Executor's Breach of Fiduciary Duty Under the Law
An executor has a fiduciary duty to always act in the best interest of the estate. This means that if an executor does not act in the best interest of the estate, they may be subject to court intervention and penalties for a breach of their fiduciary duty. Once a probate court has found that an executor breached their fiduciary duty, the court may halt or reverse an executor’s actions, remove the executor, or order the executor to compensate the estate for its losses.
An Executor’s Fiduciary Duty
The fiduciary duty of an executor to act in the best interest of the estate can be a fairly broad duty. However, most of an executor’s fiduciary duties can be distilled into a few general principles. An executor should ensure that they are keeping beneficiaries, heirs, and creditors apprised of the status of the estate and the probate process, especially when they are obligated by court order. An executor should never deceive beneficiaries, heirs, creditors, or the court. An executor need not be perfectly impartial, but they must make a reasonable effort not to display favoritism. Honest and frequent communication may help an executor defend against any accusations of partial treatment, especially when an executor may have a conflict of interest. An executor should always follow the will’s directives and court orders, avoid unnecessarily slowing down the probate process, and keep the estate and themselves organized.
One of an executor’s most important duties is to competently manage the estate’s assets. An executor must ensure that estate property stays in good repair, is adequately insured, and otherwise does not unreasonably decline in value. If an executor makes a good-faith effort to protect an estate’s assets, but they still decline in value, the executor has probably not breached their fiduciary duty.
Violations of an Executor’s Fiduciary Duty
An executor may be accused of violating their fiduciary duty for a number of reasons. For example, an executor-beneficiary who sold an estate’s property to themselves for a steep discount may have violated their fiduciary duty to protect the estate’s value and to not give themselves or any other beneficiary preferential treatment. An executor may also violate their fiduciary duty simply by failing to take any action.
Failing to properly manage the estate may lead to a breach of an executor’s fiduciary duty. An executor may fail to properly manage the estate by missing deadlines, such as tax deadlines, failing to oversee the work of estate attorneys and other professionals, or otherwise mismanaging the estate and causing it to lose value without a reasonable explanation.
An executor may also be liable for actions that violated their fiduciary duty even if those actions did not result in a loss in value to the estate. For example, it is probably unreasonable for an executor to loan themselves money from estate funds, even if they promptly pay back the debt. Mixing estate assets with an executor’s personal assets, such as depositing income from an estate’s rental property into the executor’s personal bank account, may also be a violation of the executor’s fiduciary duty. An executor may pay themselves for their work as executor, but they may breach their fiduciary duty if their fees are not reasonable and justified.
If a court finds that an executor breached their fiduciary duty to the estate, it may void the executor’s actions, remove the executor from their position, or order the executor to compensate the estate for any losses that their actions caused. If an executor not only breaches their fiduciary duty but also breaks a law, such as by stealing money from the estate, the executor may also go to jail.
