Caruana v Caruana [2013] VSC 643

The deceased was survived by 6 children one of whom was appointed as the executor.  The estate worth $277,000 was to be divided equally between the children.

The estate included a loan of $170,000 owed to the estate by the executor, however, there was no written loan agreement.

The executor claimed that $120,000 of the loan was spent on caring for the father and that therefore it would not be repaid to the estate.  While it was true that the deceased had lived with and had been cared for by the executor before his death, there was no evidence to show that the money had been spent on caring for the deceased.

The other children sought full repayment of the loan by the executor.

Justice McMillan of the Supreme Court of Victoria removed the executor on the basis of conflict of interest. By the time the order was made, the executor obviously appreciated the weakend in his position and no longer opposed removal.

Justice McMillan further ordered the defendant to repay the full amount of the loan to the estate, but required the new administrator to determine whether or not the executor was entitled to any additional money out of the estate to pay for any costs incurred in caring for the deceased.

Care should always be taken to document any substantial loans made to children.  A simple loan agreement can greatly reduce the likelihood of dispute.  This case also provides a warning against appointing only one of multiple children as executor, as this often leaves potential for conflict.