Thursday, August 21, 2014
As co-executor, am I responsible for the acts of a dishonest co-executor?
Posted by Lynne Butler
A reader recently wrote to me to ask about his legal position as co-executor. Here is his note and my response:
"As co-executor, can I be held legally and financially responsible for costs if a co-executor (who has power of attorney and all other financial and legal documents) runs up debt and runs off with the money from the estate? I don't trust either the co-executor or the author of the will."
I'm assuming for the purposes of answering this question that the testator has already passed away. You have basically two options. One is to accept the risk of dealing with the other co-executor and get on with the executor's work, and the other is to renounce your role as executor.
Renouncing as executor basically means turning down the job right from the start. You can't quit halfway through, as the courts will not allow that, so if you are going to renounce you have to do so right at the start of the estate. Once you have started acting as a co-executor, you have to stick with it unless you get permission to quit. Given the level of distrust you have with your co-executor, renouncing might be a viable option for you.
If you renounce, no liability will attach to you for any actions taken by the executor as he deals with the estate.
Assuming that it's too late to renounce, or that you don't think it's a good idea, you are stuck with your co-executor. The general rule is that a co-executor is not liable for the actions of the other co-executor, so if that person behaves dishonestly or carelessly and causes a loss to the estate, you will not be liable for that. However... and this is a big caveat... you can't just sit by and let him do whatever he wants and think that you will be safe because you're not the one taking the actions.
If you simply sit passively by and turn a blind eye to the actions taken by the co-executor, the court will likely consider you to be just as responsible as the dishonest executor, since you did nothing to protect the estate even though you knew what was going on.
The lesson to be learned? You have to be either all in, or all out. Either you renounce at the beginning or you do your very best as an executor.
If you can show the court that you were carrying on in good faith, doing the best you could in an honest, prudent way and that the other co-executor acted wrongly without your consent or knowledge, then you will likely not be held liable for his or her wrongdoing.
It's a complex answer to what seems a simple question, but this is a complex area of estate law. If you want to know more about how to protect yourself from your co-executor, not to mention the beneficiaries and creditors of the estate, pick up my new book called How Executors Avoid Personal Liability.