Is it a conflict of interest if the executor of the estate is also a beneficiary?

It is not uncommon for an executor of a Will to also be a beneficiary, with many parents, for example, choosing to nominate their children as executors of their Wills. So, can a conflict of interest ever occur? And if it does, what is the appropriate – and legal – course of action?

What is a beneficiary?

A beneficiary is any person who is bequeathed part of the deceased’s estate. A beneficiary can be any person or organisation (such as a charity), but is usually a spouse, child/ren or other family members of the deceased.

What is an executor?

An executor is the person who has been nominated to handle the deceased person’s estate after they pass away.

An executor can be any person or people who have the capacity to carry out the role. The executor’s role is a fiduciary one and therefore the person or people must adhere to certain rules and responsibilities. In theory, a conflict should not arise because the executor should avoid circumstances where conflict between their own interests and the interests of the estate and the beneficiaries may occur, however, this may happen either inadvertently or for more sinister reasons.

When might a conflict of interest arise?

One instance where conflict may arise is around the issue of superannuation. Superannuation does not automatically form part of an estate and if a binding death benefit nomination has not been made then the person’s spouse or dependents will usually be entitled to any money the deceased had in super. The issue lies in the fact that, although the spouse as the executor may have instructions to divide the entire estate equally, they may choose to withhold the funds from superannuation for themselves only, rather than adding them to the estate and splitting them amongst the beneficiaries.

Other valuable and sentimental assets may receive the same treatment, such as jewellery, art or household items that may be withheld by an executor who is also a beneficiary before discussions have been had with other beneficiaries as to how they should be divided.

Although the majority of executors will do the right thing and distribute the estate per the wishes of the deceased, the safest way to ensure no conflicts arise is to have a fool proof Will prepared.

The importance of a Will in mitigating conflict

A well-drafted Will accounts for every aspect of the deceased’s estate and typically includes provision for superannuation through a binding death benefit nomination. The more of the estate that has a direction as to who should be receiving it the better, as this leaves no room for ambiguity or for the executor to make decisions in their capacity as both the administrator of the estate and also its beneficiary.

How can a conflict of interest be resolved?

If a serious conflict of interest has arisen, an interested party, such as another beneficiary, can apply to the court for orders to compel the executor to produce accounts of their administration of the estate, or even have the executor removed.

Who becomes the executor if there is no Will?

If a person dies intestate (meaning they died without leaving a Will), the law will decide who should administer the estate. In most cases this will be the next of kin, providing they have the capacity to do so, such as the deceased’s spouse or child/ren.

Declining to act as the Executor

If you have been appointed as an executor but you believe there may be a conflict of interest then it is within your rights to decline to act. Another executor will need to be appointed and in most cases an alternative executor will be named in the Will. In some cases, a Court will appoint a new executor.

If you wish to prepare a Will or update your current one to ensure that no conflicts arise because an executor is also a beneficiary, our estates lawyers can draft a Will to suit how you want your estate to be distributed.

For further information, speak to our wills and estates lawyers in Cairns today.