Ultimate Guide: Beneficiary Executor Conflict
Mitigate Executor Conflicts BEFORE they Arise!
Beneficiary Executor Conflict
When a Beneficiary and Executor conflict arises, it can either be a conflict of interest or that a Beneficiary and Executor are conflicting on the perception of the estate’s mismanagement and lack of transparency. Either way, Beneficiary, and Executor conflicts are common, and transparency and a good sense of reason are the best antidotes.
Conflicts Between Beneficiary and Executor
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Can an Executor of a Will be a Beneficiary?
CAN AN EXECUTOR OVERRIDE THE BENEFICIARY AND CHANGE THE WILL
If you are an executor and need to override a beneficiary, stay on the right side of the court so that your Fiduciary Duty is not compromised. Should it be found you were self-dealing, you can be compelled by the court to pay back all assets used in your behalf. Learn more about what an executor cannot do while administering the will.
Now, the question is, can an executor override a beneficiary? The answer is it depends. As the Executor, you have the responsibility to carry out the essential task of carrying out the Testator’s testament to the best of your ability. Therefore, your legal duty is first, to follow the law, seek counsel where necessary such that there is no breach of fiduciary duty.
Can the Executor of a Will Take Everything
Due to the length of time it takes to complete a probate Administration process, beneficiaries get concerned that the Executor can hide their intentions and steal from the estate. Now in most instances, people can do underhanded things, but the court view stealing from an estate has a civil and can be a criminal act. The Executor must protect the assets of the deceased and create an inventory. Once a list is made, the Executor must go through a process to pay off taxes before releasing any assets to the beneficiaries. All assets should be sold at market value.
Note: A property cannot be sold to the Executor or a beneficiary at less than market value without a potential conflict of interest. If a property is sold lower than market value, the courts can consider this as a breach of fiduciary duty and self-dealing. The Executor could be liable to return all assets into the estate.
Penalty for Stealing from an Estate
The punishment for stealing from an estate can be grave. If a beneficiary feels that the Executor is not transparent in their actions, the beneficiaries can consult counsel and petition the courts to review all bookkeeping records and the inventory of the assets. Now, if the beneficiaries push for litigation, the Executor will also find counsel and use the estate assets to protect their position.
If the courts determine, the Executor was in breach of their fiduciary duty; they can be compelled to not only pay back the lost estate assets but also return the fees they were paid to manage the administration process. The Executor must keep communication lines open at all times. Beneficiary executor conflicts occur when the Executor it’s not transparent in their actions. Now it may be that they did not do anything illegal per se, but the perception is questionable.
What an Executor Cannot Do
- Not locate the Will
- To be careless and allow the assets in the Will to disappear.
- Not manage the creditors and not pay taxes.
- Sell assets way below fair market value and can be shown self-dealing.
- Mismanage Real Estate: Selling a property without completing their due diligence, e.g., getting an appraisal and possibly multiple offers.
- Co-mingling: Mixing the Executor monies with the estate.
- What can an Executor not do? Go against the wishes of the Testator, not seek counsel, and not communicate with Beneficiaries.
The Penalty for Stealing from an Estate
What is the penalty for stealing from an estate? We can go straight to the bottom line and state it can be a criminal offense for stealing from an estate. In simple terms, its called embezzlement. Most times, however, civil litigation is typically the remedy. Before explaining the ways an Executor, Trustee, or even a Beneficiary can steal from an estate and the penalty of theft, let’s go over the full breadth of the Administration process to see where things can go wrong.
Theft from Estate Before Inventory
When it comes to estate fraud, inheritance fraud, it generally starts at the beginning where there is theft from the estate before inventory.
What Happens When a Beneficiary Steals from an Estate
When the Grantor dies, some family members feel they are entitled to the estate, and they rummage throughout the house looking for jewelry, hidden money, antiques, and on-and-on. Please take note, family stealing from an estate happens very secretly and only is found out when the will or Trust calls them out for the inventory.
Inheritance Theft Laws
What are some commonly misappropriated assets?
- Family photos, heirlooms
- All types of furniture and small appliances
- Jewelry, Artwork, antiques
- Cash was hidden in the home
- In some instances, classic cars, and real estate.
So, as an Executor or a Trustee, it’s crucial to secure all assets right away, and inform all beneficiaries of your fiduciary duty and how you will be transparent on managing the estate. Now, if you believe there was pilfering that took place, you might be able to quietly resolve any “misunderstandings” by convincing the person who misappropriated the Trust assets to return them; otherwise, the penalty from stealing from an estate can be criminal if proven.
Now, if they don’t, then the uphill battle arises. You may hire a forensic accountant to review and examine the decedent’s records, i.e., financial documents and properties deeds, to ensure no underhanded dealings. With this information, you may convince the beneficiary to return the assets. It can be as simple as grabbing family albums, and they did not understand the gravity of their mistake.
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