Executor-beneficiary conflict of interest is a serious issue and one of the main reasons Executors may end up in Court. ALLEN DUGGAN from RMB Lawyers explains:
Executors of a Will have a duty to act in the best interests of the beneficiaries of that Will.
Executors are not entitled to benefit from the Will aside from receiving compensation in the form of an Executor fee, either by the approval of the beneficiaries or by a Court-ordered Executor’s Commission.
An Executor Fee or Commission is a payment to compensate for the time, effort and responsibility of managing an Estate, although such payments are not routinely applied. Many Executors are happy to perform their duties in an honorary capacity, especially if the Will is that of a parent, family member or close friend.
However, Executors must be wary of conflicts of interest. One of the most common situations is where the Executor wants to commence a Family Provision Claim because they believe that, as an eligible person (spouse, former spouse, child or someone who had been financially dependent on the deceased) they haven’t been adequately provided for in the deceased person’s Will.
There is clearly a conflict of interest when the Executor is seeking to obtain provision from the Estate at the expense of the other beneficiaries. Despite this conflict of interest, an Executor is still permitted to initiate a Family Provision claim.
If another eligible person initiates a Family Provisions Claim, the Executor has a clear duty to either compromise – that is, negotiate a settlement with the claimant – or contest it and seek to uphold the Will.
Such a compromise may be handled through mediation, where a mutually agreeable outcome is reached even though it doesn’t accord with the original Will without the costs and delays of a court battle,
However, in the recent High Court Case of Heath v Heath, Timothy Heath, an Executor and beneficiary of his mother’s estate, was removed as Executor because he had raised a dispute to contest the Will.
The Court’s decision to remove him as an executor was unusual because Timothy was not at fault through his actions.
However, the Court thought that there was a conflict of interest. Timothy was in charge of dividing up property according to a Will, which he disagreed with in respect to his own inheritance.
This case shows that someone can be removed as an Executor if there is a conflict of interest.