Topic category: Culture
Fiduciaries, Beware Keeping Estates Open Needlessly, Discriminating Among Beneficiaries and Favoring Yourselves
These principles are fundamental:
An executor has a fiduciary duty to act in the best interests of all of the beneficiaries under a will. Branch v. White, 99 N.J. Super. 295, 306 (App. Div. 1968).
The most fundamental duty owed by an executor to the beneficiaries is the duty of loyalty, see, e.g., Wolosoff v. C.S.I Liquidating Trust, 205 N.J. Super. 349 (App. Div. 1985).
The executor is obligated to deal impartially with all estate beneficiaries, not benefit any disproportionately. In re Koretzky’s Estate, 8 N.J. 506, 530 (1951).
The executor of an estate must always act with the best interests of the estate in mind. Taylor v. Errion, 137 N.J. Eq. 221 (Ch. Div. 1945), aff’d 140 N.J. Eq. 495 (1947).
An executor cannot use his or her position to further his or her own personal interests. Taylor, supra, 137 N.J. Eq. at 225-227.
Under United States law (11 U.S.C. Section 704(a)(1)), a trustee in bankruptcy is obligated to "collect and reduce to money the property of the estate for which such trustee serves, and close such estate as expeditiously as is compatible with the best interests of parties in interest."
The executor or executors of an estate is similarly obligated to act expeditiously.
A trustee in bankruptcy is not permitted to discriminate among creditors.
Likewise, the executor of an estate may not discriminate among beneficiaries.
If an estate consists solely of cash, the executor's job is simple.
For example, if the estate consists of $500,000 after payment of debts and administrative expenses and there are five equal beneficiaries, each beneficiaries should receive a check for $100,000 as promptly as possible.
Usually, it's not that simple.
Estates usually include other assets, such as regularly traded stock.
In that case, if there are, for example, 5,000 shares, the executor either can sell the stock and divide the proceeds or transfer 1,000 shares to each of five equal beneficiaries.
If the estate holds real estate, the situation is more complicated: all of the real estate can be appraised and sold, with the net proceeds divided equally among the equal benefciaries, or the real estate can be transferred to the beneficiaries.
If an estate own five houses of equal value, one each can be transferred to five equal beneficiaries and any additional real estate can be appraised and sold, with the net proceeds then divided equally among the equal beneficiaries.
If all of the beneficiaries agree that estate real estate should be retained by the estate indefinitely, then that is appropriate.
What is NOT appropriate is for an estate to retain real estate indefinitely when doing so favors one of more equal beneficiaries and prejudices at least one other equal beneficiary.
What is even more inappropriate is for an executor to use estate real property without paying fair value and keeping the estate open in order to do so.
That kind of breach of fiduciary duty and fraud upon beneficiaries eventually tends to end badly for the unscrupulous executor.
Michael J. Gaynor
Biography - Michael J. Gaynor
Michael J. Gaynor has been practicing law in New York since 1973. A former partner at Fulton, Duncombe & Rowe and Gaynor & Bass, he is a solo practitioner admitted to practice in New York state and federal courts and an Association of the Bar of the City of New York member.
Gaynor graduated magna cum laude, with Honors in Social Science, from Hofstra University's New College, and received his J.D. degree from St. John's Law School, where he won the American Jurisprudence Award in Evidence and served as an editor of the Law Review and the St. Thomas More Institute for Legal Research. He wrote on the Pentagon Papers case for the Review and obscenity law for The Catholic Lawyer and edited the Law Review's commentary on significant developments in New York law.
The day after graduating, Gaynor joined the Fulton firm, where he focused on litigation and corporate law. In 1997 Gaynor and Emily Bass formed Gaynor & Bass and then conducted a general legal practice, emphasizing litigation, and represented corporations, individuals and a New York City labor union. Notably, Gaynor & Bass prevailed in the Second Circuit in a seminal copyright infringement case, Tasini v. New York Times, against newspaper and magazine publishers and Lexis-Nexis. The U.S. Supreme Court affirmed, 7 to 2, holding that the copyrights of freelance writers had been infringed when their work was put online without permission or compensation.
Gaynor currently contributes regularly to www.MichNews.com, www.RenewAmerica.com, www.WebCommentary.com, www.PostChronicle.com and www.therealitycheck.org and has contributed to many other websites. He has written extensively on political and religious issues, notably the Terry Schiavo case, the Duke "no rape" case, ACORN and canon law, and appeared as a guest on television and radio. He was acknowledged in Until Proven Innocent, by Stuart Taylor and KC Johnson, and Culture of Corruption, by Michelle Malkin. He appeared on "Your World With Cavuto" to promote an eBay boycott that he initiated and "The World Over With Raymond Arroyo" (EWTN) to discuss the legal implications of the Schiavo case. On October 22, 2008, Gaynor was the first to report that The New York Times had killed an Obama/ACORN expose on which a Times reporter had been working with ACORN whistleblower Anita MonCrief.
Gaynor's email address is firstname.lastname@example.org.