What Executors Can and Cannot Do
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Verlan Kwan, Partner at Keystone Law Group, summarizes five things you should know about an executor overriding a beneficiary. Read the complete article below for more details. Click the YouTube subscribe button to be notified when new videos are posted.
How to Handle Executor Problems With Beneficiaries
Perhaps a beneficiary is pestering the executor to release their inheritance earlier than is advisable. Perhaps the executor is not providing beneficiaries with enough information about the estate, or a beneficiary is demanding information too frequently. Perhaps beneficiaries are delaying administration by withholding required consent, or the executor is selling estate property against the will of beneficiaries. How can such executor problems with beneficiaries be resolved?
Over the course of estate administration, which can take anywhere from six months to several years, it is not uncommon for conflicts to arise between beneficiaries and the executor of the estate. Beneficiaries often falsely believe that the lawyer for the executor represents their interests as well, but it is actually the executor who is charged with representing the interests of estate beneficiaries. Executors are fiduciaries, which means that they must act in the beneficiaries’ best interests at all times. If the executor is failing in this duty, beneficiaries should consult with a beneficiary lawyer about how to remedy the problem.
Estate beneficiaries can feel powerless when an executor is not communicating with beneficiaries or asking for their input or consent when making estate-related decisions; however, in some instances, the executor is permitted to make unilateral decisions. After all, they were named executor because the decedent had trusted them to administer their estate according to the terms of the will. If the decisions the executor is making are causing harm to the estate, or if the decisions are beyond the scope of the executor’s authority, beneficiaries can and should take legal action against the executor with help from a beneficiary lawyer.
Ways an Executor Can Override a Beneficiary
Most of the time, when beneficiaries express concern about an executor of the estate overriding them, it is because the executor is planning to take an action with which they disagree. For example, the executor may decide to sell estate property that one or more beneficiaries were hoping to receive as part of their inheritance.
Whenever a beneficiary disagrees with a proposed action by the executor, it is good practice for them to inform the executor early in the administration process. Next, they should consult with a beneficiary lawyer to determine whether the executor has the right to take the proposed action without the beneficiary’s consent. In many cases, this will depend on whether the court has given the executor “full authority” or “limited authority” under California’s Independent Administration of Estates Act (“IAEA”).
Actions an Executor Cannot Take Without Prior Court Approval
California Probate Code Section 10501 breaks down the specific actions requiring prior court approval for executors with full authority and those with limited authority. If the executor has been granted limited authority, for example, they can sell the decedent’s personal property (e.g., artwork, jewelry) without the consent of beneficiaries, but they cannot sell the decedent’s real property without obtaining prior approval from the court. If the executor has been granted full authority, on the other hand, they can take broad action on behalf of the estate without prior court approval and sell real property without obtaining permission from beneficiaries; however, they will still have to serve beneficiaries with a Notice of Proposed Action prior to selling said property. Below is a list of all the actions for which executors must obtain prior court approval.
Actions Requiring Prior Court Approval for Executors With Full Authority:
- Allowance for personal representative compensation
- Allowance for compensation of the personal representative’s attorney
- Settlement of accounts
- Subject to Section 10520, preliminary and final distributions and discharge
- Sale of property of the estate to the personal representative or to the attorney for the personal representative
- Exchange of property of the estate for property of the personal representative or for property of the attorney for the personal representative
- Grant of an option to purchase property of the estate to the personal representative or to the attorney for the personal representative
- Allowance, payment, or compromise of a claim of the personal representative, or the attorney for the personal representative, against the estate
- Compromise or settlement of a claim, action, or proceeding by the estate against the personal representative or against the attorney for the personal representative
- Extension, renewal, or modification of the terms of a debt or other obligation of the personal representative, or the attorney for the personal representative, owing to or in favor of the decedent or the estate
Actions Requiring Prior Court Approval for Executors With Limited Authority:
- All of the actions requiring prior court approval for executors with full authority
- Sale of real property
- Exchange of real property
- Grant of an option to purchase real property
- Borrowing money with the loan secured by an encumbrance upon real property
Beneficiaries who are concerned about an executor selling property they wish to inherit or taking any other undesirable actions should consider hiring a beneficiary lawyer to enforce their beneficiary rights.
Ways an Executor Cannot Override a Beneficiary
It is important for beneficiaries to keep in mind the ways an executor cannot override a beneficiary. An executor cannot change beneficiaries’ inheritances or withhold their inheritances unless the will has expressly granted them the authority to do so. The executor also cannot stray from the terms of the will or their fiduciary duty. Something an executor must do, however, is pay off the decedent’s creditors and taxes. Doing this may reduce beneficiaries’ inheritances if the estate does not have enough funds to pay, since it is legally required for executors to pay creditors before beneficiaries.
Executors also are not permitted to interpret ambiguities in the language of the will themselves. For example, if a will leaves a decedent’s home to their son, but the decedent had more than one son, the executor should not guess which son should inherit the home, nor should the beneficiaries; a Petition for Instructions will need to be filed with the court.
It is important to note that executors have a duty to the act in the best interests of the estate. This means that they can take legal action against a beneficiary if it comes to light that the beneficiary may have engaged in misconduct that harmed the estate.
Reasons for an Estate Suing a Beneficiary
Perhaps a beneficiary was stealing valuable objects from the decedent’s home under the guise of caring for the decedent when they were ill. Perhaps a beneficiary used excessive persuasion to convince the decedent to transfer property to the beneficiary before they died. Or, perhaps a beneficiary raided the decedent’s bank accounts using a power of attorney document before or after the decedent’s death. All of these examples would give the estate good cause to sue a beneficiary to recover the misappropriated money or property.
If it’s discovered that the beneficiary misappropriated estate assets when the decedent had been elderly or medically handicapped (i.e., the beneficiary committed elder financial abuse), the estate may have grounds to request attorney’s fees and costs and even punitive damages from the beneficiary in addition to the return of the assets.
Beneficiaries whose inheritances are under threat because of suspected misconduct can hire an estate lawyer to enforce their rights.
When executors are faced with a beneficiary who is difficult (e.g., a beneficiary who is constantly demanding information or pestering them to receive their inheritance early), the executor might resort to threatening the beneficiary with removal. Or perhaps the executor has a personal relationship with one beneficiary, and the other beneficiaries are concerned that the executor might provide the beneficiary they favor with a larger inheritance than they were left. Would either of these actions be allowed?
Can an Executor Change a Beneficiary?
Executors are bound to the terms of the will, which means that they are not permitted to change beneficiaries. The beneficiaries who were named by the decedent will remain beneficiaries so long as the portions of the will in which they appear are not invalidated through a successful will contest.
As previously mentioned, executors also cannot change the amount of a beneficiary’s inheritance. Executors especially cannot change a beneficiary with the intent of providing another beneficiary with a larger inheritance; doing so would not only violate the terms of the will but it would be a breach of the executor’s fiduciary duties.
If an executor has changed a beneficiary or the amount of a beneficiary’s inheritance, it is recommended for beneficiaries to hire a probate lawyer to enforce their rights and protect their inheritances.
Can an Executor Remove a Beneficiary?
As noted in the previous section, an executor cannot change the will. This means that the beneficiaries who are in the will are there to stay; they cannot be removed, no matter how difficult or belligerent they may be with the executor. The only exception to this rule would be if a beneficiary were to lose a will contest surrounding a will with a no-contest clause – although no-contest clauses, historically, have been difficult to enforce. In one particular case, a beneficiary lost a contest that resulted in their having to forfeit their 10 USD million inheritance.
Unlike executors, beneficiaries can petition the court to have the executor removed if they are acting improperly or breaching their fiduciary duties. Beneficiaries can also petition the court to surcharge the executor if any of their actions financially harmed the estate. An estate and trust lawyer can help with bringing such a case to court.
Can an Executor Evict a Beneficiary?
An executor of the estate effectively steps into the shoes of the decedent following the decedent’s death. If there is a third-party tenant living in the decedent’s property without proper payment of rent, the executor has the right to initiate eviction proceedings, even if the tenant is a beneficiary of the estate.
Other contexts in which eviction issues can arise include when a member of the decedent’s family had been living with the decedent prior to the decedent’s death and remains in the home after the decedent’s death, or when multiple beneficiaries stand to inherit a piece of real property that is currently being occupied by one beneficiary. If the person occupying the decedent’s property is entitled to the property under the decedent’s will, then an eviction may not be necessary. However, if other beneficiaries are entitled to the property, or if the property needs to be sold during the course of estate administration, an eviction may be required, especially if the tenant refuses to leave willingly.