When a person dies, others are called upon to manage their estate. The executor, named in their will, oversees the distribution of assets. If they didn’t have a will, the court names an executor, sometimes referred to as an administrator. Beneficiaries are those designated to inherit the decedent’s assets, as explained in a recent article, “Executor vs. Beneficiary Rights: Estate Planning Guide” from Nasdaq.
The terms beneficiaries and heirs are used interchangeably. Beneficiaries are typically persons named in a legal document, such as a will or a trust. Life insurance policies, retirement accounts and bank accounts also have named beneficiaries to inherit the assets or proceeds. In the case of life insurance, it is on the death of the original owner. In most cases, the person making beneficiary designations has the right to change them.
State inheritance laws legally identify the heir as having the right to receive assets from a deceased person’s estate, usually their spouse, children, or other relatives.
The executor is appointed by the will or the court to oversee probate. This is where assets are inventoried, outstanding debts are paid and any remaining assets are distributed to heirs.
When having a will prepared by an experienced estate planning attorney, it’s possible to name a beneficiary as an executor. However, there are some pros and cons to doing this.
An executor who will benefit from the will could simplify things, if the estate is relatively straightforward. However, if the estate is large, or if other beneficiaries might challenge the will, it could get messy.
Executor tasks may include:
- Consulting with estate planning attorneys, accountants, financial advisors, and others whose services are needed in the probate process
- Collect and inventory assets of the decedent
- Give notice to creditors of the person’s death, so they may bring claims against the estate for any outstanding debts
- Receive reimbursement for expenses paid to manage the estate, including professional fees
- Collect a fee for their time and services provided as the executor, which could be a percentage of the estate or a flat fee, depending on what is permitted by state law and local custom.
Beneficiaries have certain rights:
- Receive assets from the estate they’re entitled to according to the terms of the will or state law in a timely manner
- Request and receive information about the administration of the estate, including financial details
- Request the removal of the executor.
Beneficiaries also have the right to sue the executor of an estate, if they believe a breach of fiduciary duty has occurred. The executor is a fiduciary, meaning they must act in the best interest of the beneficiaries or other persons represented in financial matters.
Executors can be sued only if there are grounds for doing so. For example, a beneficiary might have grounds to sue the executor if the executor:
- Fails to provide financial statements upon request.
- Delays distribution of assets for no reason.
- Favors one beneficiary over others when distributing assets.
- Mismanages or misuses estate assets for their benefit.
- Uses estate assets to make risky investments.
- Has an obvious conflict of interest because they are also beneficiaries of the estate.
Understanding the difference between executor vs. beneficiary rights is essential if you’ve been assigned either role. If you’re preparing a will with an experienced estate planning attorney, they will clarify these roles and help you determine the best candidate for executor.
To learn more about estate planning in the East Valley, Gilbert, Mesa and Queen Creek, schedule your free consultation with Attorney Jake Carlson by using one of the links above.
Reference: Nasdaq (March 10, 2023) “Executor vs. Beneficiary Rights: Estate Planning Guide”