Common Pitfalls Made by Executors of Estates
Typically the Executor of an Estate named by a Will has little or no prior experience in administering an Estate. As such, this somewhat complex process leads to the possibility of errors being made by the Executor or Executrix—and that could result in litigation. The purpose of this blog is to advise you of potential pitfalls to avoid if you are the Executor or Executrix of an Estate.
The first major pitfall is that the Executor/Executrix must make sure that they are properly qualified by the County Surrogate to serve as the Executor/Executrix of the Will prior to taking any actions. This is done by delivering a copy of both the Last Will and Testament and a Death Certificate to the County Surrogate; thereafter qualifying as the Executor of the Estate. Afterward, the Executor must be careful to notify all potential heirs of the Estate, not just those referenced under the Last Will and Testament. Sometimes the Executor may neglect to notify all potential heirs which results in complications. This is a typical error which could result in litigation if these individuals are not notified but have a claim.
Another important task an Executor must undertake is to open an Estate account which is solely for the Estate. At times, an Executor/Executrix will make the error of combining an Estate account with his/her own personal account. This comingling of Estate assets with personal assets could result in unnecessary litigation and confusion in the Administration of the Estate. As such, a separate Estate account must be opened. Prior to making any distributions, an Executor/Executrix must ensure that all appropriate and necessary state and federal taxes have been paid. A common mistake occurs when partial distributions are made prior to taxes being finalized. Should this occur and there is a shortfall, this can result in penalties being assessed against the Estate, or disgruntled heirs of the Estate refusing to pay back the mis-distributed bequests.
The final point that will be discussed during this post, and one that is often rife with conflict in the context of estate litigation, involves Executors keeping appropriate records. In administering an Estate it is essential that the Executor maintain meticulous records, consisting of receipts, checks, and other documents evidencing payments made on behalf of the Estate. If this is not done it is almost guaranteed that the formal or informal accounting will be challenged by beneficiaries of the Estate. This may result in litigation that could have been easily avoided had these records been preserved.
The information above serves as a partial guide to potential pitfalls that may be experienced when one functions as Executor/Executrix of an Estate. It is suggested that if you are appointed an Executor you consult with an experienced attorney to seek their counsel on serving as Executor of the Estate.