When it comes to managing a deceased loved one’s estate, an executor is typically the most important person in charge of it all. If your loved one had a will, they also appointed an executor responsible for settling the estate according to the terms of the will. While executors must make sure to pay any outstanding debts or close important financial accounts, they are also responsible for making sure any assets set aside by the deceased are given to the proper beneficiaries.
Jump ahead to these sections:
- Can an Executor Actually Withhold Money From a Beneficiary?
- When an Executor Can and Cannot Refuse to Pay a Beneficiary?
- What Can You Do If an Executor Refuses to Pay a Beneficiary?
A beneficiary can receive almost any kind of asset according to a will, including cash, a car or even a house. If the will directs that the beneficiary is to receive a payment, then it is the duty of the executor to pay the beneficiary. But what happens when an executor refuses to pay a beneficiary? Below we will discuss some of the issues surrounding such a dilemma.
Can an Executor Actually Withhold Money From a Beneficiary?
The answer is not a simple yes or no, as an executor has many duties after a death and must follow the terms stated in your loved one’s will. A will can include information on how your loved one wanted to handle their funeral arrangements, on top of what to do with their assets and estate. These duties must be followed in a certain order and be performed in a manner that follows the law.
Before distributing property to beneficiaries
From the outside, the process may appear very straightforward. However, there are many things that an executor will have to address prior to and in order to give a beneficiary money. The steps the executor has to follow may vary depending on the circumstances and which state laws apply to the will. Below are general guidelines that an executor may have to follow.
- Find the will: The executor may not be able to do anything with the estate until the will is located. A person is only a beneficiary if they are named in a will. If there is no will, then there is no beneficiary.
- Petition probate court: The executor may first have to petition the court for probate. Then, the court will authorize the executor to conduct the estate’s business.
- Identify assets: They can include things such as personal belongings, land, houses, bank accounts, stocks, retirement accounts, and other financial accounts.
- Identify liabilities: Liabilities can be outstanding debts, funeral expenses, personal loans, mortgages, estate fees, or any other unpaid debt or fee.
- Notify creditors: Once all liabilities and assets are accounted for, the executor can go ahead and begin the process of reaching out to said financial institutions like credit card companies, banks, and other relevant parties.
- Pay estate debts and taxes: The will may provide instructions as to how and what can be applied to certain debts of the estate. However, all debts must be paid before a beneficiary can receive any money.
- Distribute estate assets: Once the executor has completed the above steps, they may be able to distribute the estate assets, including paying beneficiaries.
If you have been reading closely, then you may have noticed that paying beneficiaries is one of the executor’s last duties. That is because the executor has to ensure that all assets are accounted for and all debts are paid before the assets are distributed.
What does this mean for a beneficiary? All of these steps legally may have to take place before an executor can discuss distribution of any assets. So an executor can withhold money from a beneficiary while it is completing the steps discussed above.
That does not necessarily mean that the executor can withhold the money forever. However, depending on the complexity of the estate, the executor may withhold the money for an extended period of time.
When an Executor Can and Cannot Refuse to Pay a Beneficiary?
Let’s say that the executor has completed the above steps and it is now time to pay a beneficiary. Can the executor refuse to pay a beneficiary? Maybe, depending on the will and the estate.
An executor must follow the law
This is one of the first responsibilities for an executor. However, this also means that the executor could refuse to pay a beneficiary if doing so would violate the law.
Executor must abide by the terms of the will
The executor cannot change or modify the will. Additionally, an executor cannot go against the will to either refuse or ensure payment to a beneficiary. This means that if the terms of the will can be followed, and the terms require payment, then the executor must pay the beneficiary.
In that same respect, an executor can refuse to pay a beneficiary if it goes against the will. This may occur if the will has certain conditions placed on the bequest (the payment to the beneficiary). If the beneficiary does not meet those conditions, then the executor may refuse payment.
Executor can only pay what the estate possesses
An executor can only pay what the estate possesses. As mentioned above, the executor must follow the guidelines set forth by the law. Those steps require that other debts are paid before the beneficiary is paid. Unfortunately, if there is nothing left after paying off the debts, then the executor has nothing left to give the beneficiary.
In these circumstances, the executor cannot pay the beneficiary because there is no money left.
The residuary beneficiary
A will may name specific beneficiaries to receive specific amounts of money or other items. The will may also name a residuary beneficiary. A residuary beneficiary is someone who gets everything else.
For example, let’s say that a will distributes the following:
- Sally receives the car collection and house
- Johnny receives $50,000; and
- Bobby gets everything else.
This means that Bobby is the residuary beneficiary because he gets what is left of the estate. If there is nothing left from the estate after the gifts to Sally and Johnny, then there is nothing for the executor to give Bobby. Therefore, the executor can refuse to pay Bobby, as the executor cannot pay a beneficiary what the estate does not have.
If the executor is properly performing their duties and there are funds in the estate to pay a named beneficiary, then the executor will most likely have to pay the beneficiary. What happens if the executor refuses to pay a beneficiary? Read on below.
What Can You Do If an Executor Refuses to Pay a Beneficiary?
Losing a loved one is never easy, and dealing with the grief and loss can take a toll. However, the death of a loved one also means that someone may need to shoulder additional responsibility. That responsibility includes handling the deceased’s estate which falls on the executor.
In most cases, the executor is a trusted loved one that the deceased knew, such as a family member or close friend. This relationship can complicate the payment process. However, the executor has a legal responsibility to the estate and the beneficiaries. If you are a beneficiary and the executor refuses to pay you, you can hold them accountable.
So what can you do if an executor refuses to pay a beneficiary? It really depends on the circumstances. Just because you do not agree with how the executor is handling the estate does not necessarily mean that they are doing anything wrong.
Similarly, if an executor is not doing what you ask them to do, it does not mean that you have any type of legal recourse. Remember, the executor has certain obligations and those obligations may not involve you. Here are some ways to handle an executor who is refusing to pay a beneficiary.
Speak with the executor
If you do see a potential issue with how the executor is handling the estate, you do have a few options. Your first option is to speak with the executor directly and explain your concerns. Make sure to ask questions to help you understand the process of distributing assets as well as the status.
During your discussion, you should keep in mind a few points. Remember that in addition to fulfilling their role, the executor may also be mourning the loss. This means that they may have a lot of emotions that they are dealing with on top of handling the estate.
Also it is worth remembering that just because you cannot see the executor working, it does not mean that they are not fulfilling their obligations. Being aware of the steps that the executor has to go through can help you understand the process. If the steps are taking longer than expected, then that may explain the delay.
Contact an attorney
If you still have concerns after your discussion with the executor, consider speaking with a probate attorney. A probate attorney can help make sure that all of the terms of the will are being followed.
A probate attorney will also ensure that the executor is following the law when it comes to managing the estate. The attorney will check to make sure that the executor is not mishandling funds or prolonging the process. For example, you may feel that you are owed more money than what you have been paid. A probate attorney can help address those concerns as well.
You may also be able to contact the attorney who helped initially draft the will. However, some attorneys only specialize in estate planning and others specialize in estate administration.
Once you have found a probate attorney, they can advise you on how to proceed. If they find a particular cause for concern, you may have some legal recourse to have the executor removed from their position and replaced with a new executor.
It is also worth remembering that probate laws vary by state. Depending on where you live, the reasons to remove an executor may include the following:
- They are not properly performing their duties.
- They are not able to properly perform their duties.
- They have mishandled the estate.
- They have committed fraud against the estate.
- They have neglected the estate.
The process of removing an executor is done through the court. While you may be able to complete the process on your own, consulting with an experienced probate attorney is usually recommended.
When an Executor Refuses to Pay a Beneficiary
Staying in contact with the executor can help you understand the process regarding the distribution of assets and paying off any outstanding debts. After gaining insight into the steps required, you can decide on next steps. If you have any concerns with how an executor is handling an estate, you may want to consult with an attorney. Even if you are familiar with the estate, an experienced attorney will advise you of your rights and provide guidance regarding your options.
In many instances, time is of the essence. The longer you wait to address your concerns, the more difficulties you will face.