How and When to Challenge a Breach of Fiduciary Duty by the Executor or Administrator of a NJ Estate
If you are a beneficiary (meaning a person entitled to $$$ under a Last Will or Trust), this page is important to you. Executors and trustees owe a fiduciary duty to the heirs and beneficiaries of the Estate. A fiduciary duty means of a duty of good faith and fair dealing to the beneficiaries and interested third parties of the Estate. An executor, administrator and trustee must always consider the best interests of the trust or estate before his or her interests.
An executor’s job is defined by New Jersey statutes. He or she must probate the Will, create an inventory of everything owned by the decedent, manage the estate, take care of tax matters, pay debts and distribute estate assets to beneficiaries. In larger estates this role can take years to complete. During this time legal and tax issues may develop and disputes result. When an executor or trustee profits from or abuses his or her position, fails to communicate and disclose information to beneficiaries he or she may have breached their fiduciary duty to both the estate and its beneficiaries. A failure to safeguard estate assets that causes a loss to the heirs and beneficiaries may also be a breach of fiduciary duty. The estate/trust representative must vigilantly protect both the value and quantity of estate assets. The heirs and beneficiaries damaged as a result of this breach can file a lawsuit against the executor or trustee. Under some circumstances, the executor or trustee can be held personally liable for the loss.
N.J.S.A. 3B:14-21 sets forth the grounds to challenge the actions of an executor and to seek their removal. The most serious accusations include; neglect or refusal to perform an act or obey an order within a time frame directed by a Court, including the filing of an accounting, production of documents and estate resources, neglect and/or gross carelessness of responsibilities resulting in a loss of value or destruction of estate assets and income; embezzlement, theft and conversion, self-dealing of estate funds and resources, conflict(s) of interest in service to the estate and the economic welfare of beneficiaries and/or the self-enrichment of the executor, bias and favoritism between beneficiaries. The critical question most often asked by a judge when a request is made is to remove an executor/administrator is “whether the circumstances are such that the continued involvement of the estate fiduciary is/would be detrimental to the interests of the estate”. Mere friction between an executor and beneficiary is not a ground for removal unless the relationship is likely to “interfere materially with the administration” of the estate which must be supported by clear and convincing evidence.
While New Jersey is a probate friendly state and executors are not required to obtain court approval for most actions, if the estate representative is not complying with state law, the only recourse a beneficiary, creditor or other party in interest has is to file a complaint and order to show cause for relief with the Superior Court.
Successful Claims Against an Executor, Trustee or Administrator of an Estate
FAILURE TO ACCOUNT TO BENEFICIARIES BY AN EXECUTOR
Executors and administrators have a duty to keep all estate assets separate and identifiable, and to account to the beneficiaries for all monies coming into and going out of their possession. For estates subject to probate, the court will not allow the process to end until a satisfactory accounting is complete. If the trustee of a trust fails to provide a proper accounting, the beneficiaries can file a petition seeking a court order compelling the trustees to do an accounting. Trustees who fail to properly account for their actions may also be removed by the court. But the beneficiaries must take action. They cannot just sit back and complain. That won’t get them anywhere.
A court will order an executor/administrator to account if they do not do so, unless all of the beneficiaries agree to waive such an accounting. If the executor or trustee has failed to keep records, fails to keep beneficiaries informed or if they have failed to keep estate property separate from their own, a breach of their fiduciary duty is presumed.
Just how detailed the accounting must be and how frequent reasonable disclosures must be made depends upon a number of considerations, including the complexity of the estate assets, valuation of assets, the number of beneficiaries, their known or unknown addresses, income and estate tax liability, etc. I’ve written extensively about an executor’s/administrator’s obligations to provide an accounting to beneficiaries and the level of detail beneficiaries can demand in any accounting. I invite you to visit my estate administration and probate site “How to Finalize and Wind Up a Probate Estate” to learn about your right to a detailed accounting.
If you are the executor of an estate or trustee of a trust under attack by beneficiaries and need to protect yourself from the claims of beneficiaries and/or others, or if you are a beneficiary and believe that the executor or trustee is not fulfilling their legal obligations to you and the estate, contact Fredrick P. Niemann, Esq. today, toll-free at (855) 376-5291 or email him at firstname.lastname@example.org.
You’ll find him to be very knowledgeable in will contests and probate disputes and easy to talk to.
Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Will Contest Probate Litigation Attorney