Executors of a will or trust have a legal and ethical duty to act in the best interest of the estate and the will’s beneficiaries. When an executor violates their obligations to the deceased, the will’s beneficiaries, or notable third parties, they may be removed from their position as executor.
An executor’s primary responsibility is to act as a fiduciary. That is, they deal with the accounting, disbursement, and management of estate funds. Fiduciaries, including estate executors, are obligated, in most cases by law, to act honestly and in good faith. Fiduciary misconduct typically consists of a failure to fulfill financial obligations or to act in conflict with the best interest of beneficiaries.
Misappropriation of Funds
Misappropriation of funds occurs when funds are used outside their legally designated purpose. This may involve taking funds intended for beneficiaries or owed to third parties like debt collectors for personal use. However, misappropriation doesn’t require misdirecting funds for personal use and can also include the use of funds for unintended purposes. Executors willfully misappropriating funds may need to be removed from their post.
Failure to Distribute Assets
Failure to distribute assets involves preventing or delaying the disbursement of assets to beneficiaries in a timely manner. Executors are legally required to disburse funds expediently and in accordance with the will’s instructions. Proving a failure to distribute funds involves demonstrating that an executor has the ability and legal obligation to do so but hasn’t.
Conflicts of Interest
Conflicts of interest can occur when the executor has reasons to be partial and favour outside parties when executing a will. In BC, it is possible to remove an executor for a conflict of interest. However, the evidence must show that they are actively engaging in a conflict of interest, as the potential for conflict of interest alone isn’t enough to remove an executor. Executors are required to disclose potential conflicts of interest to beneficiaries and the probate court, when applicable.
Providing misleading or inaccurate estate financial information by an executor is considered false accounting and is a form of fraud. Common signs of false accounting include inflating expenses to hide misuse of funds, creating fake losses or debts, and falsifying disbursement records.
Executors engaged in self-dealing may prioritize their own financial and business interests over the proper execution of the estate. In BC, the Wills, Estates, and Succession Act defines estate procedural conduct, including order of disbursement. If an executor chooses to disburse to themselves rather than follow the will, estate plan, or legal order of disbursement, it could constitute self-dealing.
Favoring Certain Beneficiaries
Executors are expected to act with impartiality, which means they must treat all beneficiaries of a will or trust equally within the confines of their duties. When executors favour certain beneficiaries, it can raise questions about the beneficiaries’ relationship with the executor and any undue influence.
Neglecting Administrative Responsibilities
A will executor with fiduciary responsibility is required to act competently and in good faith when executing their duties as an administrator of estate funds. Executors that neglect this duty usually do so as the result of inaction, rather than active misconduct.
Failure to Obtain Proper Valuations
This failure of the executor as a fiduciary may involve inflating or deflating the value of estate assets with the intent of misleading parties with a stake in the execution of a will or trust. There are a number of reasons that an executor may seek improper valuations including tax avoidance, seeking an undisclosed or illicit loan with the estate as collateral, and a deliberate subversion of a will’s provisions, including the wrongful disbursing or allocating of assets.
Lack of Communication
Failing to provide clear and prompt communication to beneficiaries regarding the estate’s progress, actions taken, or important decisions can constitute an executor’s failure to fulfill their fiduciary duties.
Inadequate Record Keeping
Fiduciaries have a duty to maintain full and complete records in accordance with the law and financial compliance regulations. Adequate record-keeping could include general accounting practices or specific instructions laid out by probate courts. Proper record-keeping fosters trust, transparency, and accountability. Beneficiaries have a right to obtain and view estate transaction information at any time.