What Are Examples of Executor Misconduct?
What Are Examples of Executor Misconduct?
An executor of an estate has a fiduciary duty to act in the collective best interests of the estate beneficiaries when making estate-related decisions. If an executor’s actions fail to align with these interests, they may constitute executor misconduct — though, typically, misconduct requires an element of bad faith.
Say an executor carefully researches a stock and consults with a financial advisor before using estate funds to invest in it. However, the market unexpectedly crashes, causing financial losses for the estate. This likely wouldn’t constitute misconduct, since the investment was made in good faith, and unforeseen circumstances don’t necessarily indicate wrongdoing.
However, if an executor recklessly invests estate funds in their personal business — especially one with little prospect of profitability — this would not only be a bad-faith decision, but it would be an act of self-dealing as well, since the executor would stand to personally benefit from the investment, to the potential detriment of the estate.
Recognizing executor misconduct early is crucial in protecting the estate and its assets. Red flags may include a failure by the executor to prepare and file necessary legal documents, a blatant disregard for beneficiary concerns or unjustified delays in distributions.
These types of behaviors may signal deeper issues warranting legal intervention, and by identifying and addressing these issues at the first sign of trouble, further harm to the estate may be prevented.
In this article, Keystone will examine real-world examples of executor misconduct, as well as what to do if you detect it.
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11 Examples of Executor Misconduct
Executor misconduct can take many forms, some of which overlap. In the following sections, we highlight the most common instances of executor misconduct we encounter in our probate litigation practice.
Keep in mind this list is not exhaustive. If you suspect an executor is engaging in misconduct, but their actions don’t align precisely with the examples provided, don’t assume wrongdoing isn’t occurring. In such cases, consulting an experienced fiduciary misconduct attorney can help determine whether legal action against the executor may be justified.
Remember, any action the executor intentionally takes that goes against the beneficiaries’ best interests is generally considered executor misconduct.
1. Misappropriating Estate Assets
When an executor wrongfully takes estate assets, it is considered misappropriation — an act that almost always constitutes executor misconduct.
Suppose an executor hires third-party professionals to assist with estate administration and pays them using estate funds. However, they deceive the beneficiaries by inflating the cost of these services, claiming the professionals charged significantly more than they actually did. The executor then pockets the difference.
Because the executor unlawfully diverted estate funds for personal gain, their actions constitute not only misappropriation but also self-dealing, which we discuss in the next section. In such an instance, the beneficiaries could take legal action to recover the funds from the executor and possibly even a surcharge. They also could seek the executor’s removal.
2. Self-Dealing
Self-dealing entails the executor misusing estate funds for personal gain, and it often goes hand-in-hand with misappropriation.
Say an executor is responsible for selling a real property belonging to an estate and distributing the proceeds from the sale among the beneficiaries. Instead of listing the property on the open market to obtain fair market value, the executor arranges to purchase the property themselves for a substantially reduced price. They do this without obtaining consent from the beneficiaries or the court. This would be considered self-dealing.
By self-dealing, the executor is effectively prioritizing their personal interests over those of the beneficiaries, which constitutes executor misconduct. If beneficiaries were to learn of a transaction involving self-dealing, they could challenge it in court to potentially void it. Additionally, they could seek the executor’s removal.
3. Withholding Inheritances From Beneficiaries
An executor is never permitted to withhold due and payable distributions from beneficiaries, as doing so would constitute executor misconduct.
Say an executor has settled all outstanding debts, accounted for all the assets in an estate and even obtained court approval for final distribution. In short, they have completed the probate process. Yet, months have passed, and beneficiaries are still waiting on their inheritance.
Even if the executor has concerns — such as a beneficiary struggling with mental illness or addiction — they generally don’t have the authority to withhold distributions once they are legally due.
If distributions are unreasonably delayed or withheld without justification, it may indicate a deeper issue. As such, beneficiaries should not wait to take action. Consulting a probate attorney can help uncover the cause of the delay and ensure beneficiaries receive their rightful inheritance.
4. Harming Estate Assets
An executor is responsible for safeguarding estate assets and preserving their value until they can be distributed.
Say an estate’s most valuable asset is a rental property. Instead of keeping up with the mortgage on the property, even though the estate has the funds to do so, the executor fails to make the necessary payments, ultimately leading to the property’s foreclosure.
When an executor fails to properly protect and preserve estate assets, they are directly harming the estate. In such cases, beneficiaries may have grounds to hold the executor personally liable for the financial losses their misconduct caused the estate to incur. If the misconduct is severe, they may also be justified in seeking the executor’s removal.
5. Commingling Assets
When an executor mixes personal or outside assets with estate assets, it is known as commingling, which is a form of executor misconduct.
Say an executor receives a personal check, but they are across town from their bank. Instead of waiting to deposit the check into their bank, they deposit it into the estate account, intending to transfer it to their account later. While this action by the executor may appear harmless, it creates a slippery slope.
Commingling can make it difficult to distinguish estate assets from non-estate assets, which can lead to mismanagement or even loss of estate funds. If beneficiaries suspect an executor to be commingling assets, they should request bank statements and, if necessary, an accounting to review the executor’s transactions.
Ensuring that only estate-related funds are deposited into an estate account is crucial in protecting beneficiaries’ inheritances and the overall integrity of an estate.
6. Straying From the Terms of the Will
An executor is legally obligated to carry out the terms of a will exactly as they’re written. Failing to do so — whether intentionally or unintentionally — can constitute executor misconduct.
Say a will contains ambiguous language. The executor believes they understand its meaning based on past conversations they had with the decedent and distributes assets accordingly. This may be considered executor misconduct, since their actions could adversely impact certain beneficiaries. Being that an executor is required to act in the best interests of all the beneficiaries, it would be inappropriate for them to impose their own assumptions about the decedent’s true intent.
When a will contains unclear terms, the executor should file a petition for instructions with the probate court to seek guidance. The court may review the will’s language and consider extrinsic evidence, which may include testimony from the executor, to determine the correct interpretation (if one can be gleaned).
If an executor improperly interprets or deviates from a will’s terms, beneficiaries have the right to challenge their actions. They can petition the court to compel the executor to follow the will or, if necessary, file a petition for instructions themselves to ensure the estate is administered fairly and properly.
7. Allowing Conflicts of Interest to Interfere With Administration
Executors are not automatically disqualified from serving due to a conflict of interest, but they should carefully consider whether their conflict of interest could compromise their ability to fairly administer an estate. If an executor’s conflict of interest leads to improper administration, it may constitute misconduct.
Say an executor is also a beneficiary of the estate they are overseeing. With unrestricted access to estate funds, they begin secretly transferring money into their personal account, assuming no one will notice. In doing so, they exploit their position for personal gain at the expense of the other beneficiaries — an act that amounts to misappropriation.
If an executor’s conflict of interest has reduced or eliminated beneficiaries’ rightful inheritances, beneficiaries have legal recourse. They can take action to recover the stolen assets, seek a surcharge and possibly even request the executor’s removal to protect the estate from further harm.
Executors with conflicts of interest should keep in mind that they are entitled to decline their appointment or resign from their role at any time.
8. Failing to Account for Estate Assets
Executors are generally required to submit an estate accounting at least once a year for as long as the estate remains open and a final accounting before the estate is closed. Additionally, beneficiaries have the right to request informal accountings at any time — particularly if they suspect misconduct. Executors are legally obligated to comply with any such requests.
Say an estate has significantly declined in value, raising concerns among beneficiaries. They request bank statements and receipts from the executor to verify how the assets have been managed. However, the executor refuses to provide the requested financial information. Failure to comply with accounting obligations can constitute executor misconduct, as it prevents beneficiaries from keeping tabs on the trustee’s actions.
If an executor is refusing to show accounting to beneficiaries, beneficiaries can file a petition to compel an accounting. If the executor repeatedly neglects this duty or attempts to conceal financial mismanagement, beneficiaries may seek stronger legal remedies, such as the executor’s removal.
That said, beneficiaries do sometimes waive their right to an accounting, which they must do in writing for their waiver to be valid. In such cases, the executor is not required to provide one unless the court orders otherwise.
9. Failing to Keep Beneficiaries Reasonably Informed
Beneficiaries rely on the information provided by the executor to learn about the status of estate administration. For this reason, executors are required to keep beneficiaries reasonably informed throughout the process.
Say an executor is not communicating with beneficiaries about important estate-related decisions. This may constitute executor misconduct, since, without access to this crucial information, beneficiaries cannot enforce their rights or take steps to protect their inheritance.
If an executor is withholding information — whether due to negligence or intentional concealment — beneficiaries should take legal action to compel them to disclose it. Failing to do so could put their inheritance at risk, as a lack of transparency often suggests financial mismanagement or other wrongdoing.
10. Failing to Treat Beneficiaries Impartially
Executors have a duty of impartiality, meaning they must treat all beneficiaries fairly and equitably. This obligation applies even if the executor is also a beneficiary.
Say a will instructs the executor to distribute the estate in equal shares among three beneficiaries. However, because the executor has a close relationship with one beneficiary, they secretly distribute a larger share to that beneficiary at the expense of the others. This constitutes executor misconduct, as they are unfairly favoring one beneficiary over the rest.
If an executor is found to be acting with bias, the adversely impacted beneficiaries should take legal action to protect their rightful inheritance. Depending on the severity of the misconduct, they may also pursue a surcharge against the executor and their removal to prevent further harm to the estate.
11. Compensating Themselves or Counsel Without Court Approval
Executors, as well as their attorney, are generally entitled to reasonable compensation for their services, provided they obtain approval from the court prior to taking any fees. However, if an executor proceeds to compensate themselves or their attorney without securing approval from the court, it may constitute executor misconduct.
If beneficiaries suspect an executor is overstepping their authority by not seeking the court’s consent before taking fees for themselves or their attorney, it’s crucial beneficiaries work with an attorney to hold the executor accountable.
How to Prove Executor Misconduct
Proving executor misconduct can be difficult, especially when an executor is deliberately concealing their wrongdoing. Those engaging in misconduct often jump through many hoops to cover their tracks.
That said, beneficiaries can take proactive measures to gather the evidence they need to hold the executor accountable. In the following sections, we outline the key steps beneficiaries should take to protect their interests and ensure the estate is administered properly.
Understanding the Executor's Rights and Limitations
If you’ve been named a beneficiary of an estate, it’s essential to understand an executor’s powers and limitations. Knowing what an executor can and cannot do will help you identify potential misconduct and protect your inheritance.
Executors may be granted limited or full authority over estate matters. An executor with limited authority faces significant restrictions. For instance, they can only sell real estate property with prior court approval. In contrast, an executor with full authority has broader discretion, including the ability to sell real property without prior court approval.
By understanding the scope of an executor’s authority, their legal obligations and any restrictions placed on them by the will, you can oversee their actions and ensure they are performing their duties as executor properly and in accordance with the terms of the will.
Play an Active Role in Estate Administration
One of the most effective ways for beneficiaries to prevent executor misconduct is to stay actively engaged in the estate administration process. This means thoroughly reviewing the will, carefully examining any documents the executor provides (such as estate accountings) and proactively seeking updates on the progress of administration and any changes to estate assets.
By remaining informed, beneficiaries can gain a clear understanding of how the estate is being managed and can quickly investigate any red flags that arise.
Moreover, when an executor knows they are being closely monitored, they may be less likely to engage in misconduct out of fear of being caught.
Beneficiaries who actively oversee the administration process not only protect their inheritance but also help ensure the estate is handled fairly and transparently.
Communicate With the Executor in Writing
Whenever beneficiaries need to request information or accountings from an executor, it’s best to do so in writing. Keeping a record of all correspondence — including unanswered requests — can serve as critical evidence in the event litigation becomes necessary.
Even if you don’t currently suspect misconduct or have issues with the executor, maintaining thorough records of your interactions with them, as well as any documents or updates they provide, can help protect your interests. The last thing you want is to be blindsided by an executor’s misconduct and left without any evidence to take legal action if doing so becomes necessary.
Take Legal Action
If an executor refuses to cooperate with beneficiaries or engages in harmful misconduct, simply staying involved in the administration process or making requests to them may not be enough. In such cases, legal action may be necessary to protect the estate and ensure beneficiaries receive their rightful inheritance.
In the following sections, we explore the most effective legal remedies for holding an executor accountable for misconduct. If you are unsure which legal remedy would be ideal for your specific situation — or whether more than one legal remedy can be sought — consulting with a probate attorney may provide some clarity.
Court Orders
If an executor ignores beneficiary requests or fails to fulfill their duties, beneficiaries can petition the court for an order compelling the executor to comply.
For example, if an executor refuses to provide required accountings, a court order can force them to do so. Similarly, if an executor unreasonably delays due and payable distributions, the court can order them to release estate assets to beneficiaries.
Court orders can be sought for a wide variety of executor issues. If you’re unsure what type of court order to seek, consider discussing your case with an experienced probate attorney.
Suspension or Removal of the Executor
When an executor’s misconduct is severe, seeking their suspension or removal may be necessary to safeguard the estate.
While this action can be pursued alongside court orders and surcharges, it is generally considered a last resort, as replacing an executor can temporarily delay estate administration.
Having said that, if an executor is engaging in ongoing or egregious misconduct, beneficiaries should not hesitate to take action — protecting the estate from lasting harm outweighs any potential delays.
Surcharge
Beneficiaries can seek a surcharge against an executor who has committed misconduct to recover financial losses the estate suffered due to the executor’s wrongful actions.
A surcharge is a court-ordered penalty requiring the executor to reimburse the estate for damages caused by their breach of duty. This remedy can be sought in cases involving mismanagement, self-dealing, improper distributions or other forms of executor misconduct that result in financial harm to the estate or its beneficiaries.
If an executor is found to have violated their fiduciary duties, pursuing a surcharge is often one of the most effective ways to hold them accountable and make the estate whole again.
Attorney's Fees
If your executor misconduct case goes to trial and you prevail, you may be able to hold the executor personally liable for paying your legal costs. The reason for this is simple: Had the executor not engaged in misconduct, you wouldn’t have needed to take legal action.
Keep in mind that an award of attorney’s fees is never guaranteed. It’s wise to approach the case assuming you’ll pay your own legal costs and consider it a bonus if you’re able to recover them.
If other beneficiaries have also been harmed by the executor’s misconduct, they can join your lawsuit, potentially sharing the financial burden and strengthening the case against the executor.
Frequently Asked Questions
Executor Misconduct FAQs
Explore our frequently asked questions below to delve deeper into the topic of executor misconduct. If you have questions that were not answered in this article, don’t hesitate to reach out to our firm for further guidance.
Yes, an executor can face criminal charges, but most cases of executor misconduct — like those discussed in this article — are typically handled in civil court.
Criminal charges are generally reserved for serious legal violations, such as embezzlement, fraud or elder financial abuse. If an executor is found guilty of such offenses, they could face criminal penalties.
No, an executor is not generally allowed to withhold money from a beneficiary, provided probate is complete and the distributions to beneficiaries have become due and payable.
That said, executors are required to pay the decedent’s creditors before making any distributions to beneficiaries. This could theoretically deplete an estate before any distributions are made. In such an instance, the executor would not be held accountable for beneficiaries not receiving the inheritances they were left.
An executor can only withhold money from a beneficiary until probate is complete. After that, the executor must file a petition for final distribution with the court. If the petition is approved, distributions become due and payable, meaning the executor must distribute estate assets in accordance with the terms of the will promptly.
If an executor delays distributions without valid cause, beneficiaries can take legal action to compel payment or even seek the executor’s removal.
In California, probate generally takes around six to 18 months, but it can take longer if complications arise.
The statute of limitations for suing an executor depends on the nature of the misconduct that was allegedly committed. Most fiduciary misconduct claims have a three to four-year statute of limitations.
To ensure your claim against the executor won’t be time-barred, taking legal action at the first sign of trouble is recommended.
While simply telling lies does not automatically constitute executor misconduct, it can rise to the level of misconduct if the lies are used to commit wrongdoing.
For instance, if an executor falsely inflates the hours they worked in order to overcompensate themselves, their dishonesty would directly have contributed to their misconduct, making them liable for their actions. In such cases, beneficiaries can take legal steps to hold the executor accountable.
Yes, an executor could theoretically cheat beneficiaries without being found out. However, the likelihood of this happening decreases significantly when beneficiaries actively enforce their rights and monitor the estate administration process.
Still have questions about executor misconduct?
Executor misconduct is a serious issue that must be addressed promptly, as it can jeopardize your inheritance.
Whether or not you suspect misconduct, having an experienced probate attorney by your side during estate administration can help safeguard your inheritance and prevent executors from overstepping their authority.
As a firm dedicated exclusively to probate litigation, we have extensive experience dealing with problematic executors and know exactly what steps to take to hold them accountable when their actions harm the estate.
Contact us today to learn how we can help protect your beneficiary rights and ensure that the executor fulfills their legal duties.
