‘This sounds straightforward,’ says Claire Simon, Solicitor in the dispute resolution team with QualitySolicitors Parkinson Wright; ‘however, if there are only enough assets in the testator’s estate to pay the debts, expenses and legacy beneficiaries – whether this is because of a recession, a miscalculation of available assets, or mismanagement of the estate by the will’s executor – then a residuary beneficiary could receive nothing or less than they expected.
‘It is for this reason,’ continues Claire, ‘that residuary beneficiaries are the only people, other than the executor, who have a legal right to examine the estate accounts. Executors are legally obliged to produce a final set of estate accounts, which show all the money that has come in and out of the estate as debts are paid and assets sold, including a statement of the executors’ expenses. If residuary beneficiaries find something awry in the accounts, there are steps they can take to try to salvage their inheritance.’
What problems might arise with estate accounts?
Missing assets
One of the most obvious signs that something might not be right with the accounts is if an asset you knew the testator possessed is not listed. This might be the result of a genuine oversight by the executor, but the omission may sometimes have more nefarious roots, such as the executor deliberately trying to conceal an asset to avoid inheritance tax or simply to deprive you of your inheritance.
Undervalue assets
The accounts might show an unexpectedly low value was achieved for items sold off for the benefit of the estate. This could happen, for example if the executor failed to listen to expert advice on the sale of valuable assets and then sold them at an undervalue; if they put a property on the market at too low a price; or did not act swiftly enough in the disposal of volatile assets such as shares.
Executor expenses
Executors should not be left out of pocket for doing their duty and are therefore entitled to claim reasonable expenses from the estate to cover any money they may have shelled out in the course of their executor duties.
However, the accounts may highlight unreasonable expenses that the executor has tried to claim, such as excessive petrol money, fees for their services (professional executors can be paid; non-professional executors cannot), or remuneration for time they have had to take off work.
Conflict of interest
All executors have a duty to safeguard the estate from any loss or theft, to keep it safe for the benefit of all of the beneficiaries. However, given that an executor can also be a beneficiary of a will, the accounts may show that the executor has used their position to obtain a more beneficial share of the inheritance pot, for example, by spending estate money on doing up a house that only they are due to inherit.
Failure to investigate financial losses
You might suspect that an executor has failed to investigate financial losses or allegations of abuse which cropped up before the testator passed away – for example, money gifted to someone when the testator may have lacked mental capacity. It is part of an executor’s duties to look into any gifts the testator made during their lifetime to ensure that such abuse has not taken place, but also to avoid penalties that can be incurred if lifetime gifts are not correctly reported to HMRC.
What can you do if you think there is something wrong with the accounts?
If you are a residuary beneficiary and you spot a problem with the draft final accounts, your first port of call should be to talk to the executor and ask them to rectify them.
If they reject your request for amendment, you should refuse to approve the accounts. There is no statutory requirement for you to do this, but it is considered good practice for the executor to obtain written approval of the accounts and thus a release from liability from residuary beneficiaries.
What happens if you refuse to approve the accounts?
If you do not approve the accounts, the executor can:
- distribute the estate anyway;
- make a payment into court of your share; or
- apply to the court for directions, and ask the court to approve the accounts and allow the estate to be distributed.
What other steps can you take?
If you are convinced that there are errors in the estate accounts, or if you think they are incomplete (for example, if the executor has only provided receipts for liabilities but has provided no documentary support for the list of assets), you can then bring a claim before the Probate Registry for an inventory and account order.
This order requires the executor to provide a full and accurate version of the estate accounts and an explanation of how the estate has been administered. The executor must make a statement under oath setting out full details of the estate, including a list of the estate's assets and their worth at the time of death, a step-by-step account of the actions taken in administering the estate, any supporting documents such as bank statements. The registrar can also demand further information from the executor.
Can I remove an executor?
If the executor refuses to comply with the inventory and account order, or if you still think something is amiss with the accounts, you may need to go to court and ask for the executor to be removed and replaced with someone more appropriate: failing to keep adequate accounting records is a recognised ground for seeking the removal of an executor. This is not, however, a step to be taken lightly and such an action can be extremely costly.
If the executor’s actions have caused a loss of value in the estate, you can also take court action to recover the value of what has been lost – the executor could be held personally liable to cover this shortfall if the money cannot be recovered by other means. You might also want to bring a separate compensation claim against the executor for breach of their duties.
If the executor is a professional, such as a lawyer who you feel has mismanaged the estate, you can also make a complaint to the Legal Ombudsman. You must give the lawyer at least eight weeks to resolve the complaint under their internal complaints procedure, but after that, the Legal Ombudsman can become involved. If your complaint is upheld, the Legal Ombudsman will usually order a remedy which aims to put you in the position you would have been in had the service been reasonable.
How we can help
If you are a residuary beneficiary and feel there is something wrong with the estate accounts you should contact our specialist team without delay. We have experience of dealing with estate disputes and can offer practical advice on your possible next steps. We can negotiate with the executor and, if the matter needs further legal action, can prepare your case and offer advice and representation in court.
For further information, please contact Claire Simon or a member of the dispute resolution team on 01905 721600 or via email worcester@parkinsonwright.co.uk
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.