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Disputes between Executors. How they can occur and how these can be addressed.

The loss of a loved one is a challenging time, and it can be made even more so when disagreements arise about how to handle their final affairs. Perhaps you and your brother don’t really see eye to eye, but your mum wanted to give you equal input and responsibility. Now she’s passed away, and you just can’t agree on anything.

Disputes between Executors can occur for many reasons, and at various stages of dealing with a Deceased Estate. Whether it be an argument about funeral arrangements, disagreement regarding the details for a Probate application, or a dispute about how the assets should be managed during the administration of the Estate, these disputes generally have one thing in common: increased legal costs to resolve them, meaning more expenses for the Estate, and less money passing to the beneficiaries. Disputes can also result in lengthy and unnecessary delays in the distribution of the Estate.

How does the Court deal with disputes?

When you make a Will, there is an important principle at play known as “freedom of testation.” This refers to the power of the Willmaker to dispose of their property to whom and how they wish, and includes the power of the Willmaker to appoint whoever they wish as their Executor.

As “freedom of testation” is important, the Court will be hesitant to interfere with the Willmaker’s choice of Executor; however, there are circumstances where it is considered appropriate and necessary. For example, where the appointment of a particular Executor may jeopardise the administration of the Estate due to the bad character of the Executor, undue delay in the administration, or conflicts of interest.

It is vital to note that, while “freedom of testation” is important, the Court’s key concern is always ensuring the Estate is administered appropriately according to the Will and in line with the interests of the beneficiaries but of course, there will always be circumstances in which the Court will need to take action.

For example, a Willmaker may have appointed Executors to work together at a time when they had a good relationship, but what if this relationship breaks down between the time the Will is made and the passing of the Willmaker? In the recent case of Re Arklie (No 2) (Re Arklie (No 2) [2019] VSC 350), the Supreme Court of Victoria determined it was appropriate to pass over the appointment of the named Executors as their relationship had broken down to the point of conflict, and the Court formed the view that this would have jeopardised the administration of the Estate to the detriment of the interests of the beneficiaries. Instead, the Court made a grant of Letters of Administration with the Will annexed appointing State Trustees Ltd as the Executor.

Disputes can arise frequently without being quite so extreme, but even minor disputes can be tricky to manage. Let’s consider some common issues that can arise, and how best to manage the risks to avoid  the administration of the Estate being jeopardised.

Common Issues

Some common issues when dealing with Executors in dispute include:

Lack of clarity regarding the nature of the dispute and the perspective of each Executor

Plenty of disputes arise through misunderstandings or miscommunications, so it’s vital to understand why the dispute has occurred and what each party is trying to achieve.

Often this means discussing the issue in detail with each Executor individually, and if necessary proposing a compromise that each Executor can accept. In some circumstances Executors may have independent legal representation, in which case is may be possible to negotiate a resolution through legal representatives.

Incurring significant legal costs for an unresolvable dispute

It’s all well and good to try and resolve a dispute between Executors to find a way to move forward, but it’s important to consider whether a resolution is possible.

If Executors are coming from entirely different perspectives with no middle ground, there might be a point where you need to accept the dispute cannot be resolved, and an application to the Court is the best solution.

Rushing to obtain a Grant of Probate without sufficient foresight for the next steps

Even if they don’t agree on everything, Executors can generally agree on the information required for a Probate application. The problem is, once Probate is granted the Court has formally appointed the Executors and the other disputes will still remain.

In these circumstances, the best way to ensure the Executors can progress with the administration of the Estate after Probate is granted is to put a binding agreement in place that details the next steps to administer the Estate, and includes time limits for each step. This means that, if these steps are not followed within the time limits, the Executor responsible will be in breach of the agreement which provides grounds for an application to the Court and guidance on how this should be managed.

Generally, where Executors are in dispute but fail to put such an agreement in place before obtaining the Grant of Probate, ongoing disputes can result in a more costly Court application to have the grant revoked and a further grant made. The further grant will also usually be made to an independent experienced professional or to a licensed trustee company, who will charge fees for their involvement.

Seeking to appoint an independent Administrator too quickly

Although some disputes make it appropriate and even necessary to appoint an independent Administrator to replace the Executors, such parties will charge fees for their involvement, and this should be weighed against the nature and extent of the disputes.

How to manage risks

Solutions for resolving disputes between Executors is not a one size fits all as it depends on the terms of the Will, the relationships between the Executors, the relationships between the Executors and other parties, the stage of the process during which the dispute arises, and other unforeseen variables.

There are, however, some key points to bear in mind to manage the risks associated with disputes between Executors:

When making a Will, the Willmaker should give careful thought to who they appoint

Although relationships can deteriorate over time and in unpredictable ways, consider the existing dynamics between proposed Executors. It’s unrealistic to appoint family members who historically don’t get along in the hope they will work it out.

As the saying goes, “too many cooks spoil the broth,” so the more people you appoint as Executors together, the higher the risk of disputes. A simple solution is to appoint a single Executor with substitutes appointed in the event the originally appointed Executor can’t act.

The Willmaker could consider appointing an independent experienced professional or a licensed trustee company as their Executor

Although independent professional Executors will charge fees for their involvement, if the Willmaker can foresee disputes between friends and family, this may be the best option.

If the Willmaker wants to appoint multiple Executors, include dispute resolution clauses

These clauses in a Will can provide certainty as to a process to be undertaken when a dispute arises. These tools can enable an efficient and cost-effective resolution.

Prior to the Grant of Probate being obtained, consider reserving leave

Executors in dispute are often unwilling to remove themselves from the situation and forego having input into the administration of the Estate, but it is worth considering allowing the application to proceed to appoint one Executor with leave reserved to any other Executors.

This means that, should the Executors who have reserved leave identify an issue in the future, they can apply to the Court to be formally appointed as an Executor at that time.

Another, more workable, example is where there are three Executors appointed and two are in dispute; the third Executor can reserve leave, or even renounce their right to obtain a Grant of Probate, allowing the dispute to be resolved by the remaining Executors through a binding agreement or some other means without involving another party.

Sometimes a Court application is the best solution

If the Grant of Probate has been issued and the dispute can’t be resolved, the best way forward is to apply to the Court to revoke the grant, and then issue a new grant to an independent person or trustee company.

Whether or not the application proceeds to a hearing before the Court, the looming threat of the hearing may prompt the disputing Executors to finally reach a resolution. And even if it doesn’t, remember that the Court’s main concern is ensuring the Estate is administered appropriately according to the Will and in line with the interests of the beneficiaries, and sometimes a Court application is the most cost-effective option.

If you’re looking to have your Will prepared, need to update a Will and have concerns about potential disputes between Executors, or if you’re an Executor involved in a dispute and you’re not sure how to resolve it, please don’t hesitate to contact the experienced legal team in our Wills & Estates Division on +61 3 9822 8588, or via email direct to Rohani Bixler, Luke Palmer or Helen Andreou.

Insight written by Luke Palmer

Contacts

Meghan Warren

Principal

Meghan Warren

Principal
LL.B GAICD B.Bus (FinPlan)
Meghan is one of the few lawyers in Australia admitted in the State (Victoria) and Federal jurisdictions of Australia, and as an Attorney at Law to the New York State Bar in the United States.

Rohani Bixler

Special Counsel

Rohani Bixler

Special Counsel
LL.B (Hons) BA (PSYCH)
Rohani holds a Bachelor of Arts (Psychology) and a Bachelor of Laws (Honours) from Monash University, and has practiced exclusively in the areas of estate planning, deceased estate administration and estate litigation and disputes since...

Luke Palmer

Associate

Luke Palmer

Associate
LL.B BA
Luke is passionate about making things as simple as possible for people who are dealing with the loss of a loved one.

Eleni (Helen) Andreou

Paralegal
LL.B BSc
Helen has over eight years of experience providing support for lawyers and assisting clients.

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