Can executors keep secrets from beneficiaries? | gray reed
Following the untimely death last year of his father Big Daddy Bux due to COVID-19, brother Hustler Bux has been named Big Daddy’s Will’s independent executor. When Hustler requested a judicial discharge, sister Kathy “Kitten” – who had cared for both parents and still lived in the family home – objected, complaining that Hustler had failed to disclose material facts related to succession. Kitten’s distrust was intensified by altercations between them at the family home, then confirmed by Hustler’s late inventory and bookkeeping revealing his unequal distribution of Big Daddy’s $5 million estate. Without telling Kitten, Hustler (i) deeded the family home to Kitten and deducted his determination of its worth from him, (ii) deeded a ranch in Goliad to himself and their two brothers – but not to her, (iii) set aside $150,000 of estate funds to cover attorneys’ fees to defend against any legal action. Chaton asked for an explanation. Hustler refused. Worse, Hustler suggested that by simply asking for the estate information, Kitten violated the will’s “no contest” clause. Can Hustler refuse to tell Kitten about Big Daddy’s estate and assets? What is a “no-challenge clause”? What is a judicial discharge?
Refusal to Disclose Information – Breach of Fiduciary Duty to Disclose
Hustler’s oath in court when he was named Big Daddy’s executor sealed the fiduciary duty he owes to all beneficiaries of Big Daddy’s estate, including Kitten. Until properly distributed under Big Daddy’s instructions in his will, Hustler acts as trustee of the estate’s assets for the benefit of all beneficiaries under Big Daddy’s will. Acting as trustee, Hustler owes – to the owners of the property he oversees – an obligation to fully disclose all material facts of which it is aware that may affect the rights of beneficiaries. Hustler – and all other executors – also owe each of their heirs “a high duty of good faith, fair use, honest performance and strict liability.” All of these are recorded in the executor’s oath of office.
In an attempt to prevent the family’s beneficiaries from fighting over what they got when Big Daddy died, his will included a “no contest” clause. Responding to Kitten’s request for an inventory and accounting, Hustler’s attorney threatened that she risked losing her inheritance under the will’s no-contest clause. A “no-challenge clause” is a provision in a will that would result in the forfeiture of anything in favor of a person who challenges the will unless a court determines that (i) there was good cause for bringing the claim and (ii ) the claim was brought in good faith.
Around this time, Hustler filed a Request for judicial discharge under the Texas Estates Code. Kitten objected, and Hustler eventually delivered an inventory and accounting showing that Kitten had not received the same amount as his brothers. An “Independent Executor’s Judicial Release” is intended to discharge Hustler, as independent executor, of any liability involving matters relating to his administration of Big Daddy’s estate – which have been fully and fairly disclosed. Since the inventory and accounting ultimately produced revealed that not all recipients had been treated equally and that Hustler had improperly withheld funds, Hustler would not only be denied a discharge, but he would also be held , in all likelihood, to return Kitten “whole” and reimburse him for his attorney fees. When an independent executor takes an oath and qualifies as such, he assumes all the duties of a fiduciary under the law.
The real case: In re Stewart supported Kitten on appeal
The real “kitten” in the San Antonio Court of Appeals case was Jennifer Stewart. She prevailed over her executor brother Wayne Stewart. It was only through Jennifer’s efforts that she was given an equal distribution of the estate by Wayne’s own accounting; moreover, it was only through his efforts that Wayne returned $48,000 to the estate for the benefit of the residual beneficiaries. Additionally, pursuing her objection to Wayne’s judicial discharge, Jennifer obtained a judgment requiring Wayne to return $150,000 in funds he had “set aside” (i.e. paid to his attorneys) and s was refused the legal discharge he requested. the San Antonio Court of Appeals upheld the trial court’s verdict which awarded Jennifer her reasonable and necessary attorneys’ fees and expenses.
Tipping the scales in your favor
If you’re a Texas executor, communicate, communicate, communicate – let everyone know what’s going on. Disclose all assets, income, expenses and values - just as if it were co-ownership in a business. Treat all beneficiaries fairly and be sure to discharge your fiduciary duties in good faith, with fairness and full disclosure.
If you are the beneficiary of a will in Texas, you have certain rights. Encourage your executor to promptly and completely disclose all reasonably necessary information you should obtain to understand what is going on. You are entitled to it.
Both the executor and the beneficiaries are responsible for working and administering the estate according to the directives of the deceased or Texas law, and for all beneficiaries of the estate, even if you do not get along so much.