Once an individual is appointed as an executor of an estate, they will have access to assets that belong to the estate. Some of these assets may involve liquid funds which the executor can utilize during the administration of the estate to complete this process. Some permissible uses would be retaining counsel to assist with administration, or using assets of the estate to pay any applicable taxes or expenses of the estate. Unfortunately, at times, the executor may improperly utilize estate assets for their benefit and not for the benefit of the estate or the beneficiaries of the same. Such misuse of estate funds by an executor would be a breach of the executor’s fiduciary duty.
In general, an executor may utilize estate assets when the executor is seeking to protect or preserve the assets of the estate, pay necessary expenses of the estate, or they are protecting the estate, or the decedent’s last will and testament from a challenge thereto. On the other hand, an executor may not use estate assets when they seek to either prosecute or defend a claim which only benefits them to the exclusion of the estate and its beneficiaries. For instance, the executor may not use estate assets to defend against a claim that they improperly converted non-probate assets of the decedent to the exclusion of the estate. Similarly, an executor may not utilize estate assets to bring claims which seek to recover assets solely for the benefit of the executor alone and not for the benefit of the entire estate or its beneficiaries.
The last category of claims when an executor may not utilize estate assets are claims where there is evidence of the executor’s breach of fiduciary duty to the estate and/or its beneficiaries. An example would be where the executor has improperly taken estate assets for his/her benefit, and thereafter, seeks to utilize estate assets to defend against claims brought by beneficiaries of the estate. Under these circumstances, the executor cannot utilize estate assets to defend against wrongdoings the executor perpetrated while the executor of the estate. Another example would be where the executor utilizes estate assets to defend against or to bring claims in their favor concerning matters that do not involve protecting or preserving estate assets, or are entirely unrelated to the estate.
Should an executor improperly utilize estate assets for claims that do not seek to protect or preserve estate assets, or do not involve the business of the estate, a beneficiary of the estate can file an action to require that the executor return all improperly utilized funds to the estate, and further, to seek surcharges against the executor. In such a breach of fiduciary duty claim, the party which brought the claim against the executor may be entitled to an award of counsel fees from the court. These claims can be complex, and thus, it is suggested that competent counsel be retained. The focus of such a claim would be to put the estate in the same position it would have been but for the executor’s wrongful conduct.