What Can A Beneficiary of an Estate Do Should He Not Receive His Inheritance?
By Lee Ee Yang and Benaiah Lim
Disputes amongst family members over assets left behind following the patriarch’s death are not uncommon. In most cases, the question is whether the estate’s beneficiaries have been short-changed by reason of the administrators’ or executors’ misconduct.
This article discusses the types of recourse available to beneficiaries against errant executors or administrators. Further, this article will consider potential causes of action an administrator or executor may take against unreasonable beneficiaries or third parties laying claim on the estate.
Duties of the Administrator / Executor
An executor is a person appointed by the maker of the Will to administer the estate. If there is no Will, or, if the Will does not appoint an executor, the beneficiaries would first need to go to Court to appoint an “administrator” to distribute the deceased’s assets in accordance with the Intestate Succession Act. For purposes of the discussion, this article will refer to “executors” and “administrators” interchangeably.
The role of an administrator is to “call in” the assets of the estate, and to apply the monies towards the discharge of the deceased’s funeral, testamentary and administration expenses, debts, and liabilities. Finally, the administrator must distribute the assets of the estate to the beneficiaries in a timely manner.
For these purposes, the administrator owes duties to preserve the assets of the estate, to deal properly with them, and to apply them in the due course of administration for the benefit of the beneficiaries.
Beneficiaries – Calling for an Account OF Administration
An administrator must keep proper accounts of the administration of the estate that he is dealing with. These accounts would be required to show the monies and assets received by the administrator and how he has dealt with these monies and assets. Thus, should a beneficiary not receive his share of the estate’s assets from the administrator in accordance with either the Will or the Intestate Succession Act within a reasonable period, he is entitled to seek an accounting of administration by commencing legal proceedings against the administrator.
In UVJ and others v UVH and others and another appeal [2020] 2 SLR 336 (“UVJ v UVH”), the Singapore Court of Appeal highlighted two different types of procedures available to beneficiaries to take accounts of what the administrator did with the assets of the estate:
a. an account of administration on a general or common basis (the “Common Basis Account”); and
b. an account of administration on a wilful default basis (the “Wilful Default Account”).
(a) Common Basis Account
The Common Basis Account does not depend on any wrongdoing on the administrator’s part. As such, a beneficiary is entitled to of right to seek a Common Basis Account from the administrator even if there is no evidence of mismanagement or misconduct.
There are three phases to the Common Basis Account. First, it must be asked whether the applicant has a right to ask for an account. In cases where the beneficiary is the applicant, the answer to the question would be in the affirmative. Second, the actual taking of the account. This involves the administrator furnishing a full account of the monies and assets received, as well as how these monies and assets have been dealt with. Third, the Court grants consequential relief.
(b) Wilful Default Account
In contrast, the Wilful Default Account is premised on the administrator’s misconduct and this form of accounts is not available to the beneficiary as of right. In order to seek a Wilful Default Account, the beneficiary must prove at least one act of wilful neglect or default on the administrator’s part.
However, if the requirements of a Wilful Default Account are satisfied, the beneficiary would be entitled to a wider scope of accounts. This form of accounts requires the administrator to explain any suspicious transaction to the Court, even if that particular transaction was not complained of by the beneficiary.
After the Taking of Accounts
After the taking of Accounts, the beneficiary may discover discrepancies. In such an event, the beneficiary is entitled to take action against the administrator, which includes the following:
a. Delete a wrongful expense or loss charged to the account
In cases where there had been a wrongful expense or loss, the beneficiary may require that the errant entry be disallowed so that the expense or loss is no longer charged to the account. Further, the administrator would have to reconstitute the estate in specie or in monetary terms. For example, if an item was lost, the administrator must replace it or pay its value.
b. Seek to have the account surcharged
If the beneficiary can show that the administrator received more than the account records indicate, the beneficiary may be entitled to treat the assets which the administrator failed to obtain for the benefit of the estate as having been obtained. An example would be a beneficiary showing that the administrator had received income from the estate’s property (such as rent from real property or dividends from shares) that was not credited to the estate, the beneficiary would be entitled to surcharge the account to include that income into the estate.
c. Account of Profits
The term “account of profits” is not to be confused with the Common Basis Account or the Wilful Default Account. The Common Basis and Wilful Default Accounts are usually the first steps in the process of inquiry, whereas an account of profits is the remedy sought at the end of the inquiry (i.e., after the taking of accounts).
Being a custodian of the estate’s assets, an administrator owes a fiduciary duty to the estate’s beneficiaries. Therefore, in most cases, a beneficiary is entitled to an account of profits if it can be shown that the administrator has breached his fiduciary duty. An account of profits is somewhat similar to a surcharge, save that an account of profits focuses on the gain to the administrator, whereas a surcharge focuses on the loss to the estate.
Administrators – What if you have Rendered a Just and True Account of Your Administration of the Estate?
Beneficiaries or third parties may at times oppose the administrator by bringing claims against the administrator (for misconduct) or against the estate (to lay a claim on the estate’s assets).
As such, the administrator may find himself caught between a rock and a hard place. If the administrator ignores the claims, the administrator may be liable for misconduct. On the other hand, even if the claims are without basis, the administrator may nevertheless feel insecure about taking further steps in the administration of the estate.
In such cases, the administrator is entitled to seek a declaration from Court to the effect that the administrator has committed no misconduct, or that the claims laid against the estate are without basis. Examples of such applications include seeking:
a. a declaration that the administrator had rendered a just and true account of the administration of the estate;
b. a declaration that the claim(s) brought by the beneficiaries, or third parties is not valid; and/or
c. an order that the administrator be permitted to distribute the assets of the estate in accordance with the deceased’s will or in accordance with the Intestate Succession Act 1967 (whichever is applicable).
Recently, our Managing Director Lee Ee Yang and Associate Benaiah Lim successfully acted for an administrator who was faced with claims brought by the estate’s beneficiaries for allegedly mismanaging the assets of the estate. Despite having provided a full account, the beneficiaries continued to oppose the distribution of the estate’s assets with the threat of litigation.
On behalf of the administrator, we applied for, amongst other things, a declaration from the Court that our client had rendered a just and true account of her administration of the estate, and an order that our client be permitted to distribute the assets of the estate without regard to the beneficiaries’ opposition.
After hearing both sides, the Court agreed with us and granted an order in terms of our application, with costs fixed against the opposing beneficiaries.
If you require legal advice on estate litigation or related matters, our firm can provide expert advice on the latest developments in this area of law. Contact us at info@covenantchambers.com.