Estate fiduciaries, such as executors and administrators, wield tremendous power. They are entrusted with managing the estate (money and other assets) of a person who passed away—the decedent. Fiduciaries are then tasked with distributing the estate to the people entitled—the beneficiaries. Sometimes the job doesn’t get done properly, whether because of intentional or accidental misconduct.
Have you ever worried about an executor mishandling your inheritance? It’s a nightmare scenario that happens more often than you’d think. When someone passes away their appointed executor is supposed to manage the estate responsibly – not treat it like their personal piggy bank. But what happens when an executor goes rogue and spends all the money?
As an expert in probate litigation, I’ve seen firsthand how terrible this is for families. Let’s talk about what happens when the executor spends all the money, your legal options, and how to keep your inheritance safe.
Understanding the Executor’s Fiduciary Duty
It’s important to know what an executor is supposed to do before we talk about what happens when things go wrong.
An executor operates under something called a “fiduciary duty. “This isn’t just a fancy legal term; it’s a serious duty that forces the executor to look out for the estate and its beneficiaries, not their own interests.”
This fiduciary duty consists of two major components:
- Duty of loyalty: The executor must avoid conflicts of interest and can’t profit from their position (known as “self-dealing”).
- Duty of care: The executor must actively manage and protect estate assets, maintain accurate records, pay bills on time, and make sensible decisions.
When an executor spends all the money in an estate, they’ve likely breached both these duties in a serious way.
What Constitutes Misuse of Estate Funds?
“All the money is gone” doesn’t always mean that someone stole it. There were times when the estate had more debts and costs than assets. But when an executor has really stolen money, it usually falls into one of these groups:
- Commingling funds: Mixing estate money with their personal accounts, making it easy to “accidentally” use estate money for personal expenses
- Self-dealing transactions: Selling estate assets to themselves or friends at below-market prices
- Improper asset management: Making unauthorized or high-risk investments with estate funds
- Unauthorized payments: Paying themselves excessive fees without court approval
For example, I once worked with a client whose brother (the executor) sold their mother’s home to his wife’s cousin for 30% below market value. When confronted, he claimed it was “the best offer he could get” – despite never listing the property publicly.
Legal Consequences for the Executor Who Spends All the Money
When an executor is caught misusing or misappropriating estate funds, they face severe consequences:
1. Personal Financial Liability
The executor will likely be ordered to repay every dollar misappropriated from their own personal assets. This repayment (called a “surcharge”) can be financially devastating.
2. Removal as Executor
The court has the authority to remove the executor from their position. Beneficiaries can petition the court to have them stripped of their legal authority, and a new executor will be appointed.
3. Criminal Charges
In serious cases, the executor could face criminal prosecution for embezzlement, larceny, or fraud. These charges can result in substantial fines, probation, or even jail time – separate from any civil judgments.
How to Hold an Executor Accountable
If you suspect an executor is misusing funds, here’s the process to hold them accountable:
Step 1: Request a Full Accounting
Your first formal step is demanding a complete financial report of the estate. This accounting should detail every transaction made by the executor.
Step 2: File a Petition for Surcharge
If the accounting confirms funds were misused, the next step is filing a petition for surcharge. This petition must present clear evidence of the executor’s breach and the resulting financial damage.
Step 3: File a Petition for Removal
Concurrently, you can file a petition to have the executor removed. The court will generally be cautious about removing an executor chosen by the deceased, so your petition must provide strong evidence of harm to the estate.
Warning Signs an Executor Might Be Misappropriating Funds
It’s rare for an executor to drain an estate without raising red flags. Here are warning signs to watch for:
- Unexplained gaps in accounting
- Reluctance to share financial information
- Delays in estate administration without clear reasons
- Lifestyle changes suggesting sudden financial improvement
- Inconsistent or confusing explanations about estate assets
What to Do If You Suspect an Executor Has Spent All the Money
If you believe an executor has improperly spent estate funds, take these steps immediately:
- Clarify the terms of the will – Review the will to understand your inheritance rights and the executor’s powers/limitations
- Review estate documents – Scrutinize the estate inventory and accountings for inconsistencies
- Request additional information – Ask the executor for bank statements, receipts, and explanations
- Consult a probate attorney – Get professional help investigating your concerns
- File a petition with the court – If evidence supports misconduct, take legal action to recover assets
Remember, the longer you wait to take action, the less likely you are to recover assets. It’s crucial to act as soon as you suspect something is wrong.
Can the Executor Take Everything Legally?
A common question we get is: “Can the executor just take everything?”
The simple answer is no. An executor cannot legally take all estate assets unless they are also the sole beneficiary named in the will. Even then, they must first pay all debts, taxes, and administration costs before taking what remains.
Executors are entitled to:
- Reasonable compensation for their services (typically a percentage of the estate value)
- Their inheritance if they’re also named as a beneficiary
But they cannot override the terms of the will or ignore other beneficiaries’ rightful inheritances.
Common Legitimate Reasons Money Might Be Gone
Before jumping to conclusions about theft, consider these legitimate reasons an estate might have fewer assets than expected:
- Outstanding taxes: The executor must pay any taxes owed by the deceased
- Estate administration expenses: Court fees, attorney fees, accounting fees, etc.
- Creditor claims: Valid debts must be paid before beneficiaries receive distributions
- Property maintenance costs: Upkeep of estate property until it’s sold or distributed
- Litigation expenses: If the estate faces legal challenges
What If the Executor Is Also a Beneficiary?
It’s common for an executor to also be a beneficiary of the will. This dual role can create conflicts of interest but doesn’t automatically mean misconduct.
The important thing to remember is that an executor who is also a beneficiary still has a fiduciary duty to ALL beneficiaries. They cannot favor themselves in distributions or use their position to take more than their designated share.
When to Contact a Probate Litigation Attorney
If you suspect an executor has spent all the money improperly, don’t try to handle it yourself. Consult with an experienced probate litigation attorney who can:
- Review estate documents to identify suspicious transactions
- Help you understand if the executor’s actions constitute a breach of fiduciary duty
- Guide you through the legal process of holding the executor accountable
- Represent you in court proceedings
- Help recover misappropriated assets when possible
Preventing Executor Misconduct
For those creating estate plans, here are ways to reduce the risk of executor misconduct:
- Choose your executor carefully, prioritizing honesty over convenience
- Consider naming co-executors as a check and balance
- Require an executor’s bond (insurance policy that covers losses due to misconduct)
- Include specific accounting requirements in your will
- Consider a professional fiduciary for complex estates
Final Thoughts
When an executor spends all the money, it creates a painful situation for beneficiaries who may lose their rightful inheritance. However, the legal system provides remedies through surcharge actions, executor removal, and in severe cases, criminal prosecution.
If you’re facing this situation, remember that time is of the essence. The sooner you take action, the better your chances of recovering misappropriated funds and preserving what remains of the estate.
Have you experienced problems with an executor? Share your story in the comments below or contact us for a consultation about your specific situation.
This article provides general information about legal matters and should not be considered legal advice. Each situation is unique and may require specific legal guidance. If you have concerns about an executor’s handling of an estate, consult with a qualified probate attorney in your jurisdiction.
Violation of a Court Order
If the Surrogate orders you to do something, you would be wise to do it. Break this rule and you’ve committed a most avoidable fiduciary faux pas. One of the most commonly violated court orders is a directive to file a judicial accounting (which is often requested by a beneficiary who suspects fiduciary misconduct). This violation is honored with its own section of the Surrogate’s Court Procedure Act as a basis for removal of a fiduciary.
If a fiduciary doesn’t do their job right, they could lose their commissions, have their share of the estate charged more, lose their authority, or even have a judgment placed against their personal assets.
These are the Big 5, but the opportunities for bad behavior are endless.
Will you do something to stop an shady executor from being bad? Have you already been hurt by an executor’s bad behavior? Are you a fiduciary who is being wrongly accused of breaching your duty?
Contact our estate litigation team to find out how we can help.
Here Are The Five Worst Forms Of Fiduciary Failings
This trusts and estates transgression goes by many names: skimming, pilfering, embezzlement, or just plain thievery.
Executors have the authority to hold a decedent’s money, but it’s not theirs for the taking. They’re required to act in the beneficiaries’ best interest and resist the temptation to take a little off the top. Some scheming executors spend estate money on their rent, shopping sprees, and jaunts to Atlantic City. Most executors do their job. But if you succumb to your inner Bernie Madoff, you’ll likely face the wrath of the Surrogate’s Court—and possibly the District Attorney.
Thieving executors can be removed from their position, forced to return stolen assets, and in some cases, prosecuted criminally. If you’re wary of a conniving executor, you have options, but taking action quickly is key.
Self-dealing occurs when an executor puts their own interest ahead of the estate’s.
A common scenario involves a fiduciary purchasing property from the estate without first obtaining court approval. For example, a decedent leaves her home to her brother and two sisters. Her brother is appointed as executor and wants to sell the home to himself. But the brother is on both sides of the deal: seller (as executor) and buyer (individually). He would be dealing to himself, making this situation ripe for wrongdoing, such as selling the home to himself for pennies on the dollar.
This form of fiduciary misconduct occurs where an executor fails to do their job. An executor’s job is to get the person’s assets, pay off their debts, and then give the rest of the assets to the beneficiaries. Failure to attend to any of these tasks can be considered neglect, and even with no resulting financial damage, the Surrogate’s Court can impose penalties. Often, an executor simply does nothing to administer an estate—doesn’t collect assets, doesn’t pay debts, and doesn’t give the beneficiaries their inheritance. This is a blatant example of fiduciary neglect.
An executor can be held liable when their action or inaction allows the estate to waste away. Waste is the stepchild of neglect as it’s often borne out of neglect.
Did the executor forget to file tax returns and the estate got hit with penalties and interest? Did the executor refuse to sell the decedent’s stock portfolio before it got crushed by the market? Situations like these decrease the estate’s value and expose the executor to liability.
What an Executor Can and Cannot Do | RMO Lawyers
FAQ
What happens if an executor spends all the money after death?
If an executor spends all the money in an estate, the obvious consequence is that beneficiaries may not receive the inheritances they were promised. While this scenario is understandably upsetting, beneficiaries should avoid jumping to conclusions.
What can I do if an executor steals money?
If you suspect an executor is stealing from a will, you should contact a probate litigation attorney immediately to gather evidence, file a petition with the court to remove the executor and restrict estate assets, and seek a court order for a formal accounting to uncover the theft.
What can I do if an executor is taking too long?
If a beneficiary thinks that an Executor is taking too long, that person should talk to the Executor and find out why they are taking so long. Usually, there is a…
How is an executor held accountable?
You can hold an executor responsible by asking the probate court to remove them and appoint a new one, or you can sue them in civil court for damages they caused by their bad behavior, like breach of fiduciary duty, fraud, or wasting estate assets. You will need to gather substantial evidence, such as bank statements and transaction records, to prove the executor’s actions were improper.
What if an executor spends all the money from an estate?
What should beneficiaries do if an executor spends all the money from an estate? They should ask for an accounting. Beneficiaries have the right to ask for an accounting of all the assets related to an estate, such as what assets are still in the estate accounts and what transactions an estate executor has made.
What happens if an executor takes everything?
Cases of executor theft can have harsh repercussions for beneficiaries and the estate as a whole. If an executor takes everything, then they will drain the assets of the estate and leave nothing to distribute to the beneficiaries, preventing them from accessing their rightful inheritance.
What happens if an estate executor steals money?
Spending all the estate assets can also lead to fines and repercussions for the estate if there is not enough money left to pay for important expenses like estate taxes and creditor debts. Fortunately, the law provides potential recourse for beneficiaries who have experienced theft at the hands of an estate executor.
Can an executor take money from my estate?
But it’s best to check with an attorney first to make sure she’s taking money in the proper way. Your executor is permitted to make expenditures from estate money to cover payment of debts you leave behind, taxes that are due, and the costs of operating your estate.
Can an executor take money without reason?
An executor has authority to manage finances for an estate and allocate funds to pay for any fees or expenses surrounding the estate. For example, they can use these funds to pay debts, taxes, and administrative expenses, like property maintenance. However, they do not have the authority to simply take money without reason at their own discretion.
What does an executor do after a person dies?
Here’s What to Do | JMV Law Acting as an executor is an important job. After a person dies, their executor will be performing a variety of legal functions, including selling property, paying creditors, bringing any lawsuits that need to be filed, and, if necessary, reviewing medical records and distributing assets to their named beneficiaries.