Duties of an Executor in California - You've Been Nominated...Now What?

Introduction:

To be nominated to be the Executor of a Will imposes upon the person so appointed a fiduciary duty to adhere to the terms of the Will in conformity with California law. That duty can impose personality liability upon the Executor should he or she fail to perform as required. And that liability can last decades…it can even be imposed after the death of the Executor, as discussed below.

What is an “Executor?” It is the person or entity nominated by the deceased person (the “testator”) in a Will to administer the estate of that person as directed by the Will. The reader should read our articles on Wills and Trusts for a background discussion of what a Will is.

Being nominated as an Executor does not mean you have to accept the nomination. One can refuse to be an Executor and the Court will then have to appoint a different person. Most persons nominated, however, do accept the obligation imposed, usually because the testator was a friend or relative who relied upon them to carry out their wishes. As one client told this writer, “If he felt I was the right one to do it, I owe it to him to come through.  It’s my last favor to him.”

But what does that “favor” actually constitute? What do you have to know and do in order to perform the duties of an Executor?

It can be substantial. Our office once sued an Executor for breach of her duty to our client’s estate nine years after that Executor had died and twenty four years after she committed fraud upon our client’s estate while acting as the Executor. We represented the children beneficiaries who had only learned of the fraud decades after it occurred.

Since the Executor was by now deceased, we attached assets of her widower husband who had received the ill gotten gains from his Executor wife nine years before. He was astonished that a duty imposed over twenty years ago resulted in him losing assets he had long considered his own. But that is the power of the fiduciary duty imposed.

This article shall summarize the basic powers and obligations faced by a person nominated as an Executor in California. A companion article on the duties of a Trustee is also on this web site.

 

How Does One Become An “Executor?”

1. The Executor is normally nominated in the Will but it is the court who formally appoints the Executor after a noticed hearing. See our article on Probate.

 

2. If no Executor is nominated in the Will, the court appoints an “Administrator” who performs the same function, usually a relative.

 

3. Once appointed by the court, the Executor assumes the powers and fiduciary duties necessary to comply with both the terms of the Will and the legal requirements imposed by the State.

 

4. The Executor can resign by a specified process and another Executor be appointed by the Court. Normally, the Will will mention successor Executors in the event one or more do not want to serve or become incapable of serving. The fiduciary duty remains, however, until discharge from the court.

 

5. More than one Executor can be appointed but each is jointly and severally liable to perform the requisite duties to the Estate-one must be sure that the other performs adequately.

 

6. No one can be forced to be an Executor. However once one is appointed, one remains an Executor until discharged by the court and the court will not discharge an Executor unless that will not harm the beneficiaries.

 

What Is Fiduciary Duty and Why Does it Last So Long?

1. The fiduciary duty is the highest duty known in law. It is the same duty of care and good faith that a parent has to a child, a doctor to a patient, a spouse to a spouse…and a lawyer to a client. It requires the highest degree of protective action to ensure that the recipient of that duty (the beneficiaries of the Will) are protected and strictly prohibits self dealing or dishonesty. Personal liability can be imposed upon an Executor for breach of fiduciary duty. See our article on fiduciary duty for a full explanation.

 

2. The statute of limitations to bring action against a fiduciary only runs from discovery of the “wrong doing” and in the case of minor beneficiaries, only begins to run from the time of their majority. Thus, if an Executor steals something in 1980, and it is discovered by the child in 1990, but the child attains eighteen years of age in 1993, the statue begins to run in 1993, thirteen years after the event! If the fiduciary hides the theft, the statue runs from when the victim knew or should have known, which can be decades later.

 

3. There are ways to cut short the term of the statue of limitations. By certain petitions and accountings filed with the court and approved by the court, most causes of action against a fiduciary are later barred minus fraud on the part of the fiduciary. A wise Executor will make sure such petitions are filed so that the liability period is not prolonged.

 

What are the Practical Duties of the Executor?

Once appointed, the Executor “runs” the estate much as a business person runs a business. The Executor makes sure all debts are paid, all taxes paid, all assets cared for, then distributes the remaining assets to the beneficiaries in accordance with law and the Will.

If legal action is brought against the estate, the Executor is in charge of defending. Further, if the Estate (or the testator) has a legal claim against a third party, the Executor is obligated to consider filing suit.

If the Executor contests a claim against the assets, there is a formal procedure for rejecting the claim and contesting it in court if necessary.

Other typical duties:

  • Locating all assets of the estate and caring for them.

  • Paying expenses necessary to maintain the assets.

  • Paying continuing expenses that are necessary to keep the assets secure such as mortgage payments, utility bills insurance.

  • Paying income taxes that may become due. Pay any other taxes rightfully due.

  • Handling day to day details such as terminating leases and other outstanding contracts, notifying banks and governmental agencies, etc.

  • Setting up the estate bank account and brokerage accounts as necessary to keep income flowing during the life of the estate.

  • Paying any estate taxes.

  • Locating heirs and keeping them advised of the progress of the estate. Filing requisite notices.

  • Supervising the distribution of the assets and filing the necessary petitions with the court.

 

How Does the Executor Know What To Do?

The Executor normally hires, at estate expense, the various professionals necessary to perform many of the above duties. These include accountants, property managers, insurance brokers, attorneys, etc. The estate is to pay the reasonable cost of these professionals and most Executors rely on them heavily.

 

Is the Executor Paid? 

The courts allow reasonable compensation to the Executor, usually a small percentage of the assets in the Estate. The attorney is normally paid a smaller percentage unless there are extraordinary duties involved. Often when an Executor is also a beneficiary, they decline the fee since it is income taxable while the inheritance may not be taxable at all. Legal advice should be sought on this detail.

 

How Long does It Last?

Most Estates are open about a year since the various tasks of paying taxes, selling property, locating heirs, etc, often take that long. At the very least, one can expect six to nine months of time before the Estate can close and if there is litigation outstanding, the Estate can stay open for years. At times, when sizable assets need to be sold over time, Estates can stay open for decades.

Nowadays, with most Estates pouring their assets into Trusts, it is more common for the Estate to be terminated relatively quickly.

 

Why Do It?

To be nominated as an Executor is perhaps the greatest compliment a friend or family member can give you. It puts a high duty upon you…but a high duty also imposes a degree of trust in your honesty and integrity that demonstrates that the testator had great faith in you.

Not only is it not incredibly difficult, but if you hire the right experts, it is not difficult at all. It also is a duty that many people feel they have to honor to a friend or family member who hoped that the nominated Executor would carry out their last wishes.

In our experience, few people decline the honor and, after some hesitation, find the task not very onerous at all. Or, as one client put it, “I had a much harder time dealing with my own income tax, really…”

The reader should carefully review the other articles on this website as to other aspects of probate, wills and trusts.