Does an estate lawyer's services end when his or her client has drawn up a comprehensive estate plan? Given the risk of estate disputes or even lawsuits against executors, that answer is often no.
An executor named in a will is an individual entrusted with a fiduciary duty. Readers likely understand the task of distributing bequests to named beneficiaries in accordance with the will. However, an executor must attend to a whole host of other issues, some of which might land him or her into hot legal waters.
For example, an executor must also pay bills of the estate. It may seem like common sense to pay credit card or other bills when invoices arrive in the mail. However, as a law firm that focuses on probate and estate administration, we try to educate our clients about classes of estate debt. Not all debts are equal. A federal tax liability, for example, often takes priority over other unsecured debt. If an executor were to deplete estate reserves by paying off other lower-class creditor claims before the taxes, he or she could be facing legal liability from the IRS.
Yet tax authorities are not the only ones to whom an executor may be responsible. He or she also has a fiduciary duty to the beneficiaries of the estate. That duty includes conserving estate assets, but not necessarily increasing them. For example, an executor may be tempted to invest cash assets in the hopes of obtaining a higher return. Yet if the market plunges, he or she could be deemed to have breached that fiduciary duty by mishandling estate assets.
Source: Wall Street Journal, "The Biggest Mistake Executors Make," Veronica Dagher, Jan. 31, 2016