PlanetFeedback user and Mommage Mom, Venice, recently posted an important question in her PlanetFeedback blog:
"If your child inherited money from a grandparent to be used towards his or her college education, and the Executor of the Last Will and Testament of the deceased (also a relative) gave the money to her brother to help him purchase a house because he left his wife and kids and needed a place to live, would you be forgiving or take the necessary steps to recover the money for your child? The grandparent died over two years ago, and the Executor continues to promise that the money is forthcoming, despite the
admission that she gave it to someone else.
What would you do, and how would you go about doing it?"
The moral answer to this important family question aside, this Executor is in a very bad position, legally. The law is very clear that an executor (or in some states, if it's a female, "executrix", or the more gender-neutral "personal representative") has a fiduciary duty to the beneficiaries under the will, termed the duty of loyalty. There are serious and significant monetary penalties for an executor violating his or her fiduciary duty. It doesn't matter if the executor intends to replace the funds. The moment they were used for something other than what is set forth in the will, the duty was violated. The Executor can be sued for the funds and may be held personally responsible for replacing them. Very likely as well, the Executor will be replaced.
In most cases, the Executor is required to file a yearly accounting with the government agency responsible for overseeing disbursement of estates and trusts. If the Executor has not disclosed the disbursement of funds to an improper beneficiary, then he or she may also have violated state laws pertaining to estate reporting requirements. You guessed it ~ there may be more monetary penalties for which he or she will be personally responsible .
If you are making out your will, you need to take extra care when choosing your executor/-trix/personal representative. Make sure you choose someone who is going to disburse your assets to the people YOU have chosen and not do something else with it.
The moral question, however, is very much trickier.
What are your thoughts about it?
--Contributed by Deb