A Clash Of Loyalties: Executor Conflicts Of Interests

Choosing an executor is one of the most consequential decisions in estate planning. An executor is a fiduciary required to act honestly, impartially, and in the best interests of the estate over their own. Where an executor’s personal obligations, financial interests, or relationships conflict with these duties, these conflicts of interest can lead to family disputes, high legal costs, and can jeopardize proper estate administration. Accordingly, identifying what constitutes a conflict of interest can help in choosing your executors and where appropriate, provide for mechanisms to deal with any conflicts.

Kinds of Conflicts of Interest

Ontario courts have dealt with several common conflict of interest scenarios, including:

Executor as Creditor 

When an executor becomes, or already is, a creditor of the estate, their duty to maximize the estate can clash with their personal interest in recovery. For example, in Gonder v. Gonder Estate, 2010 ONCA 172, the executors registered a mortgage against the deceased’s property to secure expenses they claimed to have incurred in the estate’s administration. As a result of that conflict and for personal health reasons, the executors sought to have themselves removed from their role, which the court granted.

Personal Claims Against the Estate

A conflict may arise where an executor makes claims against the estate for monies owed to them, placing them on both sides of the dispute. This was the case in Sasso v. Sasso, 2021 ONSC 3259, where one of two executors (who were also the only two beneficiaries of the estate) attempted to bring claims against the estate as both a beneficiary and on behalf of alleged creditors. In removing the executor from the role, the court noted that this executor was effectively “suing himself” and would be unable to act impartially.

Duties vs. Personal Interests

When an executor’s personal stake is obviously at odds with their fiduciary duties, such a conflict may also warrant removal. In Spadafora v. Gabriele, 2015 ONSC 6035, the deceased’s estate held shares in her late husband’s property development company operated by two of her three children, all three of whom were co-executors and equal beneficiaries.

The two children operating the company were of the view that their father was at least partially responsible for a prior judgment against the company, and the third child brought an application to remove her brothers as executors due to this alleged conflict over the value of the estate’s shareholdings. However, the court held that a disagreement on the value of an estate asset does not mean that the administration is so unworkable that removal is required.

Conflicts Contemplated by the Testator

Not every conflict is disqualifying for an executor. If the testator clearly contemplated a potential conflict, such as appointing a child who owes or is owed money, the court may weigh that choice against removal, as recognized in La Calamita v. La Calamita, 2024 ONSC 4219.

In that case, the deceased’s will named two of his three children as executors and provided that any of his children could purchase part of the estate, but if a private sale of estate property involved a purchase by a beneficiary who was also an executor, then that private sale must be conducted by the disinterested executor. When one of his children sought to remove another as executor due to a conflict of interest arising from his dual role as trustee and beneficiary, the court found that the deceased knew of this potential conflict and provided a process to avoid it.
 

Practical Takeaways

Across these scenarios, the court’s inquiry remains the same: is there clear necessity to protect the beneficiaries by changing executors? If the estate can still be administered properly, removal may not be justified. However, where divided loyalties threaten impartial administration, the court will act to safeguard the beneficiaries and the estate assets.

To avoid these pitfalls when choosing an executor, consider the following options:

1. Consider an independent executor over family members, particularly where family dynamics are strained or there are inter-family loans.
    
2. Appoint co-executors to share responsibility, keep accountability, and include tie-breaking or dispute-resolution mechanisms.
    
3. Disclose known conflicts (such as loans) and give clear directions on how they should be handled.
    
4. Consider appointing a professional trust company, particularly where the estate is complex or contested.
    
5. Clarify executor compensation and any treatment of debts, gifts, or advances to reduce ambiguity.

With thoughtful planning, you can reduce the likelihood of conflicts and the need for possible court intervention, preserving both the estate value and family relationships.

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.