What happens when one co-executor is taking estate assets?

What happens when one co-executor does whatever she pleases with estate assets? Where does that leave the other co-executor? A reader asked me about this. Here is her letter and my reply:

"My sister and I are executors of my father's estate. Before probate she took my father's Cadillac and and put it in her boyfriend's name, without my permission. I have asked for a copy of the bill of sale because I have reason to believe that she had to have forged something to do this. Now it is out of probate and there is now a $2100.00 cheque unaccounted for. I was told it was cashed. What are my legal responsibilities to take action?"

This is yet another case of a parent naming both kids as executors in order to "treat them equally", even though your sister is clearly not cut out to be an executor. I wish parents would stop doing this!

As you are co-executors, decisions regarding estate assets are supposed to be made jointly. Your sister did not have the legal right to transfer the car to anyone without your permission. She should repay the cost of the car personally to the estate. If she is unwilling to do that (and I bet she is) then it can come out of the executor's pay she would otherwise receive, or out of her inheritance. You haven't said whether there are other beneficiaries besides you two, but if there are, she is running the risk that she will be sued by a beneficiary who sees his or her inheritance disappearing.

I don't believe that any forgery would be needed to transfer the car. An executor would be able to transfer a vehicle by showing the will, and probate would not be needed unless the car was very valuable. I would be surprised if there was any Bill of Sale involved.

Your sister also doesn't have the right to cash any cheques from the estate, unless she produces receipts showing that the funds were spent on estate expenses. Even then, she should not be dealing with expenses without your co-operation.

Co-executors are not liable for the actions of other co-executors who act without their knowledge and approval. You won't end up paying for the car yourself. But your duty is to protect and administer the estate. If it ever came down to it and you had to explain to a judge where the estate funds have gone, would you be able to establish that you had no knowledge of any of her transgressions or that you tried to stop them from happening?

The executor's bank account should be set up so that all cheques or withdrawals need the signatures of both executors. ALL estate money should be funneled through there. Let your sister know that any funds that go missing will be taken out of her share of the estate. Make sure that a listing agreement for the house or any other similar asset is in both of your names. That way, she can't receive the money herself but must deposit it into the executor's bank account.

At the end of the day, you and your sister have to agree on the accounting for the estate. If she is unable to account for funds or assets that were in her control, you have a decision to make. Are you willing to insist that she repay the losses, even if that means taking her to court? When siblings are co-executors, there is often a power struggle.

If things have ramped up since you wrote to me and your sister continues to treat the estate as her personal play money, consider asking the court to remove her so that you can carry on alone. This would be a pretty nasty lawsuit, but at least the funds would still be there for the beneficiaries and the will could be followed.