What Is an Estate Beneficiary?

An estate beneficiary is someone who stands to inherit a decedent’s assets; they are generally designated through a will. A trust beneficiary is someone who stands to inherit trust assets; they are designated through a trust.

When a decedent dies without a will (i.e., they die intestate), their assets will pass to their heirs via a process known as intestate succession. Heirs are close family members of the decedent (e.g., spouses and children) who stand to inherit the decedent’s assets.


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Understanding the Probate Process

To understand the rights of an estate beneficiary, one has to understand what an estate entails. When a decedent passes away, the decedent’s “estate” comprises all of the assets the decedent included in their will and any other assets the decedent owned, excluding property in the decedent’s trust or assets that have designated payable-on-death beneficiaries.

Estate assets generally pass through a legal process known as probate in which the court oversees the transfer of a decedent’s property from the estate to estate beneficiaries. During probate, the court appoints a responsible person, known as the administrator or executor of the estate, to help facilitate the administration process.

Probate can not only delay distributions to estate beneficiaries but it can get costly, which is why many people seek out ways to avoid it. Because the probate process is also expensive and burdensome for the courts, the California Legislature has created mechanisms by which probate can be expedited or avoided entirely. For instance, if an estate is worth less than $166,250, a Small Estate Affidavit can potentially be used to altogether avoid probate. Likewise, if a portion of a decedent’s estate passes to the decedent’s surviving spouse, a Spousal Property Petition can potentially be used to directly transfer the property to their surviving spouse without formal probate.

A beneficiary representation lawyer can help estate beneficiaries seeking to avoid probate determine whether doing so is possible, and if it is, help with looking for other viable options.

As a Beneficiary of a Will, What Are My Beneficiary Rights?

As an estate beneficiary, you are guaranteed certain rights. Understanding your beneficiary rights is a crucial first step to ensuring you receive the inheritance to which you’re entitled. The last thing you want to do is sit idly by while administration takes place. Instead, be proactive by learning your beneficiary rights and enforcing them at every stage of the administration process.

If an executor of the estate has informed you that you have been named as an estate beneficiary, you are probably wondering: As a beneficiary of a will, what are my rights? Do I have a right to see a copy of the will? Do I have a right to information about the estate from the executor? Do I have a right to remove the executor if they are acting inappropriately?

The answer to all of these questions is yes. Estate beneficiaries have important rights to not only protect against inheritance theft but also to ensure that the worth of the estate is not compromised before the executor or administrator is permitted to distribute assets. It is important for estate beneficiaries to familiarize themselves with their beneficiary rights at every stage of administration so that if anyone – e.g., the executor or administrator, another beneficiary, or an heir – violates them, immediate action can be taken.

The most important rights of estate beneficiaries include:

 

  • The right to receive the assets that were left to them in a timely manner
  • The right to receive information about estate administration (e.g., estate accountings)
  • The right to request to suspend or remove an executor or administrator
  • The right for an executor or administrator to act in their best interests

Estate beneficiaries should remember that executors and administrators are fiduciaries. In other words, they are required to act in the estate beneficiaries’ best interests at all times. For instance, executors and administrators are subject to a duty of impartiality, which means that they cannot favor certain beneficiaries over others. Executors and administrators are likewise subject to an absolute duty of loyalty; their personal interests should never be placed above those of the estate or estate beneficiaries.

Another important facet of an executor or administrator’s job is keeping estate beneficiaries reasonably informed about administration (i.e., estate beneficiaries should be provided with the information they need to effectively enforce their beneficiary rights). This duty can include regularly communicating with estate beneficiaries and supplying them with periodic estate accountings.

If executors or administrators are not diligent in carrying out the aforementioned duties, estate beneficiaries should reach out to an estate lawyer, who can utilize the courts to compel the executor or administrator to provide beneficiaries information about administration, as well as accountings; if the problem is beyond fixing, the lawyer can request for the court to have the executor or administrator removed and potentially surcharged.

Even though estate beneficiaries have broad rights, it is important for them to remember that executors and administrators are not necessarily required to involve beneficiaries in every decision they make. If estate beneficiaries want to have a say in estate-related decisions, it is essential for them to play an active role in administration and stay apprised of what is happening at every step of the process.

Can a Beneficiary Sue the Executor?

An estate beneficiary has a right to sue the executor or administrator if they are not competently doing their job, breaching their fiduciary duties or causing financial harm to the estate.

If an estate beneficiary suspects the executor or administrator to have breached their fiduciary duties – regardless of whether they did it intentionally or inadvertently – there are steps they can take to protect both their beneficiary rights and the estate.

What constitutes a breach of fiduciary duty? It can consist of anything from the executor or administrator negligently managing estate assets, to intentionally misappropriating estate property, to failing to provide information or accountings to the beneficiaries. The remedies for estate beneficiaries will depend on the gravity of the misconduct and the extent to which the misconduct caused financial harm to the estate.

If sufficient evidence exists pointing to a breach of fiduciary duty on the part of the executor or administrator, estate beneficiaries can proceed with suing the executor of the estate.

Reasons to Sue an Executor

As previously mentioned, estate beneficiaries must have a valid reason for suing an executor of an estate.

Examples of valid reasons for suing an executor of an estate include:

 

  • Executor failed to provide accountings to estate beneficiaries
  • Executor displayed favoritism toward certain estate beneficiaries
  • Executor misappropriated estate assets for personal gain
  • Executor mismanaged estate assets
  • Executor failed to pay taxes on the estate
  • Executor endangered estate assets by making risky investments
  • Conflict of interest in which an executor was also a beneficiary and placed personal interests above those of other estate beneficiaries

If any of the aforementioned scenarios exist, estate beneficiaries should get in touch with a probate lawyer right away in order to have the executor removed and replaced, and possibly surcharged.

Beneficiary Rights in Will Contests

Sometimes, it’s the will that is violating estate beneficiary rights. When this happens, estate beneficiaries may have standing to bring something known as a will contest to try to invalidate the parts of the will that are problematic. For instance, if a decedent tries to dispose of their surviving spouse’s separate property (i.e., property the spouse owned prior to getting married, inherited or received as a gift during marriage) through their will, the spouse can bring a will contest to invalidate the portion of the will relating to that property since the decedent did not have the right to dispose of it.

One of the most common scenarios occurring in the context of will contests has to do with beneficiaries challenging the validity of a will that reduces or eliminates the beneficiary’s interest on the basis that the will was procured by elder abuse, undue influence or fraud, or was executed at a time when the decedent lacked capacity. In this case, the beneficiary or beneficiaries who suspect the abuse can bring a will contest to try to invalidate the will.

If you are an estate beneficiary whose inheritance is at stake because of a will contest brought by another beneficiary, an heir or the executor, it is crucial you participate, or you could lose your seat at the negotiating table and quite possibly your inheritance. It cannot be stressed enough how important it is to not be a freeloader beneficiary or bystander beneficiary.

A will contest lawyer can help to not only bring a will contest but to defend against one if another beneficiary, an heir or the executor is challenging an estate beneficiary’s right to an inheritance.

Beneficiary Rights in Property Disputes

Estate beneficiaries, just like executors and administrators, are entitled to bring an action if they believe the decedent’s property was damaged or unlawfully taken.

Contexts in which estate property disputes can occur include:

 

  • Third party scammed the decedent, resulting in a loss of estate assets
  • Family members of the decedent had stolen personal property from the decedent’s home when the decedent had been alive without the decedent knowing
  • Executor or administrator misappropriates assets belonging to the estate
  • Assets are being held by the decedent’s trust when said assets were included in the decedent’s will

If a property dispute isn’t against an executor or administrator, it is usually the executor or administrator’s job to bring an action against whomever they believe to have caused harm to the estate, although estate beneficiaries can participate in the dispute or bring the lawsuit if the executor or administrator is refusing to do so.

Estate beneficiaries who do bring an action against another beneficiary, heir, personal representative or third party can seek to have the alleged offender pay for the property or return it, and potentially seek punitive damages if the harm to property was substantial.

In instances where a trust is in possession of property belonging to the estate, something known as an 850 Petition can be filed to try to bring the property back into the estate, although this petition will generally be filed by the executor or administrator.

When there is a dispute over estate property, it is best for beneficiaries to consult with a probate lawyer, who can devise a plan to recover the property.

Beneficiary Rights in Beneficiary Designation Disputes

Certain assets, such as life insurance policies and bank and retirement accounts, can pass to designated beneficiaries, if any were named, outside the formal probate process. The benefit of payable-on-death assets is that they are immediately accessible; the downside is that they are not subject to court supervision. Disputes can occur when one of these payable-on-death assets is also included in a decedent’s will or trust, or when the designated beneficiary is contested.

Beneficiary designation disputes can be challenging to litigate since designated beneficiaries can generally take control of the asset upon the asset owner’s death. However, if it can be proven, for example, that a designated beneficiary on a bank account unduly influenced the decedent into designating them as the beneficiary, it may be possible to invalidate the beneficiary designation. Likewise, if it can be proven that a decedent who had listed a certain payable-on-death asset in their estate plan actually wanted that asset to be distributed as part of the estate or trust, the designation could potentially be invalidated.

Estate beneficiaries are entitled to bring an action to invalidate a beneficiary designation. For the best chance at a favorable outcome, a beneficiary lawyer should be hired to enforce one’s beneficiary rights.

Beneficiary Rights to Estate Accountings

Estate beneficiaries have a right to not only receive accountings from executors and administrators, but to inspect and challenge those accountings as well. If an executor or administrator fails to provide accountings, estate beneficiaries are entitled to use the courts to compel the executor or administrator to provide them.

Estates can be complex, and as a result, so can estate accountings, which is why it’s crucial for estate beneficiaries to thoroughly examine the provided accountings for both errors and red flags (i.e., signs of financial misconduct or mismanagement of estate assets). If errors or red flags are discovered upon inspection, estate beneficiaries are entitled to challenge the accountings in court. Suppose it comes to light that an executor or administrator caused financial harm to the estate, estate beneficiaries are entitled to not only petition to have the executor or administrator removed but surcharged as well.

To ensure favorable results, it is best to involve a beneficiary lawyer both when inspecting accountings and challenging them.

Are Distributions from an Estate Taxable to a Beneficiary?

One of the most common questions on the minds of estate beneficiaries is whether the distributions they receive from the estate are taxable. The good news is that estate distributions to beneficiaries are generally not taxed. Any taxes that do need to be paid in relation to the estate are usually taken care of by the executor or administrator during administration prior to making any distributions.

The majority of estate beneficiaries can rest assured that they will receive their distributions from a decedent’s estate in full. The distributions will not be considered income, and therefore, will not be taxed. Certain rare exceptions do exist to this rule, which we’ll cover in the forthcoming section.

Rare Exceptions

If an estate is earning income or dividends (e.g., if an estate is the designated beneficiary of a retirement account), and the executor or administrator fails to pay taxes on that income before making distributions to estate beneficiaries, it could become the responsibility of estate beneficiaries to pay tax on that income.

Sometimes, the executor or administrator will intentionally leave estate beneficiaries to pay the income tax, since the estate beneficiary would fall under a lower tax bracket than the estate as whole. This method could potentially garner beneficiaries a more substantial inheritance.

Call Us to Learn How We Can Help Enforce Your Beneficiary Rights

Keystone’s probate lawyers work with estate beneficiaries every day to consult them about their rights and help enforce them. As an estate beneficiary, you should be playing an active role in administration to ensure you receive your rightful inheritance. The good news is that you don’t have to go about it alone. Our beneficiary lawyers are available to help enforce your rights through every stage of the administration process. Schedule a free consultation with us today!