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Can an executor or fiduciary withhold money from a beneficiary?

On Behalf of | Jul 16, 2024 | Estate Administration |

Being named the executor or fiduciary of an estate is a significant responsibility. If you find yourself in this role, you may wonder if you have the authority to withhold money from a beneficiary. In Texas, an executor or fiduciary can withhold funds under specific circumstances. Understanding these situations can help you fulfill your duties lawfully and fairly.

Understanding your role

As an executor or fiduciary, your job is to manage and distribute the deceased person’s estate. You will need to do so according to the deceased person’s will and Texas law. This includes paying off debts, handling taxes, and distributing assets to beneficiaries. You must act in the best interest of the estate and its beneficiaries. This way, you are operating legally and ethically.

Valid reasons to withhold money

Sometimes managing an estate means withholding money and assets from beneficiaries. There are legitimate reasons why you may need to do this:

  • Outstanding debts: Before distributing assets, you must pay off any debts and liabilities of the estate. If the estate owes money, you can withhold funds to cover these expenses.
  • Tax obligations: You must settle estate taxes before any distribution to beneficiaries. Withholding money to cover these tax obligations is within your rights.
  • Legal disputes: If there are legal disputes or challenges to the will, you may need to temporarily withhold funds. This way you distribute the estate according to the final, legal directives.

You can also withhold a beneficiary’s inheritance to settle any debts they owe to the state.

Improper withholding

Withholding money from a beneficiary without a valid reason is not permissible. Executors must not use their position to act unfairly or for personal gain. Any withholding must be justifiable and directly related to estate settlement.

Acting responsibly as an executor or fiduciary

Understanding when and why you can withhold money from a beneficiary is essential. As you make these decisions, it is important to act responsibly and transparently.

Open communication with beneficiaries is crucial. Inform them of any necessary delays and the reasons behind them. Clear communication helps prevent misunderstandings and builds trust during the probate process.

Navigating the complexities of probate and fiduciary duties can be challenging. Consulting with a probate attorney can ensure you fulfill your responsibilities correctly.

Keeping these best practices in mind honors the decedent’s legacy. It also fosters trust and fairness among beneficiaries, making the probate process smoother. This way, you can ensure you distribute the estate in a way that is respectful to everyone involved.