Suppose you had a grandmother who died with a will that names your sibling as the executor of her estate, and your sibling and you as the only estate beneficiaries. You are concerned your sibling’s appointment as executor could result in her providing herself with a larger inheritance than she’s entitled to, which could cause you to not receive your fair share of the estate.
The person appointed to the role of executor/administrator has full access to the assets of the estate they oversee, so beneficiaries are right to have concerns about whether an executor/administrator who stands to inherit from an estate can also fairly administer it.
Can an executor be a beneficiary? Can an administrator of an estate be a beneficiary? What situations might cause a conflict of interest for an executor/administrator?
While it’s fairly common for the executor to also be a beneficiary of the will, it’s a situation that can increase the potential for conflicts of interest.
Continue reading to discover the in-depth answer to the question: “Can a beneficiary be an executor of a will?”
Section 1
Section 2
Section 3
Section 4
How to Manage Conflicts of Interest When the Executor Is Also a Beneficiary
If an executor is also a beneficiary of the estate they’ve been appointed to manage, it’s important for them to thoroughly understand their responsibilities to prevent conflicts of interest from interfering with their role.
The root of a potential executor conflict of interest lies in the role itself. Since the executor has power over an estate, and beneficiaries stand to receive inheritances from the estate, it’s easy to see why beneficiaries may not be comfortable with the arrangement.
When the executor is also a beneficiary, there is always a possibility of the executor abusing their role to provide themselves with a larger inheritance than they’re entitled to. Given the risks involved, you may be wondering why a will creator (called the testator) would nominate a person to the role of executor if they are also naming them as a beneficiary.
Keep reading to find out.
Are you dealing with a trust instead of an estate? Learn what to do if the trustee is also a beneficiary or the trustee is trying to remove a beneficiary from a trust.
Who Can Be Executor?
When a testator creates a will, they generally will nominate a person they trust to serve as the executor of their estate once they die. The nominee, however, cannot commence their duties as the executor until the court formally appoints them to the role at the initial probate hearing, which launches the probate process.
If the nominee wishes to serve as executor, the court generally will appoint them, though it is within the court’s authority to appoint someone else to the role if it believes the nominee is not the right fit for it. In the same vein, beneficiaries or other interested parties can contest the nomination if they have reason to believe the nominee will act improperly in the role or abuse it.
Why it’s common for executors to also be beneficiaries is because many people, instead of leaving their assets in the hands of mere acquaintances or strangers, prefer to leave their assets in the hands of a loved one, and their loved ones are generally who will be inheriting from their estate.
The law, however, accounts for the possibility that an executor who also is a beneficiary could exploit their powers by binding them to their fiduciary duties, which, among other things, require them to treat all the beneficiaries equally. In other words, executors are not permitted to place their own best interests over the collective best interests of the beneficiaries
Who Can Be Administrator?
If no will is found, the nominated executor declines their appointment, or the court decides against appointing the nominated executor and any alternate executors named in the will (or if no alternate is named), an administrator will be appointed by the court to begin estate administration.
Who can be administrator of an estate? The court prioritizes the closest surviving heirs of the decedent. In most cases, priority will be given to the surviving spouse. If the spouse does not wish to serve or if the decedent did not die with a spouse, next priority will be given to the decedent’s children (if they qualify). Learn the full order of priority for appointment as administrator from Probate Code section 8641..
Since there is no will to provide instructions regarding the disposal of assets, the administrator will need to administer the estate according to California’s intestate succession laws, which can be found in Probate Code sections 6400-6455. With intestate succession, the decedent’s closest family members (I.e., their legal heirs) are the ones to inherit.
Keep in mind that the administrator of an estate, just like an executor, is bound to their fiduciary duties. They cannot stray from intestate succession laws, nor can they favor their own best interests over those of the other heirs. An administrator also must be a resident of the United States.
Why Might an Executor Wish to Decline Their Appointment?
It’s perfectly acceptable for a nominated executor to decline their appointment, and valid reasons exist for their doing so. For example, if they lack the time to fulfill their obligations or are otherwise ill-equipped to do so, not only could stress be added to their life, but the estate could suffer as well.
Some reasons why an executor might decline their appointment include:
- They don’t have the time.
- They reside in a different state or country than where the decedent had been residing at the time of their death, making it inconvenient or impossible for them to serve.
- They want to eliminate any risk of conflict with family and the other beneficiaries.
- They have doubts about their ability to administer the estate fairly and accurately.
Note that an executor nominee is not required to provide a reason for declining their appointment. They can simply notify the court and beneficiaries that they do not wish to serve.
If an executor declines their appointment, the next step will be to find whether a backup executor was named in the will. If one was not, then the probate court will appoint a qualified person of its choosing to the role of administrator. Of course, interested parties can express their preferences of who they’d like to serve, but the ultimate decision will still lie with the court.
It should be noted that those who are prioritized to serve as administrator can also refuse their appointment. If they do, the court will ask the next person in line to serve whether they are willing to take on the role.
Can You Be a Beneficiary and Executor of a Will?
There is nothing in the law that precludes a beneficiary from also being the executor of the will. In fact, it is common practice for the testator to nominate a beneficiary to the role of executor.
For example, a parent often will appoint a surviving spouse or their eldest adult child as the executor. Typically, this close relative will be among the beneficiaries as well.
There are obvious risks to nominating an executor who is also beneficiary, so why do testators do it? Testators may believe they can rely more on someone they know and trust to carry out the terms of their will exactly as they’re written. Someone with a stake in the estate also may be more likely to protect estate assets, since they will be inheriting a portion of them.
Can a Sole Beneficiary Be Executor?
Perhaps you knew you were nominated as executor of a decedent’s will, but upon reading the document, you realize: “I am executor and sole beneficiary.” This can be a shock, but in the best kind of way.
A sole beneficiary is a person or institution who is due to receive all the assets in a particular estate. There is nothing in the law to prevent a sole beneficiary from serving as executor.
When the executor and beneficiary are the same person, there’s generally less potential for conflict, but it’s still important to abide by the laws governing what an executor can and cannot do.
For example, even if you’re the sole beneficiary of the estate you manage as the executor, it will be necessary to pay all valid creditor claims before providing yourself with an inheritance. On the other hand, certain duties, such as an executor’s duty to keep beneficiaries informed or treat beneficiaries impartially, will not apply to your situation.
Can an Administrator of an Estate Be a Beneficiary?
Since the decedent’s next of kin stands to inherit from their estate under intestate succession laws while also being given priority to serve as administrator, it is common for a person to be both the administrator and a beneficiary at the same time — and there is nothing in the law that forbids it.
Similar to an executor, an administrator must be aware of their duty to avoid conflicts of interest as they administer an estate. Even if they previously had discussed with the decedent to whom the decedent’s assets should pass, they cannot take it upon themselves to decide who gets what.
Perhaps the decedent had told his surviving spouse, who is serving as administrator of their estate, that she could have the home he purchased prior to marriage (which means it does not count as couple’s community property). Despite this having been one of the decedent’s final wishes, the spouse may have to share the home or split the proceeds from the sale of the home with her children or grandchildren due to intestate succession laws.
If the spouse mentioned proceeds to take sole ownership of the home or keep all the proceeds from the sale for herself, it would be regarded as a breach of duty, which could result in her being sued by the other heirs.
What Constitutes an Administrator or Executor Conflict of Interest?
When an individual has personal interests that compromise their ability to be fair and ethical in a given situation, they are regarded as having conflicts of interest.
For an executor who is also a beneficiary, it is considered a conflict of interest to take an action that unduly benefits themselves. This may include paying yourself before paying the other beneficiaries, hiding or not accounting for certain assets so you can keep them for yourself, or not being forthright about how much of a probate fee you are taking as executor.
Executors who are beneficiaries have to walk a fine line between having all the assets of an estate under their control and distributing only the assets to which they’re entitled to themselves.
Because the executor must treat all beneficiaries equally, they cannot take any actions that favor themselves over the other beneficiaries. Even if they’re only perceived to have taken such actions, it can give rise to a costly executor misconduct lawsuit, so it is ideal for executors in this scenario to work with a probate lawyer during administration.
Examples of Administrator/Executor Conflicts of Interest
When an administrator/executor is unable to make fair and ethical decisions about the estate they manage because their personal interests are at odds with the beneficiaries’ best interests, it is considered a conflict of interest.
Common examples of executor/beneficiary conflicts of interest include:
- The executor is employing their own services with funds from the estate: If the executor is an attorney or real estate agent, or has a stake in a business that they hire with money from the estate, there’s potential for a conflict of interest.
- The executor is attempting to purchase estate assets: If an estate asset needs to be sold, the executor generally has a responsibility to secure the best possible price for the asset. If they wish to purchase the asset for themselves, they may be tempted to give themselves a deal or not pursue higher offers. While it’s not necessarily illegal for executors to sell estate assets to themselves, it is not always a good idea, as doing so could be regarded as a conflict of interest.
- The executor is a creditor who’s owed money from the estate: When the executor of a will is also a creditor who’s owed money from the estate, it creates a conflict of interest, because even if their creditor claim is invalid, they could approve it in their capacity as executor.
How to Navigate Beneficiary/Executor Conflicts of Interest
If you are an executor who’s a beneficiary of the estate you manage, the other beneficiaries likely will be watching you like a hawk to ensure you don’t take more than your fair share of the estate. To help you stay on track, we’ve shared some useful tips below.
Communicate With Beneficiaries
Communication is key if you are an executor who also is a beneficiary. When an executor is not communicating with beneficiaries, not only could it be regarded as a breach of the executor’s fiduciary duties, but beneficiaries may not have the information they need to enforce their rights.
By simply explaining to beneficiaries why your intentions are fair and unbiased, you’ll go a long way toward preventing liability in the future.
In fact, many potential conflicts of interest are legal and viable, so long as the other beneficiaries are in consensus with the executor’s proposed action.
For example, suppose that an executor who is also a beneficiary stands to inherit a house with their siblings from the estate they manage. They could either distribute the property to the beneficiaries outright, or sell it and distribute the proceeds from the sale. The latter option is what the executor would prefer, but instead of selling the property to an outside buyer, they would like to sell it to themselves. This generally would be regarded as a conflict of interest, but if it’s done right with permission from their siblings, they may be able to proceed without facing any legal repercussions.
The ability to communicate effectively with beneficiaries is the executor’s most powerful tool. Doing so will help the administration process go smoothly and minimize misunderstandings and disputes with the other beneficiaries.
Ensure Beneficiaries Understand Your Role as Executor
For beneficiaries who aren’t familiar with probate law, some of the tasks the executor is charged with handling may look suspicious. This is especially true if the executor is also a beneficiary.
As the executor, it’s your responsibility to clear up the confusion and explain to beneficiaries what has to be done to execute the will. The more beneficiaries know about your responsibilities, the less likely they will be to question them or to take legal action against you.
Be Transparent With Accountings
Providing accurate accountings to beneficiaries is one of the executor’s most important duties, and for good reason. A beneficiary who’s kept updated about the estate is a beneficiary who is happy and is unlikely to become suspicious.
In many ways, the executor sets the tone for how the beneficiaries will feel throughout the administration process. A good executor will provide the required accountings to beneficiaries on time and with the right information. Accountings should include a breakdown of all estate-related transactions, as well as changes in value to the assets of the estate.
When it’s time to close the estate, make sure beneficiaries know the amount of their distribution, as well as any factors that may have affected it.
Remember that being secretive about the decisions you make as executor could prove detrimental to you in the long run. Instead, ensure that you involve beneficiaries in important decisions, answer their questions and address their concerns.
Don’t Resign Over a Problem Beneficiary
In some cases, an executor may be doing everything right, but a beneficiary could still take issue with their decisions.
If you’ve provided beneficiaries with the necessary accountings to beneficiaries, kept them informed, and avoided conflicts of interest, but they nevertheless disapprove of your efforts, it doesn’t have to stop you from proceeding with your administrative duties.
As long as you have not engaged in fiduciary misconduct, beneficiaries cannot force you to step down or have you removed.
Contact Keystone for Help With Your Executor Responsibilities
Serving as executor of a will isn’t a role to take lightly, especially if you’re named as a beneficiary as well. If your duties are becoming more of a chore than you’re comfortable with, remember that help is available.
At Keystone, we regularly represent beneficiaries facing issues with the executor/administrator, as well as executors/administrators who have questions about their next course of action. Putting an experienced executor attorney on your side can take the stress and guesswork out of the administration process.
Contact us today to learn more or fill out our contact form to request a free consultation.
