An Executor's Breach of Duty to the Estate
An executor's job can be demanding and the expectations are high. An executor is responsible for:
- Locating all the beneficiaries and giving them notice;
- Collecting all the decedent's assets and preparing and filing an inventory and a list of claims with the court;
- Properly notifying creditors of the decedent's death;
- Filing appropriate forms with the IRS giving notice of decedent's death;
- Paying creditors and taxes as appropriate;
- Protecting and managing the estate's assets;
- Distributing estate property in accordance with the will's terms and the law; and
- Closing the estate.
- Distributing property to the beneficiaries too soon;
- Paying creditors too early;
- Failing to keep beneficiaries properly informed;
- Failing to act in the estate's best interest;
- Failing to take proper care of the estate's assets;
- Commingling personal funds with estate funds; and
- Taking compensation from the estate inappropriately.
In re Estate of Montemayor
Decedent Mother's will left all her estate to her nine children and appointed Son as independent executor. The estate's sole asset was Mother's house and the lot it sat on. There was evidence that before the will was admitted to probate, Son rejected an offer to purchase the house. The court heard further evidence that thereafter, he moved from a garage apartment on the property to the main house. He changed the lock on the gate and denied the other beneficiaries access to the house. He lived on the property rent-free and failed to properly maintain it. According to the court, he said that he would not sell the property, and would live in the house until he died. All of this behavior led the probate court to remove him as executor. The appellate court upheld the probate court's decision, stating that sufficient evidence supported the conclusion that Son had breached his fiduciary duty to protect the beneficiaries' interest and "allowed his personal interest to conflict with his fiduciary obligations."
Decedent Mother owned approximately 10 acres of land that was leased for several years to Company, a steel tank fabrication company owned and managed by Son. Company used the land for its business operations. When Mother died, her will left the property to Son and her other three children, with Son being appointed independent executor. Evidence showed that when Company's lease on the property was up for renewal, Son hired an appraiser to examine the property without giving notice to the other beneficiaries. Based on the appraisal, he then cut the rent on the property by nearly half. Company renewed its lease for the next three years at this reduced rate before the other beneficiaries became aware of it. In addition, when Mother's residence was sold, Son paid himself $5000 in fees and administrative expenses, none of which were including in the accounting of the sale. The other beneficiaries sued to have Son removed as executor and appointing another brother in his stead.
The court concluded that Son's concurrent positions as beneficiary, independent executor, and president of Company created a conflict of interest, and that he violated his fiduciary duty by failing to disclose the fees he paid himself for the residence sale, as well as failing to disclose the rent reduction.
- Living in Father's house rent-free and failing to pay the mortgage, which led to a foreclosure proceeding;
- Making unauthorized withdrawals from bank accounts;
- Failing to account for a $999 money order known to be in the decedent's possession;
- Failing to account for insurance proceeds on covered damage to the house; and
- Disposing of the home's furnishings without approval or accounting.