While an executor of a decedent’s estate has a duty to act in the best interests of the estate and the designated beneficiaries, this does not always happen. Notably, in cases where an executor/personal representative fails to act properly, one of the remedies available to the beneficiaries is “surcharging” the executor. This allows the beneficiaries to hold the executor accountable for a breach of fiduciary duty and compels them to pay out-of-pocket for losses caused by their negligence.
Key Takeaways
- Surcharging an executor in Michigan is a legal action where the probate court orders the fiduciary to personally repay the decedent’s estate for financial losses caused by their negligence or breach of fiduciary duty.
- The legal process typically involves beneficiaries first demanding a formal inventory and accounting to identify missing assets and then filing a petition with the probate court, providing evidence to prove the financial losses.
- In addition to a surcharge, the court can implement other remedies for executor misconduct, such as removing the executor from their duties, reducing their fees, reversing improper property transfers, or ordering estate assets to be frozen.
What Does it Mean to Surcharge an Executor?
Surcharging a fiduciary such as an executor (formally referred to as the “personal representative”) in Michigan is a legal action in which the probate court orders an executor to personally repay the decedent’s estate from their own pocket for any financial losses caused by their negligence or breach of fiduciary duty. Under MCL 700.3808, a surcharge effectively acts as a penalty and holds the personal representative individually liable for negligent or intentional mismanagement, with the objective of compensating the estate for the losses incurred due to their actions. This remedy is initiated by the beneficiaries, typically in connection with a petition for an accounting or the removal of the fiduciary.
When Can a Fiduciary Be Surcharged?
To surcharge an executor/personal representative in Michigan, a beneficiary must have proof that the executor breached their fiduciary duty or committed some other type of misconduct that caused the estate to suffer financial harm. Common grounds to surcharge a fiduciary in Michigan include the following:
- Breach of fiduciary duty
- Using estate asset to pay for personal expenses
- Failing to pay taxes or insurance, resulting in losses
- Mismanagement of estate assets
- Negligently wasting or improperly distributing estate assets
- Self-dealing or stealing assets from the estate
- Selling estate property below market value
- Failure to pay creditors of the estate
- Taking unreasonable compensation without court approval
- Failure to distribute assets in accordance with the terms of the will
Significantly, Michigan law imposes timelines on civil actions, including those involving surcharging an executor. While a beneficiary’s ability to bring a claim may be more limited after the court has entered an accounting order or the estate is closed, it’s best to consult with an experienced trusts and estates litigation attorney as soon as an executor’s misconduct is suspected.
What is the Process for Surcharging a Fiduciary?
To surcharge an executor, there are specific legal procedures that must be followed. Generally, a formal inventory and accounting must first be obtained or requested to identify the missing assets. If a proper inventory and accounting are not provided, or if missing assets or other damages have been identified, a petition can be filed in probate court detailing the executor’s misconduct and requesting a surcharge. The beneficiary seeking to hold the executor/personal representative accountable must have evidence to prove the financial losses, such as testimony, bank records, receipts, expert witness testimony, and various other documents that may need to be obtained through subpoena.
The court will hold a hearing at which the judge will review the evidence and listen to testimony in the case. If the beneficiary can prove by a preponderance of the evidence that the executor caused the financial loss, the judge may determine the specific amount that must be repaid to the estate.
Are There Other Remedies Available?
In addition to ordering a surcharge, there are other potential remedies available in situations involving an executor’s misconduct. For instance, the court may remove the executor from their duties or reduce the fees that would be owed to them for their service. A court also has the authority to reverse improper transfers of property and order estate assets to be frozen to avoid the possibility of further dissipation.
Every case is unique. The consequences of an executor’s misconduct depend upon the specific wrongdoing committed. It’s vital to speak with a knowledgeable trusts and estates litigation attorney who can advise regarding the best course of action and work to secure the most appropriate remedy.
Contact an Experienced Michigan Trusts and Estates Attorney
If you are the beneficiary of a loved one’s estate and you have concerns that the executor/personal representative is causing the estate to suffer financial losses, it’s essential to consult with an experienced trusts and estates attorney. The attorneys at Barron, Rosenberg, Mayoras & Mayoras are dedicated to helping estate beneficiaries navigate the estate administration process and representing their interests in cases involving an executor’s misconduct. Schedule a consultation today by calling (248) 641-7070 in Michigan or (941) 222-2199 in Florida to learn how we can assist you. You can also use our simple online contact form.