Examples of executor-beneficiary conflict of interest and what happens when this arises?
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An executor-beneficiary conflict of interest arises when the executor (or personal representative) cannot execute their duties under a will because the act required of them may cause them personal financial harm or conflict with their personal interests in some other way.
It is important to note that the executor of a will is often also a beneficiary of the will and this fact alone does not cause a conflict of interest.
As an executor, it is important to be aware that simply being in a position where your interests appear to conflict with those of the beneficiaries may be enough for a court to remove you as an executor. It is not necessary that you act against the interests of the beneficiaries. Our Edmonton wills and estates lawyers are available to help you identify and avoid any conflicts of interest.
The executor’s duties upon the death of the testator include:
- taking possession of and protecting the assets pending distribution or sale
- selling or investing assets appropriately
- paying the debts and expenses of the estate, including income taxes, and
- distributing the assets to the beneficiaries according to the will.
Below are some examples of executor-beneficiary conflict of interest and what happens when this arises:
1. The Executor Provides Goods Or Services To The Estate Or To One Of Its Assets
The executor is responsible for maintaining assets pending their sale or distribution to the beneficiaries. This includes everything from ensuring the grass is cut at the testator’s home to ensuring that financial assets are invested wisely.
If the executor, or a business owned by the executor, is doing business with the estate, the beneficiaries would be justified in wondering whether the estate is getting the best price for the services being rendered. The beneficiaries might also wonder if the executor is stalling the process of selling an asset so that they might continue their economic relationship with the estate.
2. The Executor Wants To Purchase An Asset From The Estate
The executor is responsible for ensuring that the estate gets the best price for any assets that are for sale. If the executor is also the purchaser of an asset, the beneficiaries would be right to think that the executor might have used their powers as the executor to get themselves a good deal as the purchaser.
3. The Estate Owes Money To The Executor
The executor is responsible for balancing the rights of the beneficiaries with their duty to pay the creditors of the estate. A creditor is often interested in being repaid as quickly as possible. However, disposing of assets quickly can mean accepting a reduced purchase price or paying additional fees or penalties, which means that there may be less to distribute to the beneficiaries after the creditors are paid.
If the executor is a creditor of the estate, the beneficiaries may wonder whether the executor is more concerned about ensuring that his debt is repaid or with maximizing the value of the estate for the beneficiaries.
What happens when there is an executor-beneficiary conflict of interest?
If there is a conflict of interest between the executor and the beneficiaries of a will, the beneficiaries can ask the court to remove the executor and assign someone else to the job. The court may decide to remove the executor or they may decide to monitor the situation more closely to ensure that the executor is acting in the best interests of the beneficiaries despite the appearance of a conflict.
Contact Our Edmonton Wills and Estates Lawyer Today for Legal Help
Whether you are an executor or a beneficiary under a will, our wills and estates lawyers can advise you with respect to any executor-beneficiary conflicts of interest that may arise. Contact us to book a legal consultation a member of our wills and estates legal team.
*Disclaimer: Please note the content prescribed in this article is only intended to act as a general overview on a legal topic. Please note this does not constitute as legal advice. Please consult with an attorney for more specific legal advice as it pertains to your situation.