If you haven’t been paid your rightful inheritance by the executor, you’re probably wondering whether you should wait a little bit longer or begin exploring your legal remedies. Generally, an executor should have a valid and legal reason for refusing to pay a beneficiary. In the absence of a valid reason, the executor may be guilty of serious misconduct. Thus, it is important to know whether the executor’s refusal to pay a beneficiary is valid or not.
When should the executor pay the beneficiary
In a nutshell, below is the sequence of activities that the executor should do before paying the beneficiaries:
- Probate the will
- Get court appointment as executor
- Gather decedent’s assets
- Pay decedent’s taxes, debts, and other administrative expenses
- Distribute remaining assets to the beneficiaries
In New York, the period of time for creditors to make a claim with the estate is seven (7) months from the time the executor is appointed. After this time period, the executor is not liable for any distributions it makes to the beneficiaries in good faith. For this reason, most distributions to beneficiaries are made after the 7-month period for creditors to file their claims have lapsed.
Some valid reasons why the executor refuses to pay the beneficiary
Here are some valid reasons why the executor can refuse to pay the beneficiary:
The 7-month period for creditors to file a claim have not yet lapsed.
If the 7-month period for creditors to file a claim has not yet lapsed, the executor can refuse to pay the beneficiary. The executor has a duty to pay first the administrative expenses of the estate and taxes and debts of the decedent. Any debts claimed upon the estate must be made within 7 months from the time the executor is appointed. During this 7-month period, if the executor makes a distribution to the beneficiary and it is later on discovered that estate assets are not sufficient to pay the debts of the deceased, the executor can be held personally liable for the distribution he made to the beneficiary. For this reason, executors err on the side of caution and do not make any distributions during the 7-month period where creditors can still file their claims.
There is a will contest.
If there is a will contest, any distribution made to the beneficiary may be delayed until the will contest is resolved. When a will is contested, even the nomination of the executor as the person who will manage the estate is also in question. In these cases, the executor’s appointment is usually delayed. The court may appoint a preliminary executor for the purpose of paying some administrative expenses and debts, but preliminary executors rarely have the power to make distributions. If the will is contested and such contest is not yet resolved, the executor can refuse to pay the beneficiary.
The decedent’s estate is not sufficient to pay the debts.
Under SCPA § 1811, the executor has the responsibility of paying the decedent’s debts and estate expense in the following order:
- Funeral and administration expenses
- Federal and state debts
- Taxes assessed prior to death
- Judgments docketed prior to death
- Court bonds and other acknowledged financial and contractual obligations and debts
If the assets of the decedents are not enough to pay all the debts mentioned above, there is nothing for the executor to distribute to the beneficiaries. Thus, if all of decedent’s assets have been exhausted to pay all his debts, then the executor’s refusal to pay the beneficiary is valid.
Even if all debts have been paid, the decedent’s estate has been used to pay off other beneficiaries.
Even if the executor has paid off all the decedent’s debts, the executor has to observe the hierarchy or priority in paying off the beneficiaries. Under EPTL 12-1.2, the following priority has to be observed in the distribution of the net estate:
- Dispositions to a surviving spouse that qualifies for estate tax marital deduction
- Specific beneficiaries
- General beneficiaries
- Residuary beneficiaries
- Distributees or heirs-at-law
So even if all debts have been paid, there is a possibility that a beneficiary may not receive a payment from the executor if the decedent’s net estate is not sufficient to pay off all the beneficiaries.
For example, if decedent’s net estate after paying off all debts, taxes, and expenses is $10,000, and in decedent’s will, he gave a $15,000 cash gift to his son, and the remainder of his estate to his surviving spouse, the son will only receive $10,000 cash gift and the surviving spouse will not receive anything as residuary beneficiary. Why? Because the remaining net estate is only $10,000. Since the general beneficiary has a higher priority than a residuary beneficiary, the executor has to pay first the general bequest of $15,000 to the son. Since the remaining net estate is only $10,000, the executor can only satisfy $10,000 out of the $15,000 general bequest to the son. No remaining net estate is available for distribution to the surviving spouse as residuary beneficiary. Absent exceptional circumstances, the executor may not be held personally liable for the unsatisfied general bequest to the son in the amount of $5,000 nor to the surviving spouse.
Executor refuses to pay the beneficiary without valid reason
If the executor fails to pay the beneficiary without a valid reason, the executor can be held liable for misconduct. It’s important for both the executor and the beneficiary to always maintain open communication lines to ensure that there is no misunderstanding. Here are some remedies of the beneficiary for an errant executor:
- Petition to remove or suspend executor and to appoint a successor executor
- Application for temporary restraining order restraining executor from performing the duties of his office until the issue of his misconduct is resolved
- Surcharge action to hold executor liable for damages arising from his misconduct
- Petition to compel executor to submit an accounting and the corresponding objections to the accounting
Sometimes, the executor will use a valid reason to refuse to pay the beneficiary (i.e., there are no assets left in the estate). Although this may be a valid reason, you, as beneficiary, can request for an accounting and review the accounting to see if there are extraordinary or suspicious expenses that should not have been charged to the estate. The estate bank account is not the personal ATM of the executor, and the executor cannot use estate funds to pay for the executor’s personal expenses.
If an executor refuses to pay the beneficiary, it is the beneficiary’s right to request for an accounting. Consult with an experienced estate attorney immediately to know your remedies and options. Should you need assistance, we, at the law offices of Albert Goodwin, are here for you. We have offices in New York, NY, Brooklyn, NY and Queens, NY. You can call us at 718-509-9774 or send us an email at email@example.com.