In the recent Victorian decision of Caruana & Ors v
Caruana the deceased's son was removed as executor of the
estate and was not allowed to access estate funds for his costs.
Instead, he had to pay his own legal costs and was also ordered to
pay the other beneficiaries' costs of the litigation.
This case illustrates the care executors must take when
administering estates, particularly where there are financial
dealings between that person and the deceased, as the consequences
for them can be significant.
During his lifetime, the deceased loaned $300,000 to his son to
purchase a property. During the final five years of the
deceased's life, he moved into the property and was cared for
by his son and his son's wife until he died. As the deceased
required a wheelchair, his son also had to make renovations to the
house to make it wheelchair friendly.
After the deceased died, the executor son proposed to repay only
$50,500 of the loan to the estate, claiming the remaining balance
as reimbursement for nursing fees, renovations to the house and a
weekly living allowance for the deceased for the time that he spent
living with them.
The deceased's other children (the other beneficiaries of
the estate) successfully brought proceedings to have their brother
removed as executor on the grounds of a conflict of interest and
for orders that he repay the whole loan.
When considering what costs orders to make, the court said:
"... the [son's] position reflects a clear case of
conflict of interest and duty whereby he preferred his own
interests to that of the estate. That, in turn, has created
hostility and friction between the parties with a consequent
failure by him to administer the estate of the deceased."
To avoid this situation brought about by the conflict of
interest, the son should have renounced as executor if he wanted to
pursue his claim for reimbursement from the estate.
This case also reinforces the importance of proper estate
planning where parents have given loans or gifts of money to their
children during their lifetime.
In this case the deceased could have:
considered a different executor;
put a loan agreement in place setting out the terms if he
intended the loan to be repaid;
forgiven the loan in his Will if he did not intend the son to
repay it (which might have been the case here); or
explain what he would have liked to have happened, and for
example, acknowledge he did not require the repayment of some of
the money spent for his benefit; and/or
if his son was also his attorney under an enduring power of
attorney, deal with the issue of presumed undue influence
appropriately, which is often overlooked in families.
Winner – EOWA Employer of Choice for Women Citation 2009,
2010, 2011 and 2012
Winner – ALB Gold Employer of Choice 2011 and 2012
Finalist – ALB Australasian Law Awards 2008, 2010, 2011 and
2012 (Best Brisbane Firm)
Winner – BRW Client Choice Awards 2009 and 2010 - Best
Australian Law Firm (revenue less than $50m)
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
There are several requirements that must be completed by an executor before the distribution of assets to beneficiaries.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).