The Executor’s Guide to Fraud Claims

Executor fraud occurs when the executor of a will uses deceit to misappropriate estate assets for themselves or someone else who is not entitled to receive them. Claims of executor fraud can have serious consequences, including personal liability for the executor.

What is executor fraud?

Fraud occurs when the perpetrator unlawfully obtains money, assets, or another benefit. When the perpetrator is the executor of a will, the deceptive activity can be referred to as “executor fraud.”

Examples of ways that an executor can commit fraud against the estate and its beneficiaries include:

  • Misappropriating funds or other assets
  • Withholding inheritances
  • Lying about estate assets
  • Hiding or omitting estate assets
  • Failing to notify a beneficiary 
  • Underpaying a beneficiary 
  • Falsifying liabilities 
  • Charging inflated fees
  • Selling assets at below market value to a friend

How does an executor account to beneficiaries?

In California, the executor of a will can also be referred to as the personal representative of the estate. Personal representatives are generally required to file an accounting of the transactions that have been conducted during the administration of the estate with the probate court. However, if all the distributees sign a written waiver of account or acknowledgment, the executor will not have to file an accounting. 

Upon completion of the administration of the estate, the executor will file an accounting with the court summarizing the financial activity that has occurred since the probate was opened. The accounting requires specificity, and any personal representative should maintain records to substantiate the estate transactions and have them readily available for inspection and review.

What’s supposed to be in a probate accounting?

The final accounting must include a financial statement and report of administration that contains the information required California Probate Code §1061 and 10900. 

Under California Probate Code §1061, all accountings that filed with the court must include a summary of the following:

  • The estate property in the initial inventory.
  • The value of any assets received during the period of the accounting.
  • Net business incomes and losses.
  • Sales gains and losses.
  • The amount of disbursements, including distributions to beneficiaries.

California Probate Code §10900 also requires the account to include the following information:

  • If notice to creditors was given.
  • Creditor claims filed, including: 
    • The date of filing the claim;
    • The name of the claimant;
    • The amount of the claim; and
    • The action taken on the claim.
  • Creditor claims not paid, satisfied, or adequately provided for, including:
    •  Whether the claim is due;
    • The date due;
    • The date any notice of rejection was given;
    • Whether the creditor has brought an action on the claim; and
    • Any real or personal property that is security for the claim.

How often does an executor need to account?

Generally, an executor needs only to file a final accounting and petition for an order for final distribution of the estate when the estate is in a condition to be closed (California Probate Code §10951). A personal representative must also account whenever a court orders an accounting.

According to California Probate Code §10950, the probate court has the authority to order an accounting at any time, either on its own motion or on petition of an interested person. The court is required to order an accounting if an interested party asks for one and it has been more than one year since the last account was filed or, if no previous accounting has been filed, more than one year after issuance of letters of administration to the personal representative.

What to do if accused of executor fraud?

If you are accused of executor fraud, it’s imperative that you take action to defend yourself. The problem won’t go away on its own if you just try to ignore it. If a beneficiary pursues action against you for fraud, you could be removed as executor or even face personal liability, which means money out of your own pocket. And if you don’t defend yourself, the beneficiary could get a default judgment, forcing you to pay even if the charges are baseless.

Given everything at stake, you should consult with an experienced probate litigation lawyer as soon as you start to suspect that a claim of fraud may be instigated against you. A probate litigation attorney can help defend you against a charge of fraud or any other executor misconduct and protect you from personal liability.

Is there a statute of limitations on executor fraud?

The statute of limitations on lawsuits based on executor fraud is three years. 

Statutes of limitations are deadlines for when a plaintiff can file a claim. These deadlines are set by state law, and the amount of time will vary depending on the cause of action. In a lawsuit to recover money damages from you for executor fraud, the statute of limitations is three years. However, this would not apply to a beneficiary filing for your removal as executor in probate court.

Can an executor be sued for fraud?

Yes, an executor can be sued for fraud, just like anyone else. 

Suppose an executor commits fraud against an estate. In that case, people who suffered a loss because of the fraud can initiate a lawsuit against the executor for fraud, as well as any other relevant causes of action.

Additionally, an executor can be removed as personal representative of the estate for committing fraud. California Probate Code §8500 allows any interested person to petition for the removal of the personal representative from office, and California Probate Code §8502 states that personal representative may be removed from office if they have wasted, embezzled, mismanaged, or committed a fraud on the estate, or are about to do so.

When should I contact a probate lawyer?

If you have been accused of executor fraud, or you suspect that you might be soon, you should contact a probate lawyer immediately. An experienced probate attorney can review your situation and determine the best defenses to any claims of misconduct that may be levied against you. You will be much better served to retain a probate litigation lawyer than to attempt to engage opposing counsel on your own.

 

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Read More
The Guide to Family Trust Embezzlement and Stealing
The California Guide to Removing an Executor of Estate
The Penalty for Stealing from an Estate

About RMO, LLP

RMO LLP serves clients in Los Angeles, Santa Monica, Ventura, Santa Barbara, San Francisco, Orange County, San Diego, Kansas City, Miami, and communities throughout California, Florida, Missouri, and Kansas. Our founder, Scott E. Rahn, has been named “Top 100 – Trust and Estate Litigation” by SuperLawyers, Trusts and Estates Litigator of the Year, and Best Lawyers in America for Litigation – Trusts and Estates. For a free consultation, call (424) 320-9444 or visit: https://rmolawyers.com.