When the Executor Has a Personal Stake

The executor wanted to buy the deceased’s business.

On paper, the plan seemed practical. The executor already understood the operation, the employees knew them, and the beneficiaries would receive cash without waiting for an outside purchaser.

There was just one problem: the executor would be sitting on both sides of the transaction.

As the person administering the estate, they were responsible for protecting the beneficiaries’ interests and obtaining a defensible price. As the proposed buyer, they naturally wanted favourable terms.

That tension is a conflict of interest.

Conflicts are common in New Zealand estates because executors are often also beneficiaries, relatives, business partners, creditors or joint owners. A conflict does not automatically disqualify an executor or prove misconduct. The legal danger begins when personal interests influence estate decisions, important information is concealed or an executor receives an unauthorised advantage.

The safest executor does not pretend conflicts do not exist. They identify them early, disclose them and create a process that can withstand independent scrutiny.

## What Is an Executor Conflict of Interest?

A conflict exists when an executor’s personal interests compete, or could reasonably appear to compete, with their responsibility to administer the estate properly.

Executors control property temporarily for the purposes of administration. Their role includes identifying and collecting assets, paying lawful debts and taxes, protecting estate value and distributing what remains according to the will.

They must not treat estate authority as an opportunity to improve their own position.

Common conflicts arise when an executor:

– Is also a beneficiary
– Owes money to the deceased
– Claims the deceased owed them money
– Wants to buy an estate asset
– Owns a business with the deceased
– Lives in the deceased’s home
– Is a trustee of a related trust
– Is involved in a dispute with another beneficiary
– Controls records needed to value an asset
– Wants the estate to take a position that protects their inheritance

The question is not only whether the executor acted dishonestly. It is whether personal interests could interfere with objective estate administration.

## Can an Executor Also Be a Beneficiary?

Yes. New Zealand law does not generally prevent an executor from receiving a gift under the same will.

In fact, many people appoint a spouse, partner or adult child because that person understands the family and has a strong interest in completing the estate responsibly. New Zealand community legal guidance expressly recognises that an executor can also be a beneficiary, while noting that appointing someone without a beneficial interest may sometimes help preserve impartiality. citeturn367978search5

Being both executor and beneficiary is therefore allowed. It simply requires discipline.

The executor must distinguish between two roles:

**As executor:** they collect assets, pay debts, manage claims and apply the will.

**As beneficiary:** they receive only the inheritance to which they are legally entitled.

Problems arise when the executor uses the first role to increase, accelerate or protect the second.

## What Beneficiary-Executors Must Not Do

An executor who is also a beneficiary should not:

– Pay themselves before other equal-ranking beneficiaries
– Withhold information to gain an advantage
– Take belongings before an inventory is prepared
– Delay selling an asset because they personally use it
– Charge personal costs to the estate
– manipulate valuations
– Ignore a claim that could reduce their inheritance
– Retain estate income that belongs in the administration accounts
– Pressure other beneficiaries to approve a favourable transaction
– decide unilaterally that they deserve extra compensation

The will may give beneficiaries unequal entitlements. Following that unequal distribution is not favouritism. Changing the administration to create an additional advantage is.

## Buying an Asset From the Estate

Self-purchase is one of the clearest conflict situations.

Suppose the executor wants to buy:

– The deceased’s home
– A vehicle
– A farm
– Shares
– Jewellery
– A valuable collection
– Business equipment
– The deceased’s company

As seller for the estate, the executor should seek a proper outcome. As buyer, the same person benefits from a lower price, flexible payment terms and reduced competition.

A private sale is not automatically impossible, but it is highly sensitive.

A defensible process may require:

– An independent valuation
– More than one market assessment
– Full written disclosure
– Independent handling of negotiations
– Co-executor involvement
– Advice about whether open-market exposure is necessary
– Proper documentation of the price and terms
– Informed beneficiary consent where appropriate
– Court directions or approval in a serious case

Consent should not be obtained through pressure. A beneficiary who is told, “Accept this price or I will delay your inheritance,” has not participated in a fair process.

## Beneficiary Consent Is Not Always Enough

Executors sometimes believe that unanimous beneficiary approval cures every conflict.

It can help, but it is not a universal shield.

Consent may be unreliable where:

– A beneficiary did not receive full information
– A beneficiary is under 18
– Someone lacks capacity
– A beneficiary has not been located
– Creditors remain unpaid
– A legal claimant has not been considered
– The estate may be insolvent
– Tax remains uncertain
– The transaction breaches another legal obligation

Beneficiaries can generally make informed decisions about their own interests. They cannot necessarily authorise an executor to defeat creditors, unknown claimants or people who are not participating.

Material conflicts should be assessed before relying on informal family approval.

## When the Executor Claims the Estate Owes Them Money

An executor may believe the deceased owed them a genuine debt.

Examples include:

– A personal loan
– Unpaid wages
– Business expenses
– Property maintenance costs
– Money advanced for medical or care expenses
– Reimbursement for household bills
– A promise to repay renovation costs

The executor is then both the person controlling payment and the person demanding it.

That does not automatically cancel a legitimate debt. It does mean the claim should not be approved privately without evidence.

The executor should produce the same information that would be expected from an unrelated creditor:

– A written loan agreement
– Bank-transfer records
– Invoices
– Correspondence acknowledging the debt
– Repayment history
– Evidence of the amount outstanding
– Interest calculations
– Evidence that the payment was a loan rather than a gift

Co-executors should assess the claim where available. In a sole-executor estate, independent legal or accounting review may be needed.

The transaction should be recorded clearly in the estate accounts.

## When the Executor Owes Money to the Estate

The reverse conflict can be equally serious.

The deceased may have lent money to the executor. The executor might argue that:

– The loan was forgiven
– It was really a gift
– Repayment was never expected
– The amount is incorrect
– The debt is too old
– The loan should be deducted only from their inheritance

The executor cannot simply delete the receivable from the asset inventory.

Evidence should be gathered from:

– Bank statements
– Loan documents
– Emails
– Accounting records
– Tax records
– Repayment schedules
– Notes made by the deceased
– Witnesses with direct knowledge

Where the debt remains enforceable, it is an estate asset that must be dealt with properly.

The executor should not use control of the records to suppress evidence or obtain a better outcome than another debtor would receive.

## Business Interests Create Layered Conflicts

A deceased person may have owned a company, partnership interest, farm or sole-trader operation with the executor.

That can place the executor in several roles at once:

– Estate representative
– Co-owner
– Director
– Employee
– Creditor
– Proposed purchaser
– Beneficiary

The executor’s preferred business outcome may not be the best estate outcome.

For example, keeping the business operating may preserve jobs and long-term value, but it may also expose the estate to further risk. A quick sale may provide certainty, but a sale to the surviving business partner at a low value may disadvantage beneficiaries.

The executor should establish:

– What the deceased legally owned
– Whether a partnership or shareholder agreement applies
– What happens on death
– Whether the business can continue
– Who controls current operations
– What liabilities remain
– How the interest should be valued
– Whether insurance or buyout arrangements exist
– Whether independent management is needed

Company property does not automatically become estate property. The estate may own shares while the company owns its buildings, vehicles and cash.

Confusing those ownership layers can result in unauthorised transfers.

## Valuing a Business Independently

Business value can be manipulated more easily than the balance of an ordinary bank account.

The executor or surviving business partner may control:

– Financial records
– Customer information
– Forecasts
– Stock figures
– Director remuneration
– Related-party transactions
– Intellectual property
– Goodwill evidence

Independent valuation may therefore be essential.

The valuation should consider matters such as:

– Sustainable earnings
– Assets and liabilities
– Existing contracts
– Dependence on the deceased
– Market conditions
– Shareholder restrictions
– Business debt
– Tax consequences
– Minority-interest discounts
– Buy-sell provisions

An executor should not select assumptions merely because they reduce the price the executor must pay.

## Using Estate Property Personally

Personal use can create a benefit even where no formal sale occurs.

Examples include:

– Living in the deceased’s home rent-free
– Driving an estate vehicle
– Using farm equipment
– Operating a business from estate premises
– Borrowing cash from the estate
– Storing personal goods at an estate property
– Receiving estate services without payment

Some temporary use may be practical or authorised. A beneficiary may already have lived in the home with the deceased, or the executor may need to drive a vehicle for maintenance.

The arrangement should still be examined.

Questions include:

– Does the person have a legal right to occupy or use the asset?
– Is the estate paying expenses that should be personal?
– Is rent or another occupation charge appropriate?
– Does insurance permit the use?
– Is the asset being preserved?
– Are other beneficiaries disadvantaged?
– Has the arrangement been disclosed?

Personal use should never be hidden from the estate accounts.

## Loans From the Estate

An executor should not treat estate cash as a temporary lending facility.

Risky transactions include:

– Lending money to the executor
– Advancing money to a beneficiary outside the will
– Lending to the executor’s business
– Allowing a family member to defer payment indefinitely
– Using estate funds to guarantee private borrowing

Even when interest is proposed, the transaction may expose estate money to unnecessary risk and create an obvious personal conflict.

Estate cash is ordinarily held to meet liabilities and beneficiary entitlements. It should not be invested or lent primarily to solve an executor’s personal financial problem.

Where a will expressly creates lending powers for a continuing trust, the legal position may differ. Those powers must still be exercised for proper purposes and consistently with applicable trustee duties.

The Trusts Act states that a trustee must not exercise a trustee power directly or indirectly for the trustee’s own benefit. That principle is particularly relevant where estate administration transitions into an ongoing testamentary trust. citeturn367978search3

## Executor Remuneration and Charging Clauses

An executor may spend hundreds of hours administering a complicated estate.

That does not automatically authorise them to transfer an amount they consider fair.

Payment may depend on:

– A charging clause in the will
– The executor’s professional status
– Applicable legal principles
– Properly informed beneficiary agreement
– Court approval
– The nature and value of the work

The executor should distinguish between:

**Reimbursement:** repayment of genuine expenses personally incurred for the estate.

**Remuneration:** payment for time, skill, responsibility or professional work.

Every reimbursement should have supporting evidence. Every remuneration payment should have a clear legal basis.

A beneficiary-executor should not take extra money because they believe other beneficiaries did less work.

## Hiring the Executor’s Own Business

An executor may own a cleaning company, property-maintenance business, accounting practice or other service that could assist the estate.

Hiring that business creates a related-party transaction.

The service may be genuinely useful, but the executor should not award work to themselves at an inflated price or without considering alternatives.

A careful process may include:

– Disclosure to co-executors
– Independent quotations
– Comparison of price and service
– Written scope of work
– Proper invoices
– Separation between approval and performance
– Beneficiary disclosure where material

The executor should not create unnecessary work simply to generate fees.

A fair market price is important, but price alone is not the only concern. The process must also show that the appointment served the estate.

## Family Loans and Alleged Gifts

Family finances are often informal.

A beneficiary may claim that money received from the deceased was a gift. Another may insist it was a loan that should be repaid or deducted from the inheritance.

If the executor is personally connected to one side, the risk of bias becomes obvious.

The executor should investigate:

– Transfer records
– Payment descriptions
– Correspondence
– Any written agreement
– Repayments
– Accounting treatment
– Statements made by the deceased
– Whether interest was charged
– Whether similar payments were made to others

Do not decide based on which family member seems more deserving.

The task is to determine the legal and factual character of the transaction.

## Settling a Claim That Affects the Executor

An executor may face a claim that would reduce their own inheritance.

For example, an excluded sibling might seek further provision from the estate. The executor-beneficiary may believe the claim is unfair and want the estate to fight aggressively.

The executor’s personal interest in preserving their inheritance must not control the estate’s response.

The executor should:

– Preserve the claim notice
– Obtain advice about its merits
– Assess legal costs
– Consider the estate’s neutral position
– Disclose the conflict
– Avoid using estate funds merely to pursue a personal vendetta
– Consider separate representation

The estate may need one adviser for its administrative position while the executor obtains another adviser concerning their personal beneficial interest.

## Disclosure Is Necessary but Not Always Sufficient

Telling beneficiaries about a conflict is an important first step. It does not automatically make every proposed transaction acceptable.

A disclosure should explain:

– The nature of the personal interest
– The transaction being proposed
– The valuation or financial information
– The alternatives considered
– The effect on the estate
– Who has provided independent advice
– What approval is being requested

A vague statement such as “I may have a small conflict” is not enough when the executor intends to buy a major estate asset.

Beneficiaries need enough information to understand the consequences.

## Managing Conflicts With Co-Executors

Several executors can provide a useful safeguard.

Where one executor has a personal interest:

– The conflicted executor should disclose it
– Independent co-executors should obtain the evidence
– The conflicted executor should not control negotiations
– Decisions should be documented
– Estate advice should be separated from personal advice
– The transaction should be reviewed objectively

The conflicted executor may need to abstain from a particular decision.

However, simply leaving the room does not fix an unfair transaction. The remaining executors must still act responsibly and obtain adequate information.

## When Court Directions May Be Appropriate

Some conflicts cannot be managed safely through private agreement.

Court directions or another form of intervention may be appropriate where:

– The transaction is substantial
– Beneficiaries disagree
– A minor or incapable beneficiary is affected
– The executor is the only realistic buyer
– Valuation is disputed
– The estate is insolvent
– A conflict prevents administration
– The executor faces competing legal duties
– A business must be operated or sold urgently

An application for directions can provide protection by placing the proposed course before the court rather than leaving the executor to make a high-risk unilateral choice.

Court involvement is not required for every ordinary disagreement. It becomes more relevant when no clearly impartial and defensible route remains.

## What Happens if a Conflict Is Mishandled?

A conflict of interest does not automatically produce liability. A concealed or exploited conflict can.

Possible consequences include:

– Reversal of a transaction
– Repayment of estate funds
– Compensation for lost value
– An account of personal profits
– Return of unauthorised remuneration
– Interest
– Legal costs
– Formal estate accounts
– Removal or replacement of the executor

A transaction may be examined more critically where the executor benefited personally.

The executor’s explanation that “the beneficiaries would probably have agreed” is weak protection without disclosure, valuations and written records.

## A Conflict-Safe Decision Process

Before entering any transaction involving an executor’s personal interest, use six steps.

### Identify

Describe the personal, family, financial or business interest.

### Disclose

Tell co-executors and affected parties before the decision is made.

### Separate

Distinguish the executor’s personal advice and role from the estate’s advice and decision-making.

### Value

Obtain independent evidence of financial terms.

### Approve

Determine whether co-executor agreement, informed beneficiary consent or court approval is required.

### Record

Keep the valuations, advice, disclosures, consents and reasons for the final decision.

The presence of a conflict does not necessarily end an executor’s ability to act. Secrecy, self-preference and inadequate process are what turn manageable conflicts into serious estate disputes.

## Frequently Asked Questions

### 1. Can an executor also inherit from the estate?

Yes. An executor may also be a beneficiary. They must still administer the estate impartially and cannot use the role to increase or accelerate their entitlement improperly.

### 2. Can an executor buy the deceased’s house?

Potentially, but the conflict must be handled carefully. Independent valuation, full disclosure, separate negotiations and professional advice may be required. Beneficiary or court approval may also be appropriate.

### 3. Can the executor repay a loan allegedly owed to them?

A genuine debt may be payable, but it should be supported by evidence and independently assessed. The executor should not approve their own undocumented claim without scrutiny.

### 4. What happens if the executor owes money to the deceased?

The debt may be an estate asset. The executor must disclose it, preserve the relevant records and address it according to law rather than simply writing it off.

### 5. Can an executor use an estate vehicle or home?

Only where there is a proper basis and the arrangement does not disadvantage the estate. Personal use, occupation costs, insurance and expenses should be disclosed and recorded.

### 6. Can an executor lend estate money to themselves?

This is highly risky and will usually create a serious conflict. Estate money should not be used to solve the executor’s personal or business financing needs without clear authority and robust safeguards.

### 7. Can the executor hire their own company?

Potentially, if the service is genuinely required, reasonably priced and selected through a transparent process. The relationship, quotations, approval and invoices should be documented.

### 8. Does disclosing a conflict remove all risk?

No. Disclosure is essential, but the transaction must still be fair, properly authorised and consistent with the executor’s duties. Independent valuation, consent, separate decision-making or court directions may also be needed.