Executors

EXECUTORS AND THE DOGS OF WAR

With the wrong executor, a minor family spat can become an ugly and costly catfight, Robert Liebman finds.

The husband has two adult step-children from a previous marriage whom he adores, and the wife has no children but is devoted to cats. It is will-writing time: He wants his step-children, whom he has not formally adopted, to benefit and she wants to leave her assets to a cat charity.

They are not familiar at all with trusts and life interests, have no idea which of them will die first, and face a bitter, seemingly intractable people versus animals war.

The husband also plans on nominating his best friend as one of his executors This friend, however, seems even more passionately dead set against animal charities receiving legacies than the testator. Passions are already running high, and as some recent cases illustrate, the wrong choice of executor in this kind of scenario can easily lead to costly and emotionally divisive legal battles.

Paula Beken, who died in 2001, left her large Grade II listed Georgian seafront mansion in Cowes, Isle of Wight in equal shares to her son/executor, and his son and daughter – her grandchildren. Her husband had a life interest and lived in the house until his death six years later, whereupon the property was sold for £885,000. This was in 2008, seven years after the death of the testatrix and shortly after the property boom went bust.

The granddaughter received her share but soon learned that her grandfather had signed a deed of variation in 2002 relinquishing his lifetime interest. Arguing that the house could have been let or sold years earlier, at the peak of a bull market, she sued the executor – her father – for failing to realise maximum profit. The High Court, at this writing, has not yet ruled, but whichever way it goes, costs will run to six figures.

In a High Court executor case that made headline news in, and apparently only in Yorkshire, a brother sought the removal of his two sisters and an accountant as executors of their mother’s will.

Adrienne Kershaw was a widow who died in 2008 leaving an estate worth – well, the value of the estate was the core of the dispute. The net probate value of her estate – primarily, a farm, a block of flats and other property – was £2.9m. Not high enough, the son claimed. His gift was cash. His sisters received property. The higher the valuation, the more cash he would receive. But the valuations were made by professionals and all seemed aboveboard, the judge decided, ruling against him. Costs compounded his misery.

In this family, the potential for conflict had actually been recognised by the mother, who intentionally did not nominate her son as an executor lest he “rule the roost.” The family in the Isle of Wight case had also been at daggers drawn before the question of inheritance arose. These were probate disasters primed to explode. The executors were the detonators.

The people-versus-cats couple settled their differences amicably, in advance, writing wills that ultimately benefited the step-daughters and the cat charity alike. The husband also changed his mind about his executors: he would not nominate his closest friend after all.

This latter action was an exceedingly charitable decision for all concerned. It increased the chances that sympathetic executors would be nominated, and the friend was spared what probably would have been a horrendous ordeal for him in his role as executor.

How did this legally unsophisticated couple achieve this brilliant result?

They put themselves in the hands of “business guru” and television presenter Sir Gerry Robinson and Withers solicitor Sue Medder in the BBC documentary Can’t Take It With You. Robinson got the family members and friends to talk about the issues, and Medder provided the relevant legal information. Informed communication - especially in families where the norm is no communication at all - can work wonders.

Of course, not every potential testator has a Gerry and Sue riding to the rescue. Some viewers of the six-part BBC series which aired earlier this year might have heeded the message to consult within the family and get legal advice. Doubtless, however, it will be business as usual for most testators, many of whom will select the wrong executor.

Preventative medicine

“Dilatory, uncommunicative, incompetent or simply wholly unsuitable for the job in hand.” These are among the executor attributes listed by Richard Sims in a 2009 article on trustee removal he co-authored in STEP Journal.

Removal after the sad fact – after the damage has been done - is one thing. What can be done to weed out problematic executors in advance?

“Even if you appoint a professional there's no guarantee he will be good,” says Sims, recalling one case in which the beneficiaries - 14 charities – had to wait an unconscionably long time before receiving their legacies. “The solicitor took well over a decade to administer the estate and failed to notify the beneficiaries of the delay. This solicitor had simply taken on too much work. In another case there were suggestions that a professional adviser might have been skimming off the interest that the estate money was earning.”

Sims, who is with London firm Mishcon de Reya, nevertheless believes that solicitors and their clients can, in tandem, improve the odds in their favour: “To minimise the risk of appointing disputatious executors, the solicitor should explore the family dynamics of the client, to ensure that there is no hostility. It is important for the solicitor to probe, for example to ask how old the nominated executor is, and make sure that there are substitute executors.”

Estates should ensure that they are not stuck with only one executor – whether by nominating only one or by being left with only one after a second (and even third) potential executor has renounced, become too old to administer the estate, has predeceased the testator, or been eliminated for any number of other reasons.

“Two executors seem to be the norm, and there is a risk that they may disagree with one another,” Sims says. “But if you are left with one executor, there is a problem if you want to set up a discretionary trust. Now, with the doubling up between husband and wife of the nil rate band, discretionary trusts are less important than they used to be in terms of tax planning. But discretionary trusts are still useful, especially where second families are concerned, and you need two trustees with any disposition of land. If there is some animosity in the family, it is a good idea to have a professional adviser or two family executors acting with a professional executor.”

Of course, after all the hard work of writing a shrewd valid will with knowledgeable and sympathetic executors, the client remarries and fails both to inform his or her solicitor of this happy event and to alter their will.

Many clients do not know, or in the excitement of marriage or remarriage forget, that marriage nullifies wills. “Solicitors should remind clients that a will is automatically revoked on marriage. Of course changes in personal circumstances may not be known to the solicitor, but competent practitioners will encourage their clients to review his or her will every five years, maybe even sooner for certain clients,” he adds. Contact with clients can be initiated “by a friendly letter in which for example you tell them that there has been an updated law or change in their tax position.”

Around the time Can’t Take It With You was being aired, the Office of Fair Trading (OFT) announced that the big four banks offering will-writing services “agreed to review and, where necessary, improve the way they sell will-writing and executor services following discussions with the OFT.” The OFT acted “following concerns that some consumers were appointing professional executors without fully understanding the likely costs and the alternative options.”

“It is encouraging that the big four banks are voluntarily reforming the way they practice. This is good for the consumer,” Sims believes. “But it is essential that the will draughtsman meet the client. When a person goes to a bank to get their will written, the bank may not meet the testator face to face. A separate firm actually writes the will, and they churn them out. It is a recipe for disaster if there is a gap between the testator and will-writer.”

All change

Dogs Trust solicitor Clive Austin notes that probate is generally but not always a good earner, and banks are not keen on small estates. “If the bank thinks it is not advantageous for them, they will renounce. This can cause problems for us as the beneficiary in that we may have no knowledge of the testator and will have to conduct a forensic investigation. We might, for example, have to get post redirected possibly for as long as a year. If the testator had an internet bank account, it might be hard to access.”

The OFT report on the big banks noted that “For an average estate, consumers can pay between £3,000 and £9,000.” Austin recalls a case in which several charity beneficiaries each received £20,000 – and so did the professional adviser!

This fee was excessive, he believes, but generally professional advisers make life easier – and safer - for charities: “There are many good and bad lay executors; there are many good and bad professional executors. If the professional executor is a solicitor, they can be reported to the Law Society. If the charity is a residuary beneficiary, and a lay executor has been appointed in the terms of the will, and that executor has appointed a professional executor, any complaint against the professional adviser must be made by the lay executor. It is different with professional executors; if they are solicitors, the charity can complain directly.”

Austin’s experience confirms the view that testators too often compose their wills in a communication vacuum. “Nine out of ten people are surprised to find that they have been named as executor in a will, probably because they are a family member and the testator thought they would naturally agree to the appointment. Testators also tend to appoint lay executors who are approximately the same age as themselves, but the will may not be read for 20 or 30 years. By that point, many executors do not want to be encumbered with the burdens of administration. Testators need to be reminded of the passage of time, and its consequences.”

The passage of time has also had profound social changes, some of which affect the entire will-writing profession: “Nowadays, it is no longer common for people to have a family solicitor who has known the family for years and would know, for example, that a family member has died. The solicitor would release the will and it would be the final will. Today, people move frequently and ties are lost,” Austin explains.

In a mobile society, it is easier for a genuine will to be “lost,” a lost will to be “found,” or for forgeries or other shenanigans to abound. “It might be advisable to lodge a will at the probate registry and when the executor makes an application for probate, the registry checks their records to see if they have a will in storage.”

Testators with pets should also consider a wide range of options currently available, including lifetime care for their pet after their death. And, oddly enough, a problem affecting homo sapiens also applies to pets: identity protection. Austin recalls a case involving a cat whose death left an executor bereft of a lucrative role. “This trustee replaced one cat with another so that he could continue as a trustee. Micro-chipping can be a benefit for both the testator and the animal in question.”

Greed and shady behaviour are not limited to animal charities. Azizah Azaz, who is in the legacy department of the Stroke Association, observes that “executors in some contentious cases feel to a certain degree that giving to charity is as if their own family was being cheated.”

Trustees pose other problems. “Some cases are open for as long as five years as executors try to fob us off. Some lay executors are fabulous, and some abuse their position, whereas very few solicitor executors are abusive.”

From the charity’s point of view, a solicitor is the wiser, because safer, option. “If a solicitor is abusive, we pursue it through the charity commission. We tell our supporters that we prefer that they use a solicitor rather than a will writer because solicitors are indemnified.”

[This is an unedited version - the "author's cut" - which differs slightly from the version that was published in Private Client Adviser.]