When loved ones pass away, dealing with their financial affairs is an imperative, but overwhelming, responsibility. Family members, particularly spouses and children, are commonly named as the preferred executor in the deceased’s will; but dealing with technical legal matters during a time of mourning makes many family members understandably uncomfortable. Further complicating matters, some estates own a family business that must continue to run while an estate is being settled.
The role of executor (also referred to as personal representative) is considered a fiduciary position, which means the executor has a fiduciary duty to the beneficiaries of the estate and must act in the best interest of the beneficiaries of the estate. Failing to comply with a fiduciary duty can leave an executor open to liability from heirs and other interested parties. The Georgia Supreme Court recently issued a decision on the standard executors must apply to the use of estate or trust funds to continue the operation of a family business. The court held that having discretionary authority to continue the operation of a family business under the terms of a trust or will does not nullify the executor’s obligation to act in the best interests of the beneficiaries or heirs by avoiding waste of assets in order to keep the business afloat. An overview of the duties an executor must assume and fulfill, and the consequences of failing to so, follows:
Executor Fiduciary Duties
Executors are tasked with a long list of duties related to opening, administering, and closing a person’s estate after death. These responsibilities are generally initiated by filing a petition and receiving formal Letters Testamentary from the Probate Court. Letters Testamentary officially appoint a person as executor and gives him authority to take action on the estate’s behalf. The primary duty of an executor is to identify, collect, and preserve probate assets, or property which is subject to the estate administration process. Probate assets include the vast majority of assets a person owns individually — from real estate to personal effects to interests in family businesses. Non-probate assets include, but are not limited to, trust-owned assets, retirement accounts, life insurance policies, and property held jointly with rights of survivorship. The executor’s ultimate goal is to distribute the deceased’s assets to rightful heirs and ensure creditors have an opportunity to receive payment for the deceased’s debts or the debts of the estate. The list of specific duties an executor must complete is quite extensive and includes everything from publishing a notice to creditors to selling assets, if necessary. While the number of executor responsibilities may seem overwhelming, executors can protect themselves and ensure a successful estate administration by adhering to the high fiduciary standard of care and always acting in the best interests of the beneficiaries.
Breach of Fiduciary Obligations
A fiduciary duty is one of the highest standards imposed under the law, and there can be significant consequences for a breach of fiduciary duty. If there is a breach of fiduciary duty, the executor can be held personally liable for losses suffered by an heir. Examples of a breach of fiduciary duty:
- selling or renting property to family members at a discounted rate;
- paying oneself excessive compensation, though executors are entitled to reasonable compensation and reimbursement for legitimate expenses;
- poor or improper investment decisions; or
- intentionally taking or wasting estate assets.
The most common defense to these claims is that the executor was acting within the bounds of Georgia law and the terms of the controlling documents (wills, trusts, etc.). An experienced probate attorney can advise executors and beneficiaries regarding what actions are permissible and those that may raise potential issues.
Speak With a Georgia Probate Attorney
As a named executor, you are likely handling an estate for the very first time; and you need the services of an experienced probate attorney to avoid making missteps that could cost you. The attorneys at the Atlanta law firm of MendenFreiman understand the sensitive and time-consuming nature of this role and can provide the guidance and representation needed to efficiently and successfully handle this responsibility. Contact us to schedule a consultation.
