Executor Responsibilities | Executor Fiduciary Duties

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 Executor Fiduciary Duties

In a fiduciary relationship the; personal representative, executor or trustee owes certain duties and responsibilities to the creator (testator/ settlor) of the will or trust. While acting as executor, personal representative or trustee these administrators are subject to various laws, regulations, standards and guidelines including (but not limited to):

The provisions of the will, retirement plan or trust document;

• The common law of trusts (or “accepted fiduciary standards”), which is a body of principles adopted by state courts over the years;
• State and federal statutory law and regulation;
• Rulings and orders from the local court of jurisdiction (probate court or other relevant court having jurisdiction over such matters); and
• Rules and regulations promulgated by an institution’s state or federal regulatory agency, which has further codified or established fiduciary principles as they apply specifically to financial institutions.

The more significant executor fiduciary duties are to:

• Take possession and maintain control of fiduciary assets;
• Keep fiduciary assets separate and distinct from all other assets;
• Maintain clear and accurate accounts and records;
• Provide information to beneficiaries in a timely manner;
• Exercise the same care and skill in administering the trust, as a person of ordinary prudence would exercise in dealing with his or her own property. This is generally referred to as the “prudent man” or “prudent investor” rule (states have adopted versions of one rule or the other)
• Administer the trust solely in the interest of the beneficiary, which is referred to as the duty of loyalty.
• This duty prevents the fiduciary from putting itself in a position where their personal interests conflict with those of the trust that it is representing.

Executor Fiduciary Liabilities

A fiduciary can be held liable if it:

• Violates any applicable law;
• Does not comply with the terms of the will, trust or pension plan or, in some instances, court rulings and orders; or
• Fails to properly discharge any of its duties or responsibilities or abuses any of its powers.

Any present or future beneficiary, or a co-fiduciary, can institute legal action against a fiduciary. The remedies that can be sought are several, depending upon the alleged violation but commonly include:

compelling the fiduciary to perform its duties; enjoining the fiduciary from committing a further violation;

• compelling the fiduciary to make restitution for the violation; removing the fiduciary; and/or disallowing the
• fiduciary from ever serving in another fiduciary capacity. If found liable, the fiduciary is said to have committed a “breach of trust.” If the fiduciary is found to have committed a breach of trust, it will be held
• liable: for any loss or depreciation of the account that results from its actions or inactions; for any profit
• made by the fiduciary through its actions; or any profit that would have accrued to the account if there had been no breach. The amount by which the fiduciary is required by a court of law to pay to the “breached” fiduciary account is known as a “surcharge.”

While there are numerous sources of executor fiduciary liability, the most significant ones generally involve :

Imprudent management of account investments, including: the purchase or sale of speculative securities.

Self dealing or other conflicts of interest.

Failure to properly manage real property, including: the failure to insure the property, the failure to pay taxes or the failure to maintain properties (residential or commercial) in proper repair.

Executor Mismanagement of an account, including: making improper or unauthorized distributions; the failure to make timely court accountings or tax filings; and the improper allocation of principal and/or income receipts.

Improper delegation of duties, including: allowing or delegating the investment discretion to someone such as an investment advisor without appropriate oversight and the failure to supervise acts of agents such as property managers.

Taking actions without approval, including: those actions that require the consent of beneficiaries, prior approval of co-fiduciaries or from a local court with jurisdiction.

Executor responsibilities vary significantly with circumstance for each estate. The executor should consult a probate attorney early in the process, to understand their inherent fiduciary duties and potential risks.