Episode 17: Dealing with a Harassing Beneficiary – Guidance for Executors and Trustees

Estate Planning Lawyer, Peter Klenk

Dealing with a Harassing Beneficiary: Guidance for Executors and Trustees

Hello, Peter Klenk here from Klenk Law. Let’s talk a little bit more about taxes, everybody’s favorite subject. Today, we’re going to talk about what to do if the beneficiaries of an estate are harassing an executor, or if the beneficiaries of a trust are harassing a trustee. As an executor or a trustee, what do you do? Well, you do have options.

First, be clear: as an executor or a trustee, you have the right to get people to help you. You’re not supposed to do this on your own. If you were a professional trust company or a bank, they have a whole group of accountants, attorneys, realtors, and everyone else they turn to for help in making decisions. They do not do it on their own. Even though you may be someone’s brother, son, or daughter who has taken on this responsibility just for the family, you’re not expected to know how to do this. You’re expected to get it done, but you’re not expected to know how to do it.

You can turn to get advice. In fact, by law, you’re able to use the estate or trust funds to pay for that advice. So, if you need a realtor to sell a house, you don’t have to do that yourself; you can hire a realtor. If you need to file an income tax return, then you hire an accountant, of course. And if you have problems with beneficiaries and trustees, you’re going to need a lawyer, at least to give you some advice.

As soon as there are rumblings—remember, no good deed ever goes unpunished—you should reach out and get some good legal advice. Our firm will look at the documents, see what the situation is, and then help you out. Of course, your situation is going to be unique, but let’s go through some common issues that come up.

If you had retained us from the beginning—many people do—right away, we would help you manage the expectations of the beneficiaries, which is very important. As soon as somebody hears they are a beneficiary and that they’re supposed to receive a certain amount, they stop listening to any details. They start imagining spending that money, and before long, they don’t know how they’re going to live or survive without this inheritance, which, of course, feels like manna from heaven. But that’s how it is, and then that gnaws at them. They get anxious, and they start coming after you because you’re the one standing between them and this money that they believe should be theirs today.

So, you have to manage expectations. For example, in Pennsylvania, the statute of limitations for creditors coming forward is one year from when the estate is advertised. This means that once you file the will, you still have to advertise it in the papers, and then there’s one year during which creditors can come forward, and you are legally obligated to address the issues they raise. So that’s a year. In between that, you might have to sell houses; you might have to pay an income tax return, which isn’t due until the following April of the year the person dies. There are all sorts of things that will take time.

It’s very important, from the beginning, to ensure that everybody—no matter how kumbaya and friendly you are—knows that it’s going to take some time to get this done. If it doesn’t get done tomorrow, that’s not your fault. You’re working as fast as you can, but things just take time.

With a trust, there could be many similar issues, or there could be a whole host of other things that will take time for you to address. Managing expectations is crucial, and sometimes family members just aren’t going to hear what you have to say. But if it comes from a lawyer, it somehow feels more legitimate. That’s a very basic level of what we could do to help you out, and that’s what you should do.

Now, after that, it could be that there are a host of other issues. You might be dealing with someone who has mental health issues or substance addiction issues. You might have someone who simply doesn’t like you for one reason or another. There are many factors that could cause them to start coming after you and bugging you.

There might be things theSometimes it just is what it is. You know, it’s a sibling you don’t get along with, and they’re never going to agree with anything you do. Well, that just happens. There is a system in place for both trusts and estates to bring matters to a close because you should never distribute any assets to beneficiaries until you’ve received a release of liability. Remember, many just don’t understand that. And you know what? Again, you weren’t chosen for this job because you knew how to explain these complex matters to people. You were put there because the person trusted you to make sure everything was handled properly and to get help if you needed it. So, again, the attorney is there to help explain to people what is going on and why it’s going to take a while.

Now, it could be that some issue has to go to court. There might be a wrongful death suit, or there could be an issue with a squatter in the house. There might also be issues related to property deeds or disputes with a person in the business. These things aren’t as common, of course, but they do happen. It’s essential to ensure that these other people understand that you’re moving forward with these issues, and sometimes the attorney just has to be the one to explain.

executor, you’re the executor forever. If you give beneficiaries funds and then they use those funds to hire an attorney years later to come back and say you didn’t sell the house for enough money or that you did something else that harmed them, you have to go back and address those issues. And where’s the money? It’s all gone. Who’s paying your lawyer? You are.

The same applies to a trustee. Before you take actions and distribute assets, you should always realize that, again, no good deed goes unpunished. You want to ensure that when you make distributions, you are done. That comes with a release of liability. If everybody’s fine, then we can get this contract signed essentially between you and everyone else involved, and then we’re done.

But sometimes, someone isn’t going to sign it or agree for whatever reason. They might dispute something you did, or maybe they just don’t like you. In every state, there is a court—especially in Pennsylvania and New Jersey—where you can file for what’s called a formal accounting.

A formal accounting has to be done in a very specific manner because judges don’t want everyone coming in with their own interpretations of what an accounting is. There’s a very specific structure, and we can help put that together for you. That’s not a problem; we do them all the time. We file them with all the necessary paperwork, and everyone is notified. This gives everyone a notice that there is a certain amount of time in which they can come forward and complain, stating what terrible thing you did and what they want.

A lot of times, these issues can be sorted through. It’s not a quick process. The judge lets everyone have their time to petition and provide information, hoping, of course, that you’ll come to some agreement. But if you don’t, then there will be a hearing. You will get to explain exactly what you did and why your interpretation of the situation should be respected, just as the other party will have their opportunity.

Of course, your attorney will help you be the adult in the room, and you must have all your paperwork and evidence presented in the correct manner so that the judge looks favorably on your interpretation. All of this is something a trust and estates attorney who works in this area can help you with, and this is all we do. Our litigation team focuses solely on trust and estate planning-related matters. We don’t handle divorces or lawsuits; we just do this.

When the judge’s gavel comes down and says, “Here’s how I see it,” then that’s it; everybody can move on with their lives. But of course, you want the judge to rule that what you did is correct, and that you’re not responsible for any losses, problems, or liabilities. You want to be released, and that’s the entire goal.

There are things you can do to reduce the chance of conflict, but sometimes conflict is inevitable and needs to be addressed. That’s what we can help you with. There is a way out. Usually, the sooner you address it, the better. Rather than letting it drag on, you want to get this job done and move on with your life. That’s the whole idea.

I’m glad to talk to you about these matters. If you have an issue in Pennsylvania or New Jersey, we will attempt to make it as easy and as boring as possible for you. It’s not always possible, but we’ll try. Feel free to give us a call and set up a free consultation to discuss it and see if we’re a good fit to help you out.

Anyway, it’s been nice talking to you about death and taxes and all these fun little wrinkles that surround them. I hope you found it interesting. Please like and subscribe. We’ll be issuing more episodes in the future, and you take care and be well.

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