Disputes about the administration of estates (or executries) are becoming increasingly common. This is due to a perfect storm of factors, including more complex family structures; the large increase in wealth among the 'baby boomer' generation (i.e. those currently in their 70s and 80s); the growing dependency of the younger generations on the 'bank of mum and dad'; and a rise in the number of people losing mental capacity or otherwise being vulnerable to exploitation in later life.

Added to that is the fact that a family death often triggers the release of pent-up family tension, or perceived unfairness to surface, all of which can easily spiral into a legal dispute.

The number of these disputes has been increasing rapidly over the last decade in the courts of England and Wales, and we are now seeing a marked rise in such disputes in Scotland too.

In this article, we highlight some of the key considerations for executors and beneficiaries when dealing with an estate dispute. 

1. Is there a valid will and what are its terms?

The starting point is to consider the terms of the deceased's will, if they have one. Ideally, the deceased will have sought professional advice during lifetime and there is a robust will in place. However, holograph wills or online will kits continue to be used, most of which are not fit-for-purpose and create further complications for the estate. For example, failure to appoint an executor, convey the whole estate, or sign the will correctly are among the most common issues encountered with such wills.

The selection of executor is crucial when preparing a person's will. The executor is responsible for administering the estate in accordance with the terms of the will. It is best practice to ensure there is an uneven number of executors (three is normally the ideal number) to reduce the risk of two executors disagreeing over a decision and reaching a deadlock scenario where they are unable to progress the estate. In Scots law, majority rule prevails and the appointment of three executors (with suitable replacement executors) helps to ensure there is an in-built majority.

If a will has been prepared by a professional and is well structured, it helps to reduce the risk of a dispute arising at the outset of the estate administration. It also reduces the risk of any valid grounds of challenge being brought by a beneficiary or estranged family member, and helps to safeguard the testator's wishes. If the testator is elderly and infirm, it may also be worthwhile to seek a medical opinion confirming mental capacity to avoid challenges on that basis.

2. Have the executors complied with their duties?

Executors are required to administer the estate, and to act in the best interests of the beneficiaries. It is common for an executor to also be a beneficiary, and it is important they do not allow their own personal interests to conflict with their duty as executor. Examples of a breach of duty would include, but are not limited to:-

  • failure to investigate the estate and properly account for assets of the deceased when reporting to court or HMRC;
  • failure to notify a legal rights claimant of their entitlement to claim legal rights;
  • making distributions or withdrawals from the estate that contravene the terms of the will;
  • failure to obtain insurance over estate assets;
  • failure to lodge tax returns on time resulting in late filing penalties and/or interest, or missing deadlines to reclaim tax causing the estate to suffer financial loss; and
  • a general failure to progress the estate that causes severe delays to the administration of the estate.

Where an executor breaches their duty and it causes the estate to suffer a financial loss, the executor can be held personally liable to pay damages (compensation) for that loss to ensure the beneficiaries' position is restored. A breach of duty also provides grounds for an executor to be removed from office.

A common cause of such disputes is where one of the executors also held a power of attorney, and other family members suspect them of abusing their powers as attorney to deplete the estate. Taking professional advice on the scope of your powers as attorney is recommended.

3. Removal of executor

In certain disputes, it may be necessary to remove the executor from office. The simplest form of removal is through a Deed of Resignation. The executor can agree to resign from office, and appoint a replacement in their place. If the executor is in breach of duty, the prospect of court action can be enough to persuade them to resign. If the executor is unlikely to resign, the party seeking to facilitate their removal should still offer this as a first step as it can be referred to in subsequent court proceedings.

Historically, an executor could only be removed under Scots law via one of two ways:-

  • The Trusts (Scotland) Act 1921 allowed for an interested party, such as a co-executor or beneficiary, to make a court application to remove an executor on the grounds of insanity, incapacity, absence from the UK or disappearance for six months or more. These grounds were of limited scope and often provided no assistance for most estate disputes.
  • Via common law through exercise of the "nobile officium" by the Court of Session. This gives the court wide-ranging discretion to provide a legal remedy where no other remedy exists. An application may be brought by a co-executor or beneficiary. The court will only rely on this power where no other option is available and if satisfied the executor remaining in office would prevent, prejudice, or obstruct the administration of the estate.

The Trusts (Scotland) Act 2024 introduces new powers for the removal of executors, to include the removal by court if the executor is deemed unfit to carry out their duties; removal by majority of co-executors, in certain circumstances, without the need for court action; and removal by beneficiaries (if all agree and certain conditions are met). These powers are not yet fully in force, and currently only apply to the removal of executors in certain circumstances. These provisions will bring welcome change to this area of the law once fully implemented.

By having a robust will in place, clients can reduce the risk of a dispute arising during their estate, and help to ensure their wishes are implemented, as they intended, after death. Where a dispute does arise during an estate administration, executors and beneficiaries should seek professional advice on the options available to resolve the dispute.

Please visit our dedicated Private Wealth Disputes webpage for more information on our team and what we can offer at Brodies LLP.

Contributors

Richard Pike

Partner

Matthew Smith

Associate