NSW Executor of Will has Conflict of Interest?

Discussion in 'Wills and Estate Planning Law Forum' started by Chelle161, 12 September 2018.

  1. Chelle161

    Chelle161 Member

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    My mum died in January. We couldn’t find a will. My brother “found” a will naming him as executor of will and got probate. We all have doubts about the validity of the will, but as the will divided all my mums’ property equally between her six children we decided not to contest it as it was what my mother would have wanted. The major asset is the house.

    The problem is, my brother has a mortgage over my mother’s house. He told my mother she was going guarantor over the house he was purchasing, but actually he gave my mother a 5% share in his property and has a mortgage over both properties making them jointly and severally liable for the mortgage.

    This now puts us in an uncomfortable position as he can sell the house as executor, and then pay off his mortgage without any of us being able to stop him. He is always short of money and has in fact already stolen $6,000 from my mother’s bank accounts to pay his personal debts. He is 62 years old and it is unlikely he will find a bank willing to refinance his $371,000 mortgage as he has a terrible credit history, no superannuation and huge credit card debts close to $100,000.

    I’d like to take a caveat over the house to prevent him from selling it without our knowledge but I’m not sure if we are counted as having a financial interest in the house. If we can’t take out a caveat then I’d like to have him removed as executor due to his conflict of interest. I am not well off myself and don’t have the money to engage a lawyer. What would you suggest myself and my siblings to do prevent a bad situation?

    I know that if he did sell the house and paid off his mortgage we could sue him to recoup the money, but again this would take time and would use money we don’t have and I’d rather prevent this situation from occurring in the first place, than trying to fix it after the house has been sold.
     
  2. AdValorem

    AdValorem Well-Known Member

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  3. Chelle161

    Chelle161 Member

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    Because he has a mortgage over my mothers house.

    Therefore it’s in his interest to sell the house and pay off his mortgage.

    He could sell without us even knowing. Then it would be a big fight to get that money back.
     
  4. Rob Legat - SBPL

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    If there are any vagaries to NSW estate or property law I'm missing, my apologies - I'm based in Queensland.

    Forget your doubts about the validity of the will. If probate has been obtained, the will is proven at law.

    A course of action can't be conclusively determined until the extent of the estate is known. If the estate is split equally between six children, that gives you each 16.67% each. The executor generally has onus to divide the estate, and the power to convert it to cash to do so. I understand you've said the property is the 'major' part of the estate. The question will become what percentage of the total estate is constituted by your mother's 5% share in the property. The way to determine that is to get a value on the house and measure that against the balance of the estate.

    If the value of the 5% of the house is less than a 16.67% share of the estate, the simple solution is that your brother takes that as part of his share - but it sounds like that is not the case. This realistically leaves two options - (a) he buys out the share for value (or so much as necessary to contra against his 16.67% portion of the estate) and pays this into the estate funds, or (b) you all get to become roughly 83/1000th holders in the property as tenants in common (assuming that is allowed under NSW law).

    To secure your interest you could lodge a caveat, but without your brother's consent it would be a 'lapsing' caveat - these require you to start court action or risk it being removed. You could get a consent caveat lodged. This would not lapse, but would need your brother's consent. However, caveats have a tendency to rub people up the wrong way; banks included.

    The better route would possibly be to get a mortgage registered in your favour - it would accomplish largely the same outcome as a consent caveat, and wouldn't alert the bank. It would stop him selling without permission. To be precise a priority arrangement should be struck with the bank to ensure he doesn't run up further debt on the property. A bank acting properly shouldn't allow that to happen without the consent of the holder of the 5% interest, but it sounds like there's not a lot of trust here.

    In any case, I'd suggest getting on to your brother immediately and creating a paper trail which puts him on notice that you know what is happening and that you expect him to be proactive in his duties as an executor. If something does goes wrong, this will be creating the evidence trail you may need down the track.
     
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  5. Chelle161

    Chelle161 Member

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    My brother is insisting that my mother never intended to claim the 5% of his property. It was just done that way so he could get the mortgage over my mums house.

    He is insisting we sign a document stating we have no claim over his house.

    It’s hard because he is a lawyer and therefore knows how to do these sorts of things whereas the rest of us don’t.

    I’m refusing to sign anything.

    I’m still looking through documents at my mums house to see if I can find her real will because before she died she told me she changed her will to reduce my brothers share because she lent him $80,000 which he didn’t have the capacity to repay.

    There is a will with the public trustee but the one my brother “found” supersedes it.
     
  6. Rob Legat - SBPL

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    Well, he either validly gifted 5% of his property to your mother (which therefore forms part of her estate) or he's potentially fraudulently misrepresented the situation to the bank in order to obtain finance. I certainly wouldn't be agreeing to relinquishing any claim over any part of the estate.

    In fact, I'd be asking about the $80,000 debt, as that is potentially an asset of the estate which should be called in (or credited against his share of the estate).
     
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  7. Chelle161

    Chelle161 Member

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    I’ve asked repeatedly about the $80,000 which he now says mum “forgave” the debt while she was in hospital. Of course he is lying. But as far as I know, because the debt was not documented, then the obligation to repay died with my mother.

    Also because he is executor he can handle things to his favour and sign her off his house and take the 5% if he manages to refinance the house. The bank told me they will allow him to do this because he is executor of the will. They will do it without our consent. He has all the control.

    I feel so powerless. Really my inheritance will only amount to $100,000 but that’s a lot of money to me and would pay off my mortgage completely.

    My siblings are so stressed over the situation and just want to give up. It’s been a stressful four years watching my mum die where my brother only visited twice and only to borrow money.
     
  8. Rod

    Rod Well-Known Member
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    Hmm, this is important to you. If he has done the wrong thing and abused his duties as trustee he runs the risk of being struck off as a lawyer.

    I'd be testing the validity of the new will. Looking at signatures and talking to the witnesses on the new will.

    @Rob Legat - SBPL - If the brother committed fraud with a fake will, is it correct to assume probate can be withdrawn? or is probate declared void?
     
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  9. Rob Legat - SBPL

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    I'm not sure, it's a little beyond my sphere of knowledge. My guess is that the Supreme Court would first look to make sure it can be undone. If it could, they'd probably void it and look for the next previous will/invite parties to submit for Letters of Administration. If it couldn't be undone (such as because the estate has been distributed), they'd likely make orders against the executor.

    The extra issue where the executor is a solicitor is not only is probate fraud a fraud, it's a fraud committed on the Supreme Court. Executors don't get probate without making declarations to the court. I'd wager that's grounds for immediate permanent disbarring.
     
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