After losing a loved one, the heavy task of administering their estate soon follows. In Texas, it’s common for parents to entrust the role of executor to one of their children, often someone who is also a beneficiary of the estate. While this arrangement can work, it’s crucial to be aware of potential pitfalls if you are serving as both executor and beneficiary.
Potential conflicts of interest for executor-beneficiaries
As executor, your responsibilities involve identifying and safeguarding the assets of the estate, paying off any debts and liabilities owed by the estate, filing the appropriate taxes and distributing the remaining assets per the decedent’s wishes. However, as the beneficiary, you also have a stake in the distribution of assets which may lead to a conflict of interest.
Consider these situations where other beneficiaries may question your actions:
- Distribution decisions: Favoring your interests or certain family members when deciding how to distribute assets.
- Estate debts: Prioritizing your repayment if you are also a creditor, over other estate obligations.
- Buying/selling assets: Giving yourself a discount on certain assets instead of selling them at a higher price, which goes against the estate’s best interests.
If a significant conflict of interest arises, those with an interest in the estate may petition the court to remove you from your duties. Depending on your actions, you may be liable for damages, responsible for paying legal fees, and face other penalties.
Prioritizing fiduciary duty is paramount
As an executor, you have a legal responsibility to act in the best interest of the estate and all beneficiaries. This entails putting aside personal interests to ensure fair distribution and management of the estate.
Prioritizing transparency, fairness, and open communication can help prevent misunderstandings. Keep other beneficiaries updated at all times, document detailed records of all transactions and decisions and consult neutral third parties where possible to uphold your duty.
Estate administration is a complex task, and there are many ways to inadvertently make costly mistakes. Don’t hesitate to ask for help—it’s better to seek guidance upfront than to risk disputes or legal issues later on.