executor can’t turn around demand the legal costs come out of the estate assets. They will have to reach into their own pocket to foot that bill.
It can be risky and quite frightening to think you are taking on these matters in a representative capacity but you can also open yourself up to personal liability in doing so.
Advice for anyone appointed as an Executor of a Will
We find that emotional pressures can be applied by family members for you to act in the role as an Executor. Acceptance of this role can come with significant burden. There is value in appointing a professional to act in the role in those circumstances. In an estate that can become quite contentious, I would recommend having an independent professional appointed as the Executor. This removes the emotional pressure that can sometimes be applied to family members who may not want to take on that role.
If you have been appointed as an Executor, you should be aware of the role and what is expected of you. Seek legal advice as soon as possible from a specialised lawyer who acts in this area of law and find out what’s involved. If you don’t think you are up for it, then you can renounce and if you decide to take that course, you should consider doing so immediately.
How can Attwood Marshall Lawyers help?
Attwood Marshall Lawyers is a leading estate litigation firm. If you have any enquiries concerning estate planning or need estate litigation advice, call our dedicated team today. Please contact our Wills and Estates Department Manager, Donna Tolley, on direct line 07 5506 8241, email firstname.lastname@example.org or free call 1800 621 071.