Failed Attempt to Resign Leaves Executor Potentially Liable for Unpaid Estate Taxes

In September, a U.S. District Court ruled that the son of an aerospace executive was liable for unpaid estate taxes because he had failed to properly resign as executor of his father’s estate.

In this case, the son had resigned as part of a settlement agreement approved by the Superior Court, but state law required him to resign through the Probate Court. While the case in question is very complicated and involved an estate worth hundreds of millions of dollars, the warning for anyone who wants to retire from his/her role as a fiduciary is clear: be sure to follow the law.

In the estate planning context, a fiduciary may be the trustee of a trust, an agent in a power of attorney, or the executor of a will. As you work with your attorney to create these documents it’s important that the people – the fiduciaries – you choose to carry out your wishes understand the responsibilities they are accepting.

In the case of a trust, a fiduciary must preserve, protect, and grow trust assets in a wise and sensible way by taking into account taxation, inflation etc. Legally, the fiduciary may not take unreasonable risks with the assets that may diminish the estate. Also, a fiduciary must keep detailed records regarding the assets and share the records when asked.    

In the case of a will, the fiduciary must execute the various aspects of the will property; with a power of attorney, the fiduciary must act on your behalf and with your best interests in mind.

If any fiduciary violates the established duties or does not follow the letter of the law as in the case we mentioned above, they risk personal liability.

It’s not a role to be assigned or accepted lightly. The person you select to manage your finances will need different skills from the person you choose to make health care decisions for you. And, the person who will be executor of your estate may need different qualifications as well.

While you may want to choose your child to be executor of your estate, it’s important to talk to your child in advance and make sure he/she is comfortable with the job. In practice, an independent trustee – someone who is not a relative -- is often a good choice. That person may be a retired accountant or attorney, family friend, or corporate fiduciary. 

At Estate & Elder Law Services we are happy to help you decide who will do the best job for you and we will train your representatives on their roles.