Can Executors and Administrators Be Removed for a Conflict of Interest?

An estate executor or administrator is an individual—or, in some cases, a corporation—who is granted permission by the courts to oversee the unsettled legal affairs of a decedent. This position comes with a variety of duties and responsibilities that depend on the scope and status of the estate in question.

The duties of an executor may include distributing the estate’s assets to beneficiaries, notifying interested parties of the decedent’s passing, filing the decedent’s will in probate court, and paying taxes and other expenses out of the estate’s account. The executor has a fiduciary duty to carry out these responsibilities in a manner that complies with the law and the desires of the decedent as laid out in the will.

Sometimes there is a valid reason to question the suitability of a particular executor with regard to the responsibilities that have been entrusted to them. One of these reasons involves a potential conflict of interest on the part of the executor.

If the executor is also a beneficiary of the estate, then could this be considered a conflict of interest? If so, is this sufficient cause for the courts to revoke the executor’s letter of testamentary that grants the right to serve in this capacity?

Generally speaking, the answers to these two questions are no and no. The existence of a conflict of interest is, by itself, usually not sufficient to remove an executor—but there are important exceptions that should be mentioned.

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Differences Between Executors and Administrators

Executor and administrator are two distinct terms used for the party responsible for managing the decedent’s estate. There are few practical differences between the two titles—an executor does more or less the same things that an administrator does. Technically, however, there is a difference between the two.

An executor is an individual or corporation named in the decedent’s will as the party selected to govern the affairs of the estate. However, the named executor does not automatically assume this role because they have been mentioned in the will. They must be approved by probate court (in this state, the Surrogate’s Court of the State of New York). Once this has been accomplished, the court issues a legal document known as “Letters Testamentary” (Letter of Testamentary) to the executor that they can present to relevant parties to verify their right to perform their duties.

An administrator performs basically the same functions as an executor but has been selected by the court rather than the decedent’s will. Why does this happen? If the decedent left no will, then it is up to the court to choose the party to manage the estate. In these instances, the administrator selected by the court will distribute the assets of the estate in a manner that complies with intestacy laws.

Another type of complication that leads to the appointment of an administrator arises when the executor named in the will is unavailable or declines to accept the role, and the will does not name an alternate executor. When this happens, the court must find a suitable replacement, usually a spouse or another close relative, for administrator duty. The court-appointed administrator is given Letters of Administration that officially confirm their right to manage the estate.

For purposes of this discussion, we will use the term “executor” to include both of these similar roles.

Executors and administrators both have a duty to manage estate assets appropriately and to follow all pertinent laws. If they fail to do so, they can be removed by the probate court. As we shall see, there are instances where a conflict of interest can be cited to remove an executor.

Concept: model houses beside pile of coins.

Potential Conflicts of Interest

It is notconsidered an actionable conflict of interest when a beneficiary of an estate also serves as its executor. As a matter of fact, this is a commonplace arrangement. When making out a will, many people opt to name a spouse or a child (18 or over)—who typically stands to inherit estate assets—to act as executor. In those cases where the courts must appoint an administrator, it is often a close relative of the decedent who ends up assuming the duties. The courts do not find anything inherently wrong with beneficiaries as executors.

However, executors can be removed if it is shown that their actions violate their fiduciary duties. The executor cannot act in a purely self-interested way while administering estate assets. They cannot, for instance, transfer or make a personal claim on estate property that rightfully belongs to another beneficiary. “Self-dealing”—placing one’s personal interests over those of the other beneficiaries—is a breach of fiduciary duty and could lead to the removal of the executor as well as the imposition of heavy fines.

The key, though, is that it is the executor’s actions that merit their removal. The courts are generally not interested in the ordinary potential for abuse—they want to see evidence that the executor has failed or has a very high risk of failing in their duties.

In 2007, the New York Court of Appeals shed light on the current viewpoint of the law in regard to potential conflicts of interest. In the Matter of Palma, the Appellate Court declined to overturn a Surrogate’s Court decision to remove an executor who had acted as the personal guarantor of a loan made by the estate, despite evidence that the loan could not be repaid. In handing down its decision, the court noted that “a potential conflict of interest on the part of a fiduciary, without actual misconduct, is not sufficient to render the fiduciary unfit to serve” but also that,in this particular matter,“the conflicts [of interest] are not merely potential, but are real and presently exist.”

The court furthermore found that “friction, hostility or antagonism between a fiduciary and beneficiaries can also disqualify the fiduciary, but only when such enmity threatens to interfere with the administration of the estate.” In other words, the existence of “tension” between beneficiaries and executor does not, within reasonable limits, merit the involvement of the courts. (Matter of Palma, 40 A.D.3d 1157, NY App. Div. 2007)

What Happens if an Executor Is Removed?

The Surrogate’s Court of the State of New York has the final say on the removal of an executor. If executors are found to have violated their fiduciary duties or to be otherwise unsuited to the job, the court will name a replacement—either the alternate mentioned in the will or, when that doesn’t apply, a close relative of the decedent.

As an estate beneficiary, you have the responsibility to contact a lawyer who handles estate litigation and begin filing the relevant documents with the Surrogate’s Court.

Contact a New York Estate Lawyer Today

Executor and beneficiary conflict of interest cases can be tricky, as New York State courts prefer not to remove an executor without compelling evidence of their unsuitability to the role. We’re here to help. The probate and estate litigation attorneys at Joseph A. Ledwidge, P.C. have 32 years of collective legal experience in the state of New York. Our estate lawyers handle a wide variety of cases, from probating wills to removing executors who violate their fiduciary duties. Call us at 718-276-6656 for a free phone consultation with an estate lawyer.

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