Professional advisors may often find themselves appointed or acting as an executor of an estate. The majority of the time things are plain sailing, but what happens when things go wrong?
The potential for disputes to arise in respect of the administration of estates is wide ranging and potentially unlimited. Ever more complicated family structures, relatives living further afield, multiple marriages, children from previous relationships and a difference of opinion on how elderly relatives should be cared for, to name but a few, can be a potent mix for disagreements.
There are also a variety of disputes that can arise, such as a challenge to the validity of the Will, including whether the testator possessed testamentary capacity or whether they were subjected to undue influence and claims for financial maintenance, but some of the most difficult issues manifest themselves when dealing with the administration itself.
One might think that the scope for such disputes should be small. Indeed, the role of an executor is in theory straight forward. Pursuant to section 25 of the Administration of Estates Act 1925 the personal representatives of a deceased person are under a duty to: -
(a) collect and get in the real and personal estate of the deceased and administer it according to law;
(b) when required to do so by the court, exhibit on oath in the court a full inventory of the estate and when so required render an account of the administration of the estate to the court;
(c) when required to do so by the High Court, deliver up the grant of probate or administration to that court.
In other words, a personal representative is obliged to secure and preserve the assets of the deceased, collect them in, pay any liabilities including any tax and distribute the same in accordance with the terms of the will or intestacy.
It is amazing how representatives manage to complicate what should be simple, especially where executors are beneficiaries and the manner in which an estate is administered may impact upon the share they are to receive. Indeed, problems can arise in a variety of ways. For example, a disagreement over the interpretation of the terms of the Will, the disapproval of the choice of an executor or co-executor, the valuation of assets, loans to family members and whether they have been or should be repaid, remuneration for care provided during the deceased’s lifetime, remuneration for administration of the estate, the unlawful removal of chattels by beneficiaries, renting out property without authority or deep seated unaired resentments between beneficiaries. Problems can spiral out of hand very quickly and lead to parties becoming entrenched in their position with the administration ground to a halt. Executors can sometimes find themselves in a very difficult situation, especially professional executors.
On many occasions I have seen professional advisors agree to act as an executor. Many have advised the deceased over a long period of time and given the relationship of trust between the deceased and the advisor, notwithstanding a potentially volatile family, the advisor may feel obliged to fulfil their duties out of some deep seated loyalty, or be enticed by the prospect of the potential fees that may be generated. Whilst the former is commendable and the latter understandable, an executorship may soon be seen to be a poison chalice, creating great risk. If not addressed properly this could lead to serious costs implications and damage to a professional reputation.
No executor is obliged to accept their position even if named in the Will. An executor can inspect the deceased’s papers and choose to renounce their position if they so wish. This can be done at any time, until they have ‘intermeddled’ in the estate. Broadly speaking, intermeddling is taking any step that confirms their office as executor, such as accepting monies or paying debts. Once an executor has intermeddled, they can only renounce with the permission of the Court. Consequently if there is the slightest hint of a dispute, an executor may be well advised to walk away right from the start, in particular, a professional executor with no vested interest in the estate.
Unfortunately difficulties do not always reveal themselves at the start. They often arise after an individual has intermeddled; obliging the executor to take out the Grant of Probate, or once a Grant has already been obtained. In such circumstances an executor cannot renounce and may have to find another way to extract themselves or resolve the matter. Whatever the issue, the first steps in a dispute are often crucial.
There is often a temptation for a professional executor, who has no vested interest in the estate, to try to negotiate a resolution between family members, whether they are co-executors and or beneficiaries. This is fraught with risk and often leads to the perception by one party or another that the professional executor is taking sides. Indeed, searching for a resolution invariably involves trying to convince a party to a make a concession. Just being seen as sympathetic to the other’s cause can create problems. The professional executor may then be seen as the bad guy.
A professional executor should consider their position carefully. It may be that a professional executor should adopt a position of neutrality and allow the other parties to resolve the matter themselves. In many situations this will reduce the risk of an adverse costs order. However, a neutral executor still owes a duty to protect the estate assets and whilst a dispute ensues, care must be taken to avoid any loss to the estate as a result of inaction. Where necessary the parties should consider whether a limited grant of probate, allowing an executor to collect in the estate assets, but not distribute them, should be obtained.
In some situations only the removal of an executor may resolve matters. In other situations a professional executor may be asked to step down. The Court has a wide variety of powers at its disposal in this regard. For example, pursuant to section 50 of the Administration of Justice Act 1985, it can order the removal of an executor both before and after the issue of a grant of probate and, pursuant to s.116 of the Senior Courts Act 1981, the Court or the District Registrar can pass over an executor and order another individual to take out a grant of probate. Care must however be taken as an ill-conceived application could lead to costs sanctions. There must be clear grounds to remove an individual. However, it may be wise for a professional executor to agree to be removed or else matters may worsen.
Where there are no grounds for removal, or that is not in issue, one of the most useful tools is that set out in Part 64 of the Civil Procedure Rules, being the right of an executor to seek directions from the Court. Part 64.2 of the Civil Procedure Rules states: -
“… this Part applies to claims –
(a) for the court to determine any question arising in –
(i) the administration of the estate of a deceased person; or
(ii) the execution of a trust”
The supporting practice directions list specific examples of questions that may be asked, but in essence a Court can assist in answering any question that arises in the administration of an estate. Providing that full and frank disclosure is provided, an order pursuant to Part 64 can provide a professional executor with protection from personal liability and depending upon the nature of the application, the associated costs are often recoverable from the estate assets. This is therefore an incredibly useful tool to resolve issues between executors and beneficiaries, or between co-executors.
Overall, it is vitally important to take advice from experts. This is a very specialised area and has its own unique rules and procedures. If it is approached like a commercial dispute, this can create additional problems. Those of us who are experienced in this area of law, generally adopt a pragmatic and reasonable stance, always looking to explore the possibility of settlement, given the very high costs involved in litigating the matter. The first letter can set the tone for the way in which the dispute develops and ultimately the manner in which it is resolved. Seeking advice at an early stage is imperative to prevent any damage to reputation and minimise the risk of adverse costs.
If you would like to discuss any of these issues raised or would like specific advice please telephone Douglas Houghton on 0121 203 5381 or email douglas.houghton@irwinmitchell.com
Winter 2017
Published: 31/01/2017
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