Episode 16: Examples of Executor Misconduct

In this episode, host Peter Klenk discusses executor misconduct, details common mistakes executors make and offers advice on how beneficiaries can address these issues. 

Transcript

Hello. This is Peter Klenk from Klenk Law. Today, we're gonna talk about examples of executor misconduct. That's right. Sometimes, executors don't behave the way they should.

Let's talk about some of the things that executors can do wrong and what you can do about it. First, just to be clear for everybody, an executor is the person whose job is to execute the plan of the deceased. There's a will, and in the will, you need to name a representative to carry out your plan. That person is the executor. In some states, like in New Jersey, it's called a personal representative. But uniformly throughout the United States, people call this person the executor, even in New Jersey. The person's job, once appointed, is to gather the assets, pay the bills, and then carry out the plan.

Now that summarizes a lot of work. There might be houses to sell, businesses to shut down, bills to be paid, taxes to be paid, funeral expenses, and then of course dealing with all the beneficiaries and their expectations. So don't become an executor if you have a thin skin and don't become an executor if you are a procrastinator. Your job is to put your nose to the grindstone, push ahead, and get things done.

Sometimes they don't. So what are some examples? Let's start with things that aren't necessarily dishonest but still go off the rails. One common issue is simply procrastination. There is no set time that an estate has to be settled. There's no law that says it has to be done in a certain amount of time. The presumption is the executor will get it done as soon as possible in a reasonable amount of time. If they're not, the beneficiaries, the people who are supposed to get the funds, will do something about it. They'll push them.

For instance, if an executor moves into mom's house and sits there without paying rent for twenty years, and none of the other beneficiaries do anything about it, that's what will happen. There's no policeman who will show up and force them to go forward. There's no judge who automatically makes them proceed. They just sit there. The system is built on self-interest, that the other beneficiaries who want their inheritance are going to do something about it. If the executor just sits, it is misconduct, but it might not be due to dishonest intent. It might be a mental health issue, an emotional issue, or just a fear of anything new. All those things can cause the executor to simply sit still and not move, and then the beneficiaries have to nudge them and move them forward.

What else can an executor do wrong? An executor might dispose of the assets incorrectly. Jewelry might disappear, or choice pieces might be handed to one person over another. The house might be sold for less than it should have been to the executor's favorite nephew or son. The family might be hired at a very expensive rate to clean up the house and cut the grass. Perhaps if there's a vacation property, the executor's family gets to use it for a season before it goes up for sale. All sorts of things can happen in managing the assets that benefit them.

If it's a little thing, like a couple of trips to the shore home without being paid, it might not be worth fighting about. But other parts, especially things with emotional attachment, like jewelry, are more significant. Family heirlooms might not be as important as they once were, but they still matter. Executors need to be careful. Their job is not necessarily to make everyone happy but to avoid causing irritation and anger. They must ensure things are divided fairly, even if people aren't completely satisfied.

Another misconduct is not paying taxes or bills on time, leading to interest or penalties that should not have been incurred. If this causes expense to the estate, the executor is responsible. For example, if the tax returns are filed late and there's an interest payment, that's on the executor to make up for. If there are no liquid assets and taxes can't be paid until a house is sold, then that's just the way it is. But if there's cash available and bills aren't paid, resulting in unnecessary fees, the executor is responsible.

The executor's job is to manage everything efficiently and follow the deceased's wishes. They cannot withhold inheritance based on personal feelings. If you're choosing an executor, think about their personality and capability. It's not always best to choose the eldest child. Sometimes it's better not to pick any kids at all to avoid family conflicts. The goal is to have everyone get along well enough to at least spend Thanksgiving dinner together.

What can you do if the executor is misbehaving? You can't physically force them to act, but there's a system in place. In every state, there's a court specifically designed to hear cases about executor misconduct. In Pennsylvania, it's the Orphan's Court; in New Jersey, it's the Surrogate's Court. You need to petition the court, proving you're a beneficiary who hasn't received your inheritance and wants the wrongs to be righted. The judge can order the executor to provide an accounting, remove the executor, or even surcharge them, meaning they must pay back losses from their own money.

Often, hiring an attorney like our firm can nudge the executor to act. If they need help and refuse to get an attorney, you as the beneficiary will have to pay for legal assistance. The estate doesn't cover that cost, but sometimes it's necessary to ensure you receive your inheritance.

Hopefully, you found this useful. There's more information on my website. If you're a beneficiary needing help in Pennsylvania or New Jersey, feel free to call or email us. This is what we do. We're here to help with death and taxes, which can't be avoided but aren't the most fun topics to discuss. Take care, and I'll talk to you again soon.

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