Executors and the even-hand rule

As a follow-up to my recent post called "The executor's challenge", I would like to look a bit more closely at the executor's duty to remain impartial between beneficiaries. In law, this is known as the “even-hand rule”. Even when a trust is written so that the executor has a lot of discretion, he or she must remain impartial between the beneficiaries of the estate.

This sounds simple in theory but in practice, remaining impartial becomes a swamp of suspicion and complaints by beneficiaries. Some complaints are about things about which have very little substance. For example, beneficiaries often complain that the executor chose a lawyer who is friends with one of the beneficiaries (not the one doing the complaining, of course).

Other complaints have more merit to them. Beneficiaries frequently complain that an executor allowed one of the beneficiaries to go into the family home and take items from it without affording the same opportunity to the rest of the beneficiaries. A variation on that complaint is that the executor allowed one beneficiary to drive the deceased’s car or live in the deceased’s home. Then of course there are the larger complaints that the estate itself is being unfairly distributed.

An executor must realize that not only must he or she be scrupulously fair, but he or she also must be seen as being scrupulously fair.

An executor should also be aware that the even-hand rule applies where there is a trust set up for one beneficiary, with the remainder of the trust going to a second beneficiary on the death of the first. This is often seen in blended families where assets may be held in trust for the deceased’s spouse, with the remainder of those assets going to the deceased’s children on the death of the spouse. It is also seen in other situations.

The even-hand rule says that the executor has to be impartial between the first beneficiary (in this case, the spouse) and the second beneficiaries (the children). This is pretty tricky, especially if the trust is written so that the executor has a discretion in how much to pay or give to the spouse during his or her lifetime. You may find that the spouse is unhappy with the amount the executor is supplying from the trust, and that he or she will take the executor to court to force him or her to pay more. On the other hand, if the executor is too generous, he or she may upset the secondary beneficiaries (the children) who may complain that the executor is unfairly using up their inheritance.

An executor who administers a will with a trust like this must read the wording of the will carefully. Lawyers have been aware of the even-hand rule for many years, and with any luck, the trust being administered will mention how to deal with the rule. Lack of specific mention of the rule in the will means that the executor is bound by the even-hand rule.

The obligation to remain impartial between beneficiaries does not in any way mean that an executor may change the terms of a will when that will gives more to one beneficiary than to another. An executor simply does not have the legal authority to decide that the distribution should be varied. Adhering to the even-hand rule means giving everyone what the will says they are to receive, without imposing the executor's personal opinion about who should get what. An executor who decides to make the deceased's will "more fair" by changing who gets what is in direct violation of the even-hand rule.

The best way for an executor to stay on the right side of this rule is to follow the instructions in the will.