A probate administrator, executor, or personal representative faces several legal and financial risks when managing an estate.
Some of these risks include:
Breach of Fiduciary Duty
The administrator must act in the estate’s and its beneficiaries’ best interests. Failure to do so, whether through negligence, mismanagement, or intentional misconduct, can lead to legal actions such as a surcharge petition. If found liable, the administrator may be required to personally compensate the estate for any losses.
Personal Liability for Debts and Taxes
If the administrator fails to properly handle the estate’s debts or tax obligations, they could be personally liable. This includes ensuring that estate and income taxes are paid on time, that creditors are appropriately notified, and that the estate’s assets are not distributed prematurely. Missteps in these areas can lead to personal financial responsibility for any shortfalls.
Improper Asset Distribution
Distributing assets incorrectly or prematurely can expose the administrator to legal risks. If assets are distributed before all debts and taxes are settled, the administrator may have to recover those assets, which can be difficult or impossible. Additionally, improper distribution can lead to disputes among beneficiaries, resulting in lawsuits against the administrator.
Failure to Account
Administrators must keep detailed records of all financial transactions related to the estate. This includes maintaining an accurate inventory of the estate’s assets, tracking all expenses, and providing periodic accountings to the court and beneficiaries. Failing to provide an accurate account can lead to legal challenges and possible financial penalties.
Conflict of Interest
If the administrator has a personal interest in the estate or stands to gain from certain decisions, they may face conflicts of interest. This can lead to accusations of self-dealing or favoritism, resulting in legal challenges and potential removal from their role as administrators.
Negligence in Asset Management
The administrator is responsible for preserving the value of the estate’s assets. If they fail to properly manage or protect these assets—for example, by not securing property, investing wisely, or collecting debts owed to the estate—they could be liable for any resulting losses.
Failure to Comply with Court Orders
Probate courts often issue specific orders that the administrator must follow, such as selling certain assets, distributing funds, or filing reports. Failure to comply with these orders can lead to legal sanctions, fines, or even removal from the administrator’s role.
Handling Contested Wills
Administrators might find themselves in a legal battle between beneficiaries if the will is contested. This can lead to delays in probate, increased legal costs, and potential liability if the administrator is found to have acted improperly during the contest.
To mitigate these risks, probate administrators should seek legal and financial advice, act transparently, and fully understand their legal responsibilities.