CONFLICTS OF INTEREST
Conflicts of interest are a commonly encountered problem in the administration of estates. Often, one of the executors of an estate will be a beneficiary as well. That leads to the scope for other beneficiaries to complain that the executor/beneficiary is preferring his or her interests to the interests of the other beneficiaries. If not properly dealt with, these situations can inflame tempers and lead to distrust and, in the most extreme cases, litigation.
That litigation can take the form of specific claims against the executor on the basis of a particular conflict, or a more general passing of accounts, which is essentially a court audit of the entire administration. During the audit, the beneficiaries have the chance to criticize any decisions of the executor, including conflict of interest. Some examples of conflict of interest that might be alleged are:
1. that the executor used estate assets to his or her own benefit, and to the detriment of the beneficiaries;
2. that the executor, without good reason, administered the estate with a view to maximizing executor's compensation at the expense of the beneficiaries of the estate;
3. that, where the executor is a part owner in estate assets, he or she managed them in such a way so as to increase the executor's interest at the expense of the estate; and
4. that the executor owes the deceased money, and has failed to collect on that estate asset.
The range of situations of potential conflicts is a very broad category. It will be important for the executor to seek legal advice with respect to any specific interest that causes difficulties. For the remainder of the week, I will be discussing conflicts arising when the executor/trustee is also a director of a company of which the estate holds substantial shares.
Thanks for reading. Sean. --------
