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Friday, August 13, 2010

Answering your question - executors and beneficiaries

On a recent post, one of you readers asked such a good question that I thought I'd reproduce the question and answer here (for those of you who don't go back and read the comment threads). The question arose on my post about "Top Five Mistakes Made by Executors".

Q: Why are executors only required to communicate with residuary beneficiaries and not specified beneficiaries?

A: A specific beneficiary has been given a certain gift, say $500. This person is going to get the same $500 whether the estate is worth $1,000 or $10,000,000. Therefore there is no need for all of the deceased's private information - both personal and financial - to be divulged. On the other hand, a residuary beneficiary's gift is, by definition, a share of "the rest" of the estate. They won't know what they are supposed to receive unless they know how much "the rest" is. For example, if you were to receive 50% of an estate, you need to know whether the estate is worth $1,000 or $10,000,000 so you can figure out what your share is worth. How else will you know whether the deceased's instructions were properly carried out? Every dollar that an executor spends on expenses or loses by being negligent is a dollar that is taken out of the residuary beneficiary's pocket, but not from the specific beneficiary's pocket.

Thanks for the great question!

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