by Hess-Verdon | Nov 30, 2023
What is Inheritance Withholding?
As the name suggests, this is the withholding of inheritance benefits by the person named as an executor or trustee. Here are some of the most common executor misconduct:
- Failure to pay taxes and other expenses: This can occur when the executor intentionally fails to settle the will-maker’s financial affairs, including expenses such as taxes and payment of creditors.
- Withholding beneficiary benefits: Executors are tasked with distributing assets to the beneficiaries according to the will’s terms. It is misconduct for the executor to withhold beneficiary benefits.
- Stealing and misappropriation of funds: Misappropriation is when the executor takes funds from the decedent’s trust for personal gain, including unauthorized transfers, stealing, or gifting assets to relatives.
- Favoritism: It is considered misconduct for an executor to favor some beneficiaries more than others.
There are some instances when the executor can hold funds from beneficiaries. However, any of the above instances is misconduct and a breach of fiduciary duties.
When is an Executor Allowed to Withhold Money from Beneficiaries?
There are several cases when it is acceptable for an executor to withhold funds from a beneficiary. It is known as reserving and should only be performed if directed by the court. Here are some of the reasons that can lead to the withholding of funds:
Missing beneficiaries
There are instances when a beneficiary refuses to accept their share or cannot be contacted. This can prompt the executor to withhold their funds or assets, especially if the beneficiary is a minor and cannot manage the funds.
Debts that need to be settled
Executors can also hold beneficiary funds until they know debts are cleared, aiming to protect the decedent’s trust and the executor from paying creditors from their pocket.
Beneficiary lacks mental capacity or is a child.
The executor can hold money from a beneficiary if they lack mental capacity or are too young to receive the funds left to them by the decedent. In such cases, the judge should decide the way forward and provide directions to the executor. Families of dependents have up to six months to claim a share of the estate or trust.
How Long Can an Executor Withhold Funds From a Beneficiary?
Typically, there is no set time limit to how long an executor can hold funds from a beneficiary. The executor must maintain communication with the heirs to update them on the status of the distribution of their assets. If beneficiaries feel that the executor is taking too long, they can contact a lawyer or file a lawsuit in court.
It will be the court’s responsibility to decide whether the reasons for holding the funds are legitimate. The executor should also know that they can be held personally liable in case of losses.
Withholding Funds and Executor’s Challenges
Executors will always face challenges when dealing with instances of withholding beneficiary funds. If an executor determines that it will be necessary to hold funds in a trust, they should be prepared and justify doing so. Seeking guidance from a professional or a probate lawyer is advisable. An experienced attorney will help them consider the legal implications of withholding the funds and ensure the rights of the beneficiaries will not be violated.
Executor of will refuses to pay beneficiary
If an executor fails to fulfill their responsibilities as mandated in a will, beneficiaries have legal recourse. They can file either a civil suit for damages or an injunction in probate court as evidence that estate losses were sustained as beneficiaries were denied their inheritance – and so ensure that executor fulfills his/her responsibilities responsibly.
The Available Options for Executors
Usually, when the beneficiary’s funds are withheld, several options are available to the executor. Such possibilities may include restrictions or limitations on the beneficiaries’ use of their inheritance. In addition, before all the tax liabilities and outstanding debts are settled, they may also set up a trust fund for minors and separate accounts to hold amounts withheld from them.
If there are disputes among beneficiaries, the executor may choose to freeze or postpone the disbursem*nt of money until they have been resolved. Most importantly, they should choose to work with a professional lawyer to guide the best way to deal with the situation.
Going to court and involving lawyers can prove to be an expensive affair, and beneficiaries should consider mediation to reach an amicable agreement and avoid lawsuits.
What to Do When the Executor Refuses to Pay a Beneficiary
There are instances when the executor of the will refuses to pay the beneficiary. In such cases, the executor will breach his fiduciary duties and may be brought to court. You can mediate and reach an agreement to avoid legal action if the executor is a close friend or a trusted family member.
During the discussion, ask questions to help you understand why the executor is not performing their duties. Sometimes, the executor can be your elder sibling, who is also dealing with the loss of your loved one. It is also worth noting that just because an executor is seen not working does not mean they are not performing their duties.
If the mediation talks fail, as a beneficiary, you have a right to file a lawsuit in a civil court. You can have the executor removed or replaced if found to have breached their fiduciary rights. The first thing you need to do is contact an attorney to help you go through the process.
Can the Executor Change the Distribution Plans?
According to the law, the executor has no right to change or modify the decedent’s will and distribution plans. They must strictly adhere to the original terms listed on the will. Failure to do so gives the beneficiaries the right to go to court and remove or replace the executor. Technically, any modification to the distribution plans that might need to be done will require the court’s approval.
Beneficiaries, with the help of a lawyer, will be required to draft a formal document known as a codicil outlining the desired changes. The court will review the document and set a hearing date for contesting the will. All parties must present arguments and evidence that should necessitate changing the distribution plans.
After that, the judge will check the evidence provided, assess the claims, and decide whether to disapprove or approve the requested amendments. Note that will-related changes can only happen in instances such as removing beneficiaries, adding or altering conditions, changing executor designation, or making legal changes on a contested will.
When You Should Contact a Probate Lawyer
The services of an experienced lawyer are indispensable, whether you’re the beneficiary who wishes to contest a will in court or the administrator seeking to defend your rights. If you are a beneficiary, a probate lawyer can help ensure that all the terms listed follow the decedent’s wishes. In addition, the lawyer may ensure that the executor doesn’t misappropriate or use funds for personal gain.
In addition, you might feel that you deserve more than what you are getting from your executor. The necessary proportion can be assessed by your attorney and guaranteed that you receive the requested sum. If the executor is found to have breached their fiduciary duties, your lawyer can also help you remove or replace the executor with a suitable candidate.
probate lawyer specializing in dealing with cases in your area is essential. It will save you a lot of money. You might need to change or hire several lawyers to handle your case.
Final Thoughts: Can an Executor Withhold Money from a Beneficiary?
Yes, an executor can withhold money from a beneficiary if they have justifiable reasons. There will, however, be repercussions for such actions, and the executor should be prepared to deal with the beneficiaries if they take them to court. The most important thing is for the executor to seek financial advice from a professional before withholding funds.
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