What are Some Examples of Executor Misconduct?
An executor is someone appointed to manage a person’s estate once they pass away and ensure assts and property are given to the appropriate people. Because of the power they have, they must abide by their duties to the estate. Otherwise, they may be liable for their misconduct.
What qualifications must an executor have?
An executor acts as a personal representative of an estate. (Cal. Prob. Code § 7660.) They are usually appointed by the decedent to carry out the terms of the decedent’s will. If the decedent dies intestate a person will be appointed as an administrator, but these administrators are often considered along with executors regarding their responsibilities as personal representatives.
An executor takes possession and control of the estate and distributes its assets to the beneficiaries. (Estate of Gerber (1977) 73 Cal.App.3d 96, 110.) To be an executor, the person must be above the age of majority and able to execute the duties of the office, meaning they are not incapacitated. (Cal. Prob. Code § 8402.) If they do not adhere to their duties, like fiduciary duties, they can be removed by the court or their appointment to be executor may be denied. (Cal. Prob. Code § 8502, 8402, 9601.)
As an executor the appointed person must properly manage the funds within the estate and ensure they are completing any necessary acts in a timely manner. Any heirs of the estate or any other interested party may petition the probate court for removal of the executor if they think the executor is engaging in misconduct. (Cal. Prob. Code § 8500.) An executor is usually entitled to a statutory fee but that compensation may be limited or barred if there is any fault, mismanagement, or other misconduct by the executor. (In re Fulmer’s Estate (1928) 203 Cal. 693, 702.)
What does an executor committing fraud look like?
For an executor or other representative to have committed fraud in relation to the estate it does not just need to be actual fraud in a money or assets context, they can also be liable for constructive fraud. Actual fraud might look like trying to send estate funds out of the jurisdiction to prevent creditors from accessing them. (Estate of Gainfort (1938) 11 Cal.2d 298, 300.) It may also be the executor leveraging their position to get money or property from the estate. (Estate of Kromrey (1950) 98 Cal.App.2d 639, 645.)
Constructive fraud may be less money focused. For example, the decedent’s widow could try to become a representative of his estate even while she was actually married to someone else at the time of her marriage to the decedent. (Estate of Tersip (1948) 86 Cal.App.2d 43, 48.) Under actual or constructive fraud, a court may remove the administrator. Fraud may also expose the executor to charges for embezzlement. (Cal. Penal Code § 506.)
For example, Julie is appointed as the executor of her friend’s estate. Shawn is designated as a beneficiary of this estate. If Julie was trying to use her position as an executor to take money from the estate or trying to avoid the estate having to pay off her friend’s debts Shawn could bring an action against her for actual fraud.
If Shawn and Julie were estranged siblings, Shawn may allege constructive fraud if he felt Julie was using her position as executor to disadvantage him as a beneficiary.
If Shawn was successful in bringing a claim against Julie for actual or constructive fraud she would be removed as the executor.
What does an executor neglecting the estate look like?
An executor or representative may also be removed for neglecting the estate. For example, failing to file inventory of the estate over several years may cause removal. (Estate of Richardson (1946) 74 Cal.App.2d 350, 351.) Similarly, not providing an account of the estate may allow removal of the executor. (Gross v. Needham (1960) 184 Cal.App.2d 446, 462.)
Neglect may also look like the executor delaying their compliance with other obligations. If an executor does not comply with the probate court’s order regarding the administration of the estate, they may be removed. For example, the failure to comply with a court order to sell property for 15 years leading to its decline in value was grounds for removal. (Estate of Sapp (2019) 36 Cal.App.5th 86, 106.) A mere delay is not enough to remove an executor as they benefit from the presumption that their conduct was fair, and they faithfully performed their duties. (In re Buchman’s Estate (1954) 123 Cal.App.2d 546, 554-555.) So, where a delay in hope of discovering additional assets did not cause significant loss to the estate an executor would not necessarily be removed. (Estate of Meyers (1955) 130 Cal.App.2d 145, 150.)
For example, Julie is the executor. Before her passing her friend informed Julie she wished to sell her home and have the proceeds distributed among the estate’s beneficiaries. If Julie put off selling the home that significantly decreased the home’s sale value, she could be found in breach of her duties as a trustee. As a beneficiary, Shawn could bring an action against her for these lost profits as well as for her removal.
How might the sale of estate property cause an executor’s removal?
A refusal to sell property in the estate may be grounds for removal. For example, where the main asset in an estate is the decedent’s home and the executor failed to perform the sale can be considered the executor acting in their own personal interest and is grounds for removal. (In re Estate of Feeney (1983) 139 Cal.App.3d 812, 820-821.) This is significant because many individuals’ wealth is centered around property, specifically their residence. Ensuring the property is properly sold or handed off is thus a very important duty for an executor.
This duty also applies when the property is ordered to be sold by court order. For example, a property was to be sold pursuant to a contract and the sale was confirmed. (Harm v. Frasher (1960) 181 Cal.App.2d 405, 423.) However, the executor refused to execute and deliver the necessary documents. (Id.) This caused the executors to be personally liable because of their refusal to carry out the sale. (Id.)
An executor may also be liable if any of the property’s value is lost through neglect to pay taxes or otherwise ensure the property does not lose value prior to sale. (In re Estate of Harteman (1887) 73 Cal. 545, 546.)
If the executor were to fraudulently sell property of the estate against statutory provisions governing the probate process, they will be liable for double the fair market value of the property sold. (Cal. Prob. Code § 10381.) This allows a beneficiary to bring an action against the executor for these liquidated damages.
For example, Julie is the executor and Shawn is the beneficiary. If Julie refused to sell the decedent’s home Shawn could bring an action against her both to compel the sale and to remove her as the executor. Julie would be personally liable for failing to carry out the sale, not the estate.
If Julie tried to sell the property to herself under an alias or through someone else that could be considered a fraudulent sale. She may be liable then for double the fair market value of the property and would be removed.
When can an executor be removed for acting self-interested?
An executor may also be removed for acting in their own interests. For example, a beneficiary may seek to remove an executor when they fail to file an inventory and use estate assets for things like personal travel expenses. (Estate of Hammer (1993) 19 Cal.App.4th 1621, 1637-1638.) Specifically, the named executor was the estranged husband of the beneficiary. (Id.) The executor engaged in litigation against the beneficiary both causing a serious conflict of interest but also allowing him to exploit his position as an executor. (Id. at 1642.)
If the executor used the property of the estate for their own purposes, they may be surcharged on the final account for loss of the property and interest on its value. (In re McSweeney’s Estate (1954) 123 Cal.App.2d 787, 792-793.)
For example, Julie is the executor and Shawn is the beneficiary. Julie would need to provide an account of the estate assets upon Shawn’s request. Failure to do so repeatedly may be grounds for her removal as Shawn would have no way of knowing how she is managing the estate and if she is doing so properly.
If Julie and Shawn or other beneficiaries had a strained relationship the beneficiaries could raise their concerns about there being a conflict of interest. However, they would need to show actual evidence of Julie’s conduct showing a conflict of interests.
Conclusion
As an executor, if an estate is requiring you to manage real estate or you are a beneficiary and want to dispute your claim to real estate, we may be able to help. Ensuring no executor misconduct is occurring ensures this property is dealt with properly. If you want to pursue a partition action for estate property, at Underwood Law, our partition attorneys can help you navigate your partition action efficiently and with care. We are here to help.