Poorly performing, biased or dishonest executors can cost beneficiaries of wills dearly. Ed Stanley, director and head of contentious probate at Harrison Drury, assesses situations where executors stray from the straight and narrow and the remedies available when things go wrong.
Executors (or administrators where there is no will) are supposed to collect in and administer the assets in the estate of a deceased person and to provide to the beneficiaries and to the court an inventory and an account of their dealings. However, things don’t always happen that way.
In 2019 alone, 236,000 grants of representation were issued with thousands more stuck in the queue. An uncomfortably high proportion of these estates, history suggests, will have been or are being dealt with unsatisfactorily.
When do executors breach their duty?
Typical complaints made against executors centre around:
- Misuse of assets – where typically the executor will have taken or adapted the asset for their own use; allowing personal friends or close family members to reside in estate property free of charge and granting them rights of occupation
- Maladministration – for example failing to pay the liabilities of the estate in the specified order
- Breach of financial duty – for example purchasing an asset from the estate at an undervalue without anyone’s approval
- Negligence – for example delaying administration, not encashing assets, selling land and buildings at incorrect market value; any mistakes made which have cost the estate financially
- Fraud and dishonesty – typically failing to report assets in the accounts and retaining those assets for themselves, or unauthorised use of estate cash or assets
- Bias – for example failing to deal with all beneficiaries in an even-handed manner; acting in the best interests of some to the detriment of others
- Spending estate funds on themselves or converting estate assets for their own use
- Using estate assets in their own business
- Incorrect calculation of inheritance tax resulting in either an overpayment which is not recovered or an underpayment which results in penalties and interest deducted from the estate
- Inheritance tax paid out of the residuary estate where it is chargeable instead to a person receiving a specific gift
- Failing to collect rent on a property when at a later date the tenant becomes insolvent or disappears
- Failing to invest estate funds when there is a duty to do so or investing in such a way that causes the estate to suffer a loss
- Delays generally for example in selling assets within a reasonable timeframe or pursuing claims which due to the length of time taken become irrecoverable
This is by no means an exhaustive list. Many beneficiaries will have their own horror tales to tell; there are many executors who find any number of ways to cause damage to the estate and its beneficiaries.
What can beneficiaries do about an executor beaching their duties?
Executors may be liable to beneficiaries, creditors or third parties for breach of their duties and to make good to the estate from their own pocket losses arising because of their actions. Further, where the executor has profited from an abuse of their position they must personally account to the estate for those profits.
There are certain statutory defences available to executors in response to claims for breach of duty. Beneficiaries should also beware falling foul of statutory limitation periods for bringing claims. Different periods can apply to different types of claims.
In certain cases where the administration of the estate is still ongoing, the wrongful actions or persistent delay of the executor may lead to the reasonable conclusion that the executor should no longer continue in that role and should be replaced. Statutory provisions exist enabling the court to remove an executor. Typically, there are three often-used grounds for removing executors:
- Failing to administer the estate properly for example, unauthorised use of estate cash or a simple prolonged lack of progress in the administration
- Material conflict of interest where for example the executor abuses their position to benefit themselves over other beneficiaries
- Being unfit to act, for example due to lack of mental capacity or imprisonment.
Where an executor is taking their time unreasonably to pursue an application for a grant of probate and where they refuse to step aside as executor, the court can compel the executor to take out the grant within a specified time or can nominate some other person to do so.
On so many occasions, problems occur due to a breakdown in communication between the executor and the beneficiaries. While the law relating to reporting duties is not at all straightforward and may surprise beneficiaries by its lack of robustness, it is common sense and good practice for the conscientious executor to keep the beneficiaries updated as to significant progress without unreasonably incurring costs in doing so.
Where there is a breakdown in communication – particularly where it is prolonged – there is a natural suspicion that all is not well with the administration and that the estate is at risk. While that is not always the case, in a significant number of estates the lack of communication with beneficiaries is an indicator of the executor going about things in a way to their detriment.