What Does An Executor Have To Disclose To Beneficiaries?
When you’re serving as executor, the single best way to avoid problems with beneficiaries is to keep them informed about the process and make your actions as transparent as possible. Let people know what you’re doing, and what the court requires you to do. Probate is a mysterious process to most people after all, it’s something most of us experience only a time or two, when a parent or spouse dies. The executor, charged with safeguarding assets, paying bills, and distributing property, has the greatest responsibility. But the process can produce anxiety in other family members, too.
Often they are unsure about what’s happening, reluctant to ask the executor, and confused by the legal documents that may come their way. If you’re the executor, the beneficiaries’ anxiety can come back to haunt you in a big way. If they convince themselves that you’re doing a bad job as executor or that you’re dishonestly depriving them of their inheritances you could even end up with a costly, nasty court battle. Even if resentments simmer without actually boiling over into a lawsuit, the damage can still be severe: strained relationships and mistrust that never go away. To keep beneficiaries from worrying (and complaining), don’t wait for them to come to you. When you take on your executor’s responsibilities, starting with filing the will and securing estate property, let everyone know. Tell them that they will named you as executor (or if there’s no will, that you’re willing to take on the job and have priority under state law) and that you’ll be gathering property, paying bills and taxes, and eventually distributing property to the people who inherit it. If you know that a formal probate proceeding will be required, let them know that, too, and give them an idea of the time frame. If certain property can be transferred without probate, explain that, too. If you’re working with a lawyer, let them know. Email is often an easy way to contact groups of people and make sure everyone gets the same information. The key is simply to let people know what to expect.
Requests to See the Will
If someone wants to see a copy of the will, produce it promptly. Once the will is deposited with the court—which you should do whether or not you actually file a probate case later—it’s a public record anyway, available to anyone who wishes to see it.
Questions About Delays
Beneficiaries often complain that probate takes too long. It’s hard to blame them, because it does take a long time before they can actually receive their inheritances. But it’s not the executor’s fault. You’ll probably need to explain (or remind them, if you’ve already communicated it) that hard as it may be to believe, that once you file the probate case and publish notice of it in the local newspaper, the law requires you to do nothing for a period of months. The waiting period, which varies by state but is typically four to six months, is to give creditors time to hear about the death and come forward with their claims. If they don’t, they’re out of luck after the waiting period ends.
Requests for Property from the Estate
For example, say your brother really wants to take your late father’s car—after all, it’s just sitting in the garage, not useful to anyone and in need of an oil change anyway. But you’ve just filed the papers to get the probate case started. Don’t just tell your brother no; explain that at least until you get the estate inventoried and valued, you can’t let anyone take anything. It’s part of your fiduciary responsibility as executor; you are required by law to make sure there’s enough money to pay the bills before you start giving out property to beneficiaries. If you can get your brother to understand that this isn’t a personal rule, made by you and applied just to him, you have a much better shot at heading off hurt feelings. Contrary to scenes you might have seen enacted on television or in the movies, there’s really no such thing as a “reading of a will.” There’s no legal requirement that a last will and testament must be read aloud to anyone. The executor or personal representative of the estate determines who is entitled to receive a copy and who should be sent a copy even if state law doesn’t require it.
Locating the Will
It doesn’t always happen that family members can immediately locate a decedent’s last will and testament, yet everything begins with this document. Logical places to look include safe deposit boxes and anywhere the decedent was fond of filing away personal papers. The decedent’s lawyer might have kept a copy if he drafted the document. If you don’t know who that lawyer is, consider placing a notice in the local newspaper. You can also check with the probate court. Some states allow individuals to file their own wills before their deaths for safekeeping. Many states require that the individual in possession of the will must file it with the probate court when it’s located. Ideally, the document will name the individual the decedent wanted to act as executor of her estate. Once filed, the will is a matter of public record. Anyone can see it. Interested parties can also usually learn the name of the executor by getting a copy of the death certificate from the county registrar. They can then request a copy of the will if they haven’t yet received one or if it’s not yet available for viewing in the court system. This leaves a somewhat long list of who should receive a copy.
The Executor Named in the Will
Obviously, the executor must have a copy of the will. He’s responsible for settling the deceased’s estate according to its terms. He must review it to understand who the beneficiaries are and to learn of any special restrictions or instructions that might exist about their shares of the estate. Many wills also determine what powers should be granted to the executor, sometimes called a personal representative, when he’s settling the estate. They might detail what type of compensation he’s entitled to receive for carrying out all the fiduciary responsibilities involved in the probate process.
The Beneficiaries Named in the Will
All beneficiaries named in a will are entitled to receive a copy of it so they can understand what they’ll be receiving from the estate and when they’ll be receiving it. If any beneficiary is a minor, his natural or legal guardian should be given a copy of the will on his behalf.
Heirs at Law and/or Prior Beneficiaries
If the executor or the estate attorney anticipates that anyone will file a will contest to challenge the validity of the will, he might send copies to any heirs at law of the deceased who aren’t named in the will. He might also want to provide copies to any beneficiaries named in a previous will if there is one. Heirs at law are individuals who are so closely related to the decedent that they would have inherited from her if she had not left a will. All states have prescribed lists detailing who these people are. They commonly begin with a surviving spouse, if any, then children, grandchildren, and outward to more distant relatives in an ever-widening arc. More distant relatives typically do not inherit unless all those who precede them in line are also deceased. Providing copies of the will to all these people can help to limit the amount of time that any disinherited beneficiaries or heirs have to challenge the will. In many states, it starts the clock ticking toward the deadline by which they must do so.
The Accountant for the Estate
The accountant for the estate must receive a copy of the will if one is appointed. He must understand any instructions the will gives for paying off the debts of the estate. He must also deal with the apportionment of any estate and income taxes, instructions on the allocation between estate income and principal, and when and if estate accountings must be given to the beneficiaries and filed with the probate court. He must know what powers the executor has in settling and compromising creditor claims filed against the estate.
The Successor Trustee of a Revocable Living Trust
The last will and testament might be a “pour-over will.” This type of will often comes into play when the deceased had a revocable living trust that was not completely funded prior to his death — not all his assets had been placed into the trust’s ownership. This type of will simply directs that any property left outside the trust should be moved into the trust at his death. A pour-over will also require a probate proceeding, and the successor trustee the individual named to manage the trust after the owner’s death — must receive a copy of the will. It should explain how the executor and the successor trustee should work together to settle the trust and the probate estate. It sometimes happens, however, that successor trustee and the executor are the same person.
The IRS and the State Taxing Authority
If the estate is taxable for federal or state estate tax purposes, a copy of the will must also be submitted to the Internal Revenue Service and to the applicable state taxing authority. It should accompany the filings of any estate tax returns.8
Wills Are Public Record
Remember that a will becomes a public record for anyone to see and read when it’s filed for probate with the state court. The beneficiaries of the will can request that the probate judge seal the court records to prevent the general public from viewing it under certain circumstances. When you’ve been chosen to act as the trustee of a trust, you must handle both money and people. You might be more worried about the financial part, but the people may prove to be the greater challenge. Your job as trustee will be infinitely easier (and you’ll be far more effective) if, right from the start, you have cordial dealings with the trust beneficiaries — the people who benefit from the trust money. Most beneficiaries are unfamiliar with the trust administration process and anxious about their lack of control. This combination is the perfect recipe for fear and paranoia. You may be doing everything right from a technical standpoint, but if the beneficiaries don’t know what you’re doing or why you’re doing it you’re not likely to get their cooperation or support. And, without it, your job is likely to take longer and be more difficult than it needs to be.
The best way to relieve beneficiaries’ concerns is to:
• get in touch with the beneficiaries early
• educate them about your role
• help them to form realistic expectations of how long it will take to administer the trust
• treat their questions as opportunities to engage them (rather than as annoying intrusions), and
• don’t hide the trust document or assets from them.
You are required (by law) to keep beneficiaries reasonably informed about how trust assets are being managed. Some states require you to send specific kinds of notices and information to the beneficiaries on a regular basis. Think of these requirements as the minimum you should do. You’ll do better if you exceed these requirements and make sure that all the beneficiaries know exactly what the trust owns and what you’re doing with the assets. The more transparency there is during a trust administration, the happier the beneficiaries should be. If the beneficiaries all live nearby, a good way to start might be to call a family meeting and sit down together to go over the process of trust administration. You can answer beneficiaries’ basic questions about the trust and its terms and give them an overview of what must happen before you can hand over the trust assets to them. Limit the scope of the meeting to a discussion of what the trust instrument says and how trust administration works. The attorney who’s helping you in your role as trustee can also be at that first meeting (for more about whether you should hire an attorney. The attorney can answer questions about the trust and your responsibilities. But beneficiaries need to understand that the lawyer is there to represent you in your capacity as trustee and that the attorney cannot give the beneficiaries legal advice. Unhappy beneficiaries can get their own attorneys to help them advocate for them in the trust administration process though if you keep them informed and engaged, they shouldn’t need to. If a face-to-face gathering isn’t practical, send each beneficiary a letter to notify them that you are the trustee, give your contact information, and provide an overview of the trust administration process. This letter should be in addition to whatever notices your state law requires. Whenever you take an action as trustee or discover information that affects the beneficiaries, be sure to let the beneficiaries know about it. You have a legal duty to give the beneficiaries information that they might need to protect their interests. You’ll be providing regular written reports (called “accountings”) that detail all financial transactions, but it’s a good idea to keep informal lines of communication open, too. A short email that tells the beneficiaries that you’ve gotten an offer on some trust real estate you want to sell or the troubles you’ve been having with liquidating a brokerage account will let the beneficiaries know what’s happening and that you’re keeping them in mind. If you think a beneficiary might second-guess you in the future for example, you want to sell some stock owned by the trust but know a beneficiary wants to hang onto it — it might be prudent to go a step further and ask for the beneficiaries’ approval before you act. In most states, if beneficiaries consent in writing to a proposed activity, they can’t later sue you if the decision turns out to have been a mistake. If a beneficiary objects to something you’ve proposed, you can go to the local court and ask the judge what to do. In some states, beneficiaries have the right to see a copy of the trust document itself. In other states, beneficiaries don’t have a legal right to see the whole trust instrument, so if you wish, you can give them only enough information for them to safeguard their interests. You might decide to disclose only the provisions that apply directly to a particular beneficiary. In many cases, such as when all siblings are receiving an equal share of the trust it may make sense to give each one a full copy of the trust instrument itself, even if it’s not required by state law. But in some situations, sharing the whole trust document with all the beneficiaries can trigger bad feelings. If one beneficiary’s share is being kept in a trust because of that beneficiary’s past inability to manage money, or if one beneficiary is receiving more than others, you might not want to offer the entire trust instrument. You can provide it if a beneficiary asks you for it. It’s quite common to be both a trustee and a beneficiary of a trust. The surviving spouse, for example, is almost always the successor trustee and beneficiary of a family trust. And it’s quite common for one adult child to be the trustee and all the siblings to be beneficiaries of their parents’ trusts. This can be a difficult position because, as the trustee, it’s your job to be fair to everyone and never to benefit yourself at another beneficiary’s expense. If you’re in this position, don’t be sloppy just because everything’s in the family. When it comes to record keeping and decision making, pretend you don’t know the beneficiaries — treat them as you would strangers, not your siblings or children. That means being sure to:
• keep very good records
• never use trust assets for your own use, and
• if you pay yourself compensation, be prepared to justify what you’ve charged and what services you provided to the trust.
When you need legal help with beneficiary law, probate, and trust law in Utah, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506