Executor removed due to conflict of interest …

Dean passed away aged 83 and having lived at a rest home for the past 12 years.  When he died, Dean’s estate consisted of one asset (a $500,000 debt owed to him by a trust) and a debt of $50,000 owed to the rest home.  Dean’s daughter, Mel, was the sole trustee of the trust.  She was also the executor and sole beneficiary of his will.  Dean’s will required all debts of the estate to be paid before distributions were made to beneficiaries.

The only way the rest home could recover the $50,000 owed to it by Dean was by claiming against the debt owed to Dean by the trust – i.e. by Mel, as executor of Dean’s estate, suing herself as trustee of the trust …

A similar scenario recently played out in the High Court where the rest home brought legal proceedings to recover the debt owed to it by Dean’s estate.  As a preliminary matter, the court was required to consider the ability of Mel to carry out her duty as executor of Dean’s estate.

The court found that Mel’s decision-making would be clouded by personal financial considerations and that she had financial interests to protect both as sole beneficiary of Dean’s estate and as the trustee of the trust (being the only source of money from which the rest home could recover the debt owed).  This meant that she had a clear conflict between her duty as executor and her interests as trustee of the trust and sole beneficiary of Dean’s will.  This conflict bought into question her ability to properly administer Dean’s estate and to make necessary decisions independently and impartially.

As a result of its findings, the court removed Mel as executor of Dean’s estate and appointed an independent third party.

This scenario highlights the importance of careful decision-making when choosing the executor for your will.  One of the key features of a well-drafted will is that it helps to provide certainty and clarity following death.  The appointment of Mel as executor meant that, ultimately, Dean’s estate was not able to be managed as he had hoped – and resolution would be at a decent expense to the estate too.

If you need assistance with or advice on the preparation of a will, feel free to contact one of the members of our Personal Legal Services team at Rainey Collins.  Alternatively, if you need assistance with estate litigation, please feel free to contact one of the members of our Litigation Team.