Estate fiduciaries, such as executors and administrators, wield tremendous power. They are entrusted with managing the estate (money and other assets) of a person who passed away—the decedent. Fiduciaries are then tasked with distributing the estate to the people entitled—the beneficiaries. Sometimes the job doesn’t get done properly, whether because of intentional or accidental misconduct.
Here Are The Five Worst Forms Of Fiduciary Failings
1. Misappropriation
This trusts and estates transgression goes by many names: skimming, pilfering, embezzlement, or just plain thievery.
Executors have the authority to hold a decedent’s money, but it’s not theirs for the taking. They’re required to act in the beneficiaries’ best interest and resist the temptation to take a little off the top. Some scheming executors spend estate money on their rent, shopping sprees, and jaunts to Atlantic City. Most executors do their job. But if you succumb to your inner Bernie Madoff, you’ll likely face the wrath of the Surrogate’s Court—and possibly the District Attorney.
Thieving executors can be removed from their position, forced to return stolen assets, and in some cases, prosecuted criminally. If you’re wary of a conniving executor, you have options, but taking action quickly is key.
2. Self-dealing
Self-dealing occurs when an executor puts their own interest ahead of the estate’s.
A common scenario involves a fiduciary purchasing property from the estate without first obtaining court approval. For example, a decedent leaves her home to her brother and two sisters. Her brother is appointed as executor and wants to sell the home to himself. But the brother is on both sides of the deal: seller (as executor) and buyer (individually). He would be dealing to himself, making this situation ripe for wrongdoing, such as selling the home to himself for pennies on the dollar.
3. Neglect
This form of fiduciary misconduct occurs where an executor fails to do their job. An executor must collect the decedent’s assets, pay the decedent’s debts, and then hand over the remaining assets to the beneficiaries. Failure to attend to any of these tasks can be considered neglect, and even with no resulting financial damage, the Surrogate’s Court can impose penalties. Often, an executor simply does nothing to administer an estate—doesn’t collect assets, doesn’t pay debts, and doesn’t give the beneficiaries their inheritance. This is a blatant example of fiduciary neglect.
4. Waste
An executor can be held liable when their action or inaction allows the estate to waste away. Waste is the stepchild of neglect as it’s often borne out of neglect.
Did the executor forget to file tax returns and the estate got hit with penalties and interest? Did the executor refuse to sell the decedent’s stock portfolio before it got crushed by the market? Situations like these decrease the estate’s value and expose the executor to liability.
5. Violation of a Court Order
If the Surrogate orders you to do something, you would be wise to do it. Break this rule and you’ve committed a most avoidable fiduciary faux pas. One of the most commonly violated court orders is a directive to file a judicial accounting (which is often requested by a beneficiary who suspects fiduciary misconduct). This violation is honored with its own section of the Surrogate’s Court Procedure Act as a basis for removal of a fiduciary.
Fiduciary misconduct can result in denial of commissions, surcharge against the fiduciary’s share of the estate, revocation of the fiduciary’s authority, and even judgment against the fiduciary’s personal assets.
These are the Big 5, but the opportunities for bad behavior are endless.
Do you want to prevent misconduct by an unscrupulous executor? Have you already been harmed by an executor’s misconduct? Are you a fiduciary wrongly accused of breaching your fiduciary duty?
Contact our estate litigation team to find out how we can help.
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If you need legal help with an estate issue you should speak with an experienced estate litigation attorney as soon as possible. Contact us online or call our New York City office directly at 212.227.2424 to schedule your free consultation. We proudly serve clients in Brooklyn, Manhattan, Queens, Staten Island, Nassau County, Westchester County and throughout New York as well as northern New Jersey.
