Understanding The Fiduciary Duties of An Executor of a Will and Consequences of Failing to Fulfill Those Duties
Upon a person’s passing, their last will and testament have to be legally executed in the purview of the law, following the directions of the decedent and respecting their wishes.
To do this, the will needs to be implemented by an executor who can be either appointed by the decedent in his will or by the court (should the instructions be unclear on who the executor should be). In addition, the executor can also be the decedent’s close family member, a friend, an attorney, etc.
However, when someone is indeed nominated to be the executor, it falls on them to diligently execute the will fairly and as per the wishes of the decedent. Failing to do so may come with significant legal consequences.
Considering this, let’s understand what an executor is, their responsibilities, and what they can and cannot do when executing a will.
Understanding the Difference Between an Executor and a Trustee in a Nutshell
You may have often heard the term “trustee” being used interchangeably with the term executor, however, while in concept, both types of individuals have the same fiduciary responsibilities, a trustee is responsible for an individual trust while an executor is responsible for implementing the estate and assets of an individual.
In addition, while a trustee will disburse an individual trust to the mentioned and valid beneficiaries, an executor distributes a decedent’s money, assets, and real estate to the mentioned beneficiaries in the will after the probate process.
Explained: The Fiduciary Responsibilities and Objectives of an Executor
It is immensely important for the executor to execute the will with honesty, without bias, and with due diligence. They are required by law to act as the decedent’s representative in good faith when implementing the will. There are a variety of responsibilities an executor must carry out, some of the most important ones include:
Properly Submitting the Will to the Probate Court
The first step in the process is for the executor to find and possess the last will of the deceased. After they have the will, the next step is to submit the document to the probate court so that the estate can be evaluated and the process of distribution initiated pending other requirements such as tax liabilities, creditors, etc. The process may include deciding to sell any securities or assets that the decedent owns.
After the court has the will, it will then further assess its legality and viability. Upon declaring the document legal, the court will then begin the distribution process.
Identification of the Estate and Figuring Out the Decedent’s Liabilities
After the court deems the will as authentic, the executor is then instructed to analyze the total worth of the estate and make a detailed report of the decedent’s assets. Moreover, they are also responsible for evaluating whether the decedent has any outstanding debts that need to be paid or any tax liabilities that need to be cleared.
The executor has the power and the right to access the decedent’s financial information such as their credit or debit card information, bank statement, lease documents, estate files, and others. After the executor has all the information gathered, the next important task to carry out is using the existing estate funds to pay off outstanding mortgage payments, insurance policies, etc. These transactions can only be done through an estate bank account not the personal account of the executor.
Successful Concluding the Estate Evaluation
When the total distribution of assets and/or monetary shares is realized after deducting the liabilities and court and executor fees, the next step is to properly identify the rightful beneficiaries of the will. The report generated by the executor will then be shared with the court thereby starting the distribution phase. This, however, will also be subject to evaluation and approval of the court. Once it is green-lit, the estate will be divided and distributed to the rightful heirs in line with the will.
Things an Executor is Not Allowed and/or Authorized to Do When Executing a Will
While there are plenty of responsibilities that an executor is accountable for during the execution of the will, there are, however, certain things that the individual is not allowed to do. These are:
The Executor Is Not Authorized to Utilize the Estate Funds for Personal Benefit
Beyond what is rightfully owed to the executor in terms of his hourly or weekly pay for carrying out their responsibilities, it is unlawful for the executor to leverage his position or authority to use any estate funds for personal use. For example, it is illegal for the individual to sell any property or asset of the decedent at a cost-to-cost basis just to transfer the cash for their own use.
An Executor Has no say in What an Heir is Entitled or Not Entitled to Receive from the Will
Executors are required to strictly follow the instructions and requirements mentioned in the will and respect the wishes of the decedent. They are not allowed to intervene no matter how muddy the situation gets between the beneficiaries. However, in some cases, an executor is granted authority by the court to disburse assets to pay off the decedent’s liabilities granted those assets are not marked for disbursement to any specific beneficiary.
The Consequences for an Executor Should They Fail to Fulfill the Requirement of the Will
They May Potentially Face Legal Liabilities
If a beneficiary suspects and proves that the executor is not competent enough to fulfill their duties and as a result, has caused significant delays and/or losses, the executor may be fined by the court or be ordered to financially cover the costs associated with any misappropriation or mismanagement of the estate.
The Threat of Incarceration
In situations where a beneficiary can provide the court evidence that the executor has been stealing or defrauding the rightful beneficiaries of their inheritance, the executor will likely have to face severe criminal charges which may either translate into heavy financial penalties or prison time.