One of the greatest challenges facing executors (and to a lesser extent trustees) is claims by disappointed beneficiaries and those parties who have not been included in the beneficial class at all. Such claims can, sadly, cause havoc for the administration of estates (and trusts) and often incur substantial and irrecoverable costs which ultimately fall upon the other beneficiaries. This article will offer some practical tips to executors for dealing with these claims in the most efficient and cost effective manner.
The first type of litigant, is one who is a bona fide beneficiary of the estate (or trust). They may raise claims relating to the testator’s lack of capacity when they made the Will or the presence of undue influence when the testator signed their Will. This type of litigant is generally the most challenging for an executor to deal with as the executors still owe them fiduciary duties as beneficiaries. If the executors are also beneficiaries then, unfortunately, the best way to deal with such claims is to stand down and appoint a neutral third party to administer the estate. As hard as this is, it avoids an inevitable conflict of interest which could draw the executor-beneficiaries into expensive and internecine satellite litigation regarding their executor role. If the executors are not beneficiaries, then they are best advised to take a neutral position and to hear out the claims. Executors are strongly advised to retain sufficient funds to defend the claims in a worst case scenario, as is their legal right, even if this means withholding distributions to other beneficiaries. Failure to do so could mean they become personally liable to defend such claims.
The second type of litigant is one who has been excluded from the beneficial class entirely. From an executor’s perspective, such litigants can pose a serious threat to the estate administration. However, unlike in the first case, the executors do not owe them any fiduciary duties and if, after taking advice, they are confident that their claims lack merit, they can resist such claims. However, as with the first type of litigant, executors are best advised to take any potential claim seriously, to consider it properly by way of legal advice as required, and to retain estate funds to defend it in a worst case scenario.