When An Executor of An Estate Is Dishonest
Executors of an estate have an obligation to engage in the due administration of the estate.
Enormous obligations are cast upon an executor to gather in the estate, pay all testamentary debts and expenses and to distribute the estate in a correct and legal way.
Commonly, an executor is unsure of his or her obligations without legal advice.
Executors who seek to administer an estate without legal advice may place themselves in a difficult situation where they are personally liable for the creditors of the estate and for large claims against them. Sometimes their mistakes are genuine, but all too often an estate is administered by a dishonest executor.
June, Robyn and Graham are siblings whose mother, Shirley, died four years ago. Shirley had a very normal-sized estate: a house worth $700,000 and some cash and investments worth about $100,000.
June, the eldest child, was named executor of her estate. Shirley had named her executor only because she was the eldest, rather than being the most capable. She was in fact a lady who had previously escaped prosecution for stealing benefits from Centrelink and had been in charge of a travel agency suspected of stealing money from clients.
Although Shirley no doubt hoped that June would act honestly in her role as executor, she didn’t.
Rather than splitting the money evenly with her siblings, June kept more than half the money for herself. In an effort to conceal the money, she moved it from account to account. She also moved into her deceased mother’s house and refused to settle the estate.
Robyn and Graham were forced to ask the court to remove June as the executor after they grew suspicious about her actions. Through the court action, Robyn and Graham discovered that June had also inflated the cost of her mother’s funeral expenses and had been using her mother’s bank account for her own personal expenses.
By the time June was removed as executor, she had dishonestly acquired $75,000 from the estate and it is unlikely that Robyn and Graham will see those funds again.
The moral of this story is that it is disastrous to appoint someone to the role of executor if they have a history of dishonesty. Don’t be fooled into thinking that a previously dishonest person will suddenly act with integrity just because you’ve died. The odds are that a dishonest person will continue to behave dishonestly, which could have catastrophic results for your estate and other beneficiaries.
Signs of a dishonest executor include:
- Treating the deceased’s bank accounts as their own
- Living in the deceased’s house as their own
- Paying themselves advances from the estate
- Not treating beneficiaries fairly or using threatening behaviour
- Paying themselves expenses that aren’t reasonable
- Delaying the administration of the estate
- Selling assets of the deceased to family members or friends with a gross under-valuation
- Paying themselves a ‘salary’ to act as executor
- Acting un-cooperatively or belligerently once estate litigation is commenced
If the other beneficiaries think that an executor is acting dishonestly, they must ask the court to remove the executor. The cost of doing this is high because by this time, the estate is likely to have suffered financial loss. In the case of modest sized estates, this situation can leave the estate empty with nothing left for the beneficiaries.
Therefore it’s important when choosing who to appoint as your executor when you die to consider:
- A previously dishonest person is unlikely to suddenly behave honestly upon your death
- The position of executor requires a person who will not exploit the position for their own gain
- The consequences of appointing a dishonest executor can mean that your beneficiaries end up with nothing except litigation
If you suspect an executor is acting dishonestly, seek legal advice from a Specialist in Succession Law as soon as possible. The sooner the situation can be remedied, the less likely the financial losses will continue.
Ultimately, it’s important to always seek legal advice regarding the administration of an estate. Contact us for your free, 10-minute phone consultation.