When an executor of a will refuses to pay a beneficiary, the beneficiary may or may not have a cause of action against the executor depending on the reason for refusal. If the refusal is for no reason or an invalid reason or an unreasonable reason, the executor may be liable. To know whether the executor is liable, it’s important to know first the executor’s duties to see if the executor has breached any of his duties in refusing to pay the beneficiary. In a nutshell, the executor’s duties are to get the will probated, gather and inventory all of the deceased’s assets, pay off all the debts in the order required by law, and if there is any asset left, to pay off the beneficiaries.
It is possible that the executor of the will refuses to pay the beneficiary because the creditors have not yet been paid. If this is the reason, it is valid, and the executor is not liable to the beneficiary. However, if there is any suspicion of executor misconduct or breach of fiduciary duty of the executor, the executor can be held liable. Consult with an experienced estates attorney to know your options and remedies.
First, the will has to be probated. If the will is not probated, the executor will not be granted letters testamentary, and without any appointment from the court, the executor does not have any liability. Thus, the first duty of the executor is to get the will probated. Once the will is probated and the executor is appointed, the executor has the authority to gather the assets of the deceased.
Gathering the assets of the deceased includes the establishment of an estate banking account. To establish a bank account in the name of the estate, the executor needs to apply for the estate’s own Tax ID number. The executor needs to fill out IRS Form SS-4, Application for Employer ID number, even if the estate is not an employer.
With the court’s grant of letters testamentary, the executor will be able to access the deceased’s bank accounts and other information related to the deceased’s assets. All these assets must be gathered and consolidated in one bank account. If there are assets that have not specifically been designated to be given to a beneficiary, the asset may be sold.
Paying off the debts of the deceased is important before any distribution to the beneficiary may be made. Creditors in New York usually have seven (7) months from the time of appointment of the fiduciary to make claims against the estate. After this time period, the executor is not liable for any distributions it made to the beneficiary from the remaining assets after payment of debts. In New York, payment of debts should be in the order of preference provided in Surrogate’s Court Procedure Act § 1811. Generally, a lot of executor misconduct arises from the payment of debts and the sale of the deceased’s assets.
For example, suppose John had a will naming his brother, Michael, as executor, and left his mother, Martha, $5000 in his will. John left a BMW car with car loan of only $2000 left. If the BMW car was not specifically given to anyone in the will, Michael can sell the car for $5000, pay the $2000 debt for the car, and place the remaining $3000 in the estate bank account. If the net estate is $3000 after payment of debts, John can give Martha $3000, instead of $5000 because there is no more asset left in the estate. Does Martha, as beneficiary, have a cause of action against Michael, the executor, for refusing to pay her the remaining $2000? Generally, absent any suspicious circumstances, everything appears regular and the executor doesn’t have any liability.
Suppose, however, that the market value of the car is $10,000 and the executor sold the car for $2000 to his friend, just enough to pay off the remaining car loan. No net estate is left, and the executor of the will refuses to pay the beneficiary any amount because there is no asset left in the estate. In this case, the executor’s refusal to pay the beneficiary is for an unreasonable reason. The executor could have had more assets in the net estate if the executor executed his duties accordingly and sold the car for market value. Thus, the beneficiary may have a cause of action against the executor foe executor misconduct.
Suppose Michael’s son, Rick, files a claim against John’s estate as creditor. Rick claims that John borrowed from him $5,000. Michael pays off his son, Rick, $5,000, leaving a net estate of $2,000. Michael distributes the remaining $2,000 to John’s mother, Martha, as beneficiary. If Martha can prove that Rick’s claim of debt against John’s estate is invalid (i.e., John did not really borrow money from Rick or Michael allowed the claim of Rick despite Rick submitting the claim via email and not certified mail), Martha can claim that Michael, the executor, should be liable for the invalid creditor claim of Rick that was allowed in the estate of John.
When an executor refuses to pay the beneficiary, the executor will normally use a reason that there is no asset left in the estate, claiming that the estate is insolvent. In this case, it is important to check the accounting of the executor to see that there are no suspicious activities or unauthorized withdrawals in the estate banking account and to ensure that all estate funds are accounted for. 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.