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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:
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Locating all
assets of the estate and caring for them.
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Paying expenses
necessary to maintain the assets.
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Paying
continuing expenses that are necessary to keep the assets secure
such as mortgage payments, utility bills insurance.
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Paying income
taxes that may become due. Pay any other taxes rightfully due.
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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.
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Paying any
estate taxes.
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Locating heirs
and keeping them advised of the progress of the estate. Filing
requisite notices.
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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.
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