What is Self-Dealing By an Executor?

When a person dies, their estate is managed by an estate representative. This individual handles the deceased person’s final affairs and has a legal duty to act in the best interests of the estate and its beneficiaries.

An estate representative who misuses or abuses their position for self-gain engages in “self-dealing.” Self-dealing is a serious breach of the estate executor’s fiduciary duty that undermines the integrity of the probate process and is a betrayal of trust.

Estate Executor Self-Dealing Explained

The estate representative (an estate executor if the deceased person had a Will, or an estate administrator if the deceased person died without a Will) has a fiduciary duty to act in the best interests of the estate and its beneficiaries. Self-dealing occurs when an estate representative uses their position of authority for personal gain rather than to benefit the estate.

What Are Examples of Self-Dealing by an Estate Executor?

While an estate representative has some discretion in managing estate assets, as a fiduciary, they are legally obligated to act in the best interest of the estate. Examples of actions that might constitute self-dealing by an estate executor include:

• Borrowing money from the estate
• Using estate funds for personal expenses
• Investing estate assets in their own business
• Using estate assets to make investments for their own benefit
• Selling property to or buying property from the estate, on terms that are more favorable than the market value
• Co-mingling estate assets with their own personal assets
• If they are an heir or beneficiary, making distributions to themselves but not to other heirs or beneficiaries

What Are the Consequences of Self-Dealing by an Estate Executor?

When an estate executor engages in self-dealing, the transactions may be voided, they may be removed from their position and ordered to disgorge any profits, or the court may order restitution.

Transactions Are Voidable

When an executor has engaged in self-dealing, they are presumed to have acted invalidly. The court can void those transactions unless the executor can prove the fairness of the transaction.

Removal of the Executor

The court may order that the executor be removed from their position.

Disgorgement and Restitution

The executor may be ordered to disgorge any profits and unauthorized compensation gained through self-dealing.

Criminal Prosecution

If the self-dealing involved theft, concealment, or embezzlement, the executor could face felony or misdemeanor criminal charges, depending on the value of the assets involved.

How to Protect Against Allegations of Self-Dealing?

An estate representative has a fiduciary duty to the estate and its beneficiaries. They should strive to make every decision transparent, well-documented, and at arm’s length. To avoid allegations of self-dealing, an estate executor should:

• Tell heirs and beneficiaries about any personal interests, relationships, or potential conflicts of interest
• If a conflict of interest exists, consider seeking written consent from all beneficiaries or court approval before proceeding with a transaction
• Avoid selling estate assets to family members or business associates without disclosure and consent from heirs and beneficiaries
• Document transactions that involve estate assets
• Maintain a separate estate bank account and do not co-mingle personal funds with estate assets
• Precisely follow the terms of the Will and court orders

For many estate executors, this is their first time serving in their role. They may not realize they are engaging in self-dealing. The best way to avoid allegations of self-dealing is by working with an experienced probate attorney who can offer legal advice and guidance and provide an additional layer of protection and credibility.

Self-Dealing by an Estate Executor: Your Legal Rights and Options

Transparency is the best way for estate executors to avoid allegations of self-dealing. An estate representative should disclose potential conflicts, document decisions, and communicate openly with beneficiaries. If you suspect an estate representative is engaging in self-dealing, legal recourse is available. Depending on the circumstances, you may consider seeking an accounting, requesting removal of the estate representative, or pursuing a claim for breach of fiduciary duty.

These matters are fact-specific, and you will benefit from seeking advice from a qualified probate attorney, regardless of which side of the concern you are on.

Contact Gudorf Law Group Today

Gudorf Law Group is located in Dayton and serves clients throughout Ohio. Contact us today to schedule a consultation to discuss your situation and how we can assist you.