The death of a parent is a difficult time, bringing up strong emotions and highlighting any family conflict. Add to that the distribution of wealth, and there is a strong possibility of family strife – even more so when the executive is not fit for duty.
Consider the hypothetical 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, the lawyer said all beneficiaries would need to wait eight months before the proceeds of the sale would be distributed to ensure no unknown creditors came forward – a process known as probate. This was double the legally required minimum notice period of four months in Minnesota. (1)
Jessica’s late father had no known creditors or debts, so his lawyer sent a letter to Jessica’s sister, who was the executor of the will, to request a speedy distribution. Jessica was asked to sign a release and then a few weeks later the funds were sent to her.
It’s been four years now. At that time, Jessica’s sister failed to execute the terms of the will; stopped talking to other beneficiaries; delay in transfer of three other properties to his siblings; Fired the original attorney and ended the source of the property. Now she is asking Jessica to return about half of her inheritance to help pay $60,000 in legal fees incurred during the distribution of other assets.
Jessica realizes her sister has mishandled the estate administration process and doesn’t want to pay. She argues that her portion of the estate was already settled, with associated legal and probate fee deductions, and that since she could not benefit from the remainder of the estate, she should not have to pay.
Jessica is right that the process is wrong. Aside from mishandling distributions of other assets, distributions prior to the end of the probate process are not best practice or recommended, so Jessica had to wait.
It is best to settle all matters of the estate first, including paying any creditor claims against the estate, executor compensation, taxes and fees to settle the estate, before any distributions are made.
Generally, legacies are paid out of the value of the estate that remains after all costs and claims have been deducted – known as the “residual estate”.
In the case of this will, certain bequests were made in the form of certain assets, but if the estate is unable to pay all its obligations, the sale of these assets to pay the bills will take precedence over the will.
Unfortunately for Jessica, when she signed the release she also likely signed a refunding bond — and that would legally force her to give back a portion of her estate to help pay for the additional legal fees involved in settling the estate.
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Jessica will be able to withdraw the money from the savings set aside for the emergency fund, but making this payment will set her back financially because she will have to rebuild her emergency fund at the expense of her regular contributions to the retirement fund.
He wants to work with his financial advisor who can develop a plan to help him recover from the loss of those funds.
Jessica may also choose to fight the request in court, as she already has a strained relationship with her sister. However, it may cost more than her sister is asking for, and the release and return bond she signed could potentially limit her recourse against the executor.
Jessica still wants to consult with a will and estate attorney to try to remove her sister as executor. His replacement can help prevent additional costs and eventually lead to closing the property.
Removing an executor is not easy, but Jessica can argue that her sister should be relieved of her duties due to her inaction and delay in distributing the three estates, her mismanagement of expenses and lack of communication and hostility toward other beneficiaries.
To do so, Jessica needs to gather all the probate documents, including the original will, as well as evidence to support her argument for removing her sister. She will then make a formal request to the probate court. A successor executor may be named in the will, but if not, the court may appoint one.
Managing 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 documents they sign.
Being an executor carries great responsibilities and the person chosen must be ready and able to fulfill these duties. If not, beneficiaries may need to act.
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Estate Executor (1).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
