How to stop executor abuses
Under Pennsylvania estate law, an executor has considerable powers.
Named before a person's death, he or she becomes the decedent's personal representative in carrying out the wishes expressed in the will. The executor actually assumes control of and legally "owns" all of the estate's assets, including the deceased's real and personal property.
Along with extensive powers, executors are assigned certain duties under the law, and are forbidden from representing their own interests. Their duties include conducting an inventory of the estate for the purposes of valuing it and filing a state inheritance tax return. The executor then must distribute the estate assets in accordance with the decedent's wishes, after all debts, expenses and taxes have been paid.
The executor swears an oath to "well and truly administer the estate according to law." His "fiduciary duty," as the Latin word implies, is to "hold the estate in trust" until it can be distributed under the will and the law.
But individual executors are also human. (There are, of course, also corporate executors, such as banks.) Complicating matters, the executor often has a relationship to the deceased and a personal interest as a beneficiary. As such, a built-in conflict of interest can arise: On one hand, the executor is to act as an impartial instrument of the decedent's wishes and Pennsylvania estate law. On the other, he or she may also stand to inherit a portion of the estate.
This tension can cause some executors to behave badly, often to the detriment of other beneficiaries or heirs, as they abuse their powers or fail to live up to their duties.
Executors behaving badly
It's unfortunate but true: Death often brings out the worst in human nature. A family patriarch's or matriarch's death creates a sudden power vacuum. The control this person once exercised is suddenly gone - and now everything is seemingly "up for grabs."
Pennsylvania estate law is designed to make the transfer of estate property and other assets orderly and honest. In cases where no will exists, the laws of intestate succession take control. Eventually, a court-appointed administrator will be named to carry out the functions of an executor, all of it overseen by the county orphans' court.
Pennsylvania depends on the executor or administrator to file an inheritance tax return and pay any levy owed on the inventoried and appraised value of the total estate, usually within nine months of the death.
Thus, one of the main duties of an executor is to conduct and file a verified inventory of all estate assets with corresponding fair market values. The values of bank and investment accounts are more clear-cut. In the case of real estate, rare collectibles and fine jewelry, professional appraisals are typically made. Valuation of other, miscellaneous tangible personal property is left largely to the executor's good judgment, relying on resources such as Kelly Blue Book.
All debts, liabilities and liens on the estate are paid, as are inheritance taxes. The executor also pays all expenses incurred in administering the estate, which can include appraisal fees, legal fees, filing fees and other professional services necessary to administer the estate. But this also includes personal remuneration to the executor himself, a calculation left largely to personal discretion.
Only after these costs are deducted from the estate do beneficiaries and heirs receive what is left.
Holding executors accountable
Thankfully, beneficiaries and heirs can place a legal check on an executor's considerable powers. This safeguard stems from a clause in Pennsylvania law stating that executors "may be required to file an account" of their administration of estate. This clause enables the orphans' court to order that a full accounting be made at the request of a "party in interest," such as another beneficiary or heir.
This court-ordered accounting process is a useful legal tool, providing beneficiaries with a counterbalance to check the executor's exercise of her duties. It details "expenses of administration" paid to the executor and his agents, and lists how and to whom the net assets of the estate will be distributed.
This court-ordered accounting is how an executor's feet can be held to the fire. The process forces executors to justify their actions, and swear in court to the accuracy of their account.
The process also puts beneficiaries in a legal position to hire an experienced estate litigation attorney to file objections to what they believe are false or inaccurate accounts by the executor. These legal objections can cover undervaluing assets, failing to list assets, wrongly distributing estate assets, wrongly taking estate assets for themselves, and generally acting against the interests of the beneficiaries or the instructions of the will. In addition, executors can be surcharged for any abuse. Fees can be blocked, and/or the court could remove the executor altogether.
Yes, executors have considerable powers, but they also have duties.
Because estate law is filled with deadlines and limitations, heirs should not delay after they detect signs of abuse. Waiting could mean that assets will be long gone and valuable possessions lost forever.
An experienced estate litigation attorney can help ensure that the executor follows the will and the law so that the decedent's final wishes are fulfilled. That attorney can help heirs to trust, but verify.