The death of a parent is a difficult time that can bring up strong emotions and highlight any family conflicts. Coupled with the division of assets, the potential for family conflict is high – even more so when the executor is unsuited to the task.
Consider the case of Jessica from Minneapolis, whose father died four years ago. She was entitled to a percentage of the value of her childhood home, which was sold shortly after her father’s death.
At the time, lawyers said all beneficiaries would need to wait eight months for the sale proceeds to be paid to ensure no unknown creditors came forward, a process called probate. That’s twice the four-month minimum notice period required by Minnesota law. (1)
Jessica’s late father had no unknown creditors or debts, so his attorney sent a letter to Jessica’s sister (the executor) requesting expedited payment. Jessica was asked to sign an agreement and the funds were sent to her a few weeks later.
It’s been four years now. At that time, Jessica’s sister failed to enforce the terms of her will; stopped talking to other beneficiaries; delayed the transfer of three other properties to her siblings; fired her original attorney and depleted the estate’s resources. Now, she’s asking Jessica to return nearly half of her estate to help pay for the $60,000 in attorney fees she incurred while paying out other properties.
Jessica believes her sister mishandled the estate settlement process and doesn’t want to pay. She argued that part of her estate had already been settled, including deduction of related legal and probate fees, and that because she did not benefit from the remainder of the estate, she should not have to pay.
Jessica is right, the process is poorly managed. In addition to mishandling payments to other property, making payments before the probate proceedings are complete is not best practice and is not recommended, so Jessica should wait.
It is best to settle all matters of the estate, including payment of creditor claims against the estate, executor indemnification, settling taxes and fees incurred by the estate, before making any payments.
Typically, an estate is paid out of the value of the estate that remains after all expenses and claims have been deducted, known as the “residuary estate.”
In this will, certain bequests are made in the form of specific property, but if the estate is unable to pay all of its obligations, the sale of those properties to pay the bills will take precedence over the bequest.
Unfortunately for Jessica, when she signed the release, she may have also signed a refund bond—which would legally force her to return part of the estate to help pay for the additional legal fees incurred in settling the estate.
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Jessica can afford to repay the money from the savings she set aside for her emergency fund, but paying it would put her in a financial bind because she would need to rebuild her emergency fund at the expense of regular contributions to her retirement fund.
She may want to work with her financial advisor to develop a plan to help recover from these financial losses.
Jessica also has the option of fighting the request in court, as her relationship with her sister is already soured. However, this may be more expensive than what her sister is asking for, and the release and refund bond she signs may limit her recourse against the executor.
Jessica may still want to consult with a wills and estates attorney to try to remove her sister from serving as executor. Replacing her may help prevent further additional costs and eventual closure of the estate.
Removing executor is not easy, but Jessica can argue that her sister should be removed from duty because of her inaction and delay in distributing three estates, her mismanagement of expenses, and her lack of communication and hostility toward other beneficiaries.
To do this, Jessica needed to gather all the probate documents, including the original will, as well as evidence to support her argument for evicting her sister. She will then make a formal request to the probate court. A will may name a successor executor, but if none is named, the court may appoint a successor executor.
Settling an estate is a complex and time-consuming process. It is important that beneficiaries fully understand the implications of anything they agree to or any document they sign.
Being an executive comes with tremendous responsibilities and the person selected should be ready and capable to perform these duties. If not, the beneficiary may need to take action.
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Real Estate Executive (1).
This article provides information only and should not be considered advice. It is provided without any warranty of any kind.
