Reasonable Interval Before Claiming Breach of Fiduciary Responsibility

[Kaz A.K.Stan]

The matter about which I posted to this group a month ago was resolved
in part with the trustee(s) being removed and a successor trustee
appointed, in regard to a small estate.

Does probate law in general (this probate is Pennsylvanian) take time
into consideration when making decisions about breach of fiduciary
duties? I recognize that a billionaire's spendthrift beneficiaries can
spend money as fast or faster than those of a man or woman of modest
means. In this case, the matter involves the executor permitting one
of the beneficiaries to live rent- and utility- (and property tax-)
free at the home whose sale will represent the greater part of the
estate's assets. The executor has adopted a laissez-faire position
regarding the free-loader because the executor utilizes the property,
in a desirable quasi-resort area, as a place to kick back and relax.
Using the squatter/freeloader as an excuse for not putting the home up
for sale, the executor is knowingly spending down the estate's modest
liquid assets in order to maintain the squatter (and a nice weekend
crib).

If the estate were that of a billionaire, the costs associated with
heating, taxes, property maintenance, and other home-related expenses
would by no means be astronomical. In the case of this estate, they
are.

Thank you.

[Stuart A. Bronstein]

"Kaz A.K.Stan" <astan...@gmail.com> wrote:

> Does probate law in general (this probate is Pennsylvanian) take
> time into consideration when making decisions about breach of
> fiduciary duties?

It depends on what you are talking about. Most issues are fact
specific, so asking broad general questions often won't get you a
response that is useful in your specific situation.

> In this case, the matter involves
> the executor permitting one of the beneficiaries to live rent-
> and utility- (and property tax-) free at the home whose sale
> will represent the greater part of the estate's assets. The
> executor has adopted a laissez-faire position regarding the
> free-loader because the executor utilizes the property, in a
> desirable quasi-resort area, as a place to kick back and relax.
> Using the squatter/freeloader as an excuse for not putting the
> home up for sale, the executor is knowingly spending down the
> estate's modest liquid assets in order to maintain the squatter
> (and a nice weekend crib).

The executor has a duty to all the heirs to make estate property
productive as is reasonable under the circumstances. If there is a
good reason for the "freeloader" to live there (e.g. maintaining
the place until it can be sold) then that might be reasonable. But
if there is no good reason, then rent should be paid, and the
property should be put up for sale without delay.

You should go into court and ask the judge to order the executor to
do just that.

> If the estate were that of a billionaire, the costs associated
> with heating, taxes, property maintenance, and other
> home-related expenses would by no means be astronomical. In the
> case of this estate, they are.

That's another way to determine the reasonableness of what the
executor is doing. Unless he has a good reason that what he is
doing has a net benefit to the estate, he should make the property
productive (either by charging rent, putting it up for sale or
both) as soon as possible.

___
Stu
http://DownToEarthLawyer.com

[nos...@isp.com]

"Kaz A.K.Stan" <astan...@gmail.com> wrote:

> Does probate law in general (this probate is Pennsylvanian)
> take time into consideration when making decisions about
> breach of fiduciary duties?

Yes, of course. An executor is obliged to act prudently - which
importantly includes acting promptly - as would the fictive
"reasonable person" to identify and marshal estate assets, to pay or
establish a sufficient reserve for the benefit of creditors, and to
make the will-directed distributions to beneficiaries.

But when there is or is likely to be a serious (and especially if
vigorously litigated) dispute, reliably estimating even tentatively
and preliminarily whether an executor has or has not violated law
required and law redressable fiduciary standards and whether an estate
beneficiary in the position of the one to whom you refer below has not
been legitimately authorized to act at estate expense or ought be
required to reimburse the estate for the reasonable value of his use
and occupancy of estate property will depend on more contextual facts
and less speculation than you so far post.

> In this case, . . . the executor [is] permitting one of the
> beneficiary to live rent- and utility- (and property tax-)

> free at the home whose sale will represent the greater
> part of the estate's assets.
>
> The executor has adopted a laissez-faire position
> regarding the free-loader because the executor utilizes
> the property, in a desirable quasi-resort area, as a place
> to kick back and relax.
>
> Using the squatter/freeloader as an excuse for not putting
> the home up for sale, the executor is knowingly spending
> down the estate's modest liquid assets in order to maintain
> the squatter (and a nice weekend crib).

Your characterization of the executor's behavior and motives possibly
may be accurate and, if push comes to shove, also provable. However,
the facts as you so far post them are also consistent with the
competing possibility that he has basically disinterested estate
beneficial reasons for the delay before the property's eventual sale.
Thus, for instance, you OTOH do not actually say that the underlying
will does not contain provisions that authorize the beneficiary in
question (to whom I'll refer below as "Mr.B" to distinguish him from
other beneficiaries) to use and occupy the property rent- and utility-
(and property tax-) free and/or a provision which, when fairly read
and applied in light of all the relevant circumstances, authorizes the
executor to exercise his discretion to allow this.

And even if one supposes that there are no such will provisions, you
have not said that you or any other person interested in the estate
confirmed with Mr.B or with the executor that Mr.B has not agreed or
will not agree to compensate the estate for the reasonable value of
his use and occupation of the property (an exercise that not
infrequently is done by reducing such a person's otherwise required
distributive share accordingly).

Nor do you say in connection with what you experience as frustrating
delay that you have confirmed that the executor has not made or
obtained a fact/realistic based assessment of present depressed
compared with probable improving future market/price conditions re.
which Mr.B may be acting in the meantime as an explicit or at least de
facto caretaker and that, as such, his use/occupancy and the
executor's occasional related use of the property as well as the
passage of time before the property's eventual sale and the
distribution of the net proceeds to all will entitled beneficiaries
may be only incidental and not financially damage causing to them.
Etc., etc.

Nevertheless, lets arguendo posit OTOH that your conclusory summary
and related implications derive from a careful reading of the will and
from related attempts to inquire of and maybe even to negotiate with
Mr.B and the executor.

In such event, arguably more important than you framing your concern
"in general" terms of "tak[ing] time into consideration" would be more
fact-specific focus on and development of your apparently more basic
underlying concern as you first state it in your posting's subject -
namely, whether there has been and, unless credibly addressed,
probably will continue to be fiduciary neglect (a failure prudently to
manage and to take timely steps to dispose of valuable but illiquid
estate property) compounded by wrongful self-dealing (the executor's
delay if substantially motivated by his desire to "kick back and
relax" for his personal benefit at what for him is a de facto resort).

In other words, focusing as you do in you posting's text mostly even
if perhaps not exclusively on whether Pa. probate law applicable to
evaluating an estate fiduciary's conduct "in general" is
construed/applied somehow to "take time into consideration" but in
ways you do not particularize appears to be diverting you from the
more important substantive and comparatively well established
principle of law that the test in Pa. for prohibited fiduciary
self-dealing does not strictly require proof that actions from which
an executor benefits personally have in fact affected his judgment
and, instead, can turn on whether the executor's conduct might affect
his fiduciary behavior.

It therefore is not always necessary in Pa. (or in most other U.S.
states) for an interested party seeking redress as against an executor
to prove that such an estate fiduciary yielded to self-interested
temptation or has acted in bad faith and has gained some unfair
advantage or, for that matter, that the complaining beneficiary was
harmed as compared with a fact-based appearance that the fiduciary has
placed himself or has allowed himself to be placed in a position of
conflicting interests in a manner that warrants deterring and,
depending on the particulars, disqualifying and/or surcharging him.

The litigated determination of these issues in Pa. relatedly
implicates important burden of proof issues which, in summary, are as
follows: In the first instance, and understandably, those seeking to
surcharge an executor are required prima facie to demonstrate the
executor's breach of duty - something which may be done if, as you
claim viz. the executor of interest to you, there has been unjustified
delay in undertaking required acts so as to create a substantial
discrepancy between required and/but not taken action - whereupon the
burden or proof shifts to the fiduciary to require him to provide
exculpatory evidence and thereby avoid the sanction sued for. As a
result, an estate beneficiary who wants to be an effective claimant
presumably ought take any number of pre-litigation steps to establish
circumstances that probably will enable taking advantage of such
anticipated burden of proof allocation.

A related issue your posting seems to raise but re. which you have not
yet posted sufficient facts to enable meaningful analysis, however, is
whether you or others interested in the estate have at least in effect
been enablers by foot-dragging in credibly and otherwise seeking
consensual or court ordered redress.

[Kaz A.K.Stan]

"Stuart A. Bronstein" <spamt...@lexregia.com> wrote:

> The executor has a duty to all the heirs to make estate property
> productive as is reasonable under the circumstances. If there is a
> good reason for the "freeloader" to live there (e.g. maintaining
> the place until it can be sold) then that might be reasonable. But
> if there is no good reason, then rent should be paid, and the
> property should be put up for sale without delay.

Yes, the reason given for the freeloader's continued presence is
"maintaining the place until it can be sold." The word "maintenance,"
however, implies...maintenance. This freeloader is a hoarder, who does
not clean, does not "maintain" even personal property, let alone the
real property in question. Thank you for the response. Tortious
interference I suppose can be inferred about an executor negligent
about property maintenance--negligent because knowledgeable of "non-
maintenance" by a laggard whose sloth is perhaps the distinguishing
characteristic.

> You should go into court and ask the judge to order the executor to
> do just that.

The problem is the working together in tandem of executor and, for
lack of a better term, professional bum.

Thank you.

[astan...@gmail.com]

nos...@isp.com wrote:
> A related issue your posting seems to raise but re. which you have not
> yet posted sufficient facts to enable meaningful analysis, however, is
> whether you or others interested in the estate have at least in effect
> been enablers by foot-dragging in credibly and otherwise seeking
> consensual or court ordered redress.

--Nor would I post additional facts, not only because in fact you have
given a "meaningful analysis." Foot-dragging is not an issue here; indeed,
out of compassion for the squatter/free-loader, I was the only
co-beneficiary who suggested (at probate in July of this year) that an
entire year be offered at my (and others') expense. For my kindness,
I have watched the property not enjoy so much as a single swipe of a
rake, the lather of a single window, the emptying of the hoarders' trove.

The gem of a freeloader, like the executor, is a hoarder. In any event, I
have informed counsel for all parties that my patience and largesse
expires on December 31. But thank you for the reminder that PA
probate code requires the executor to, in essence, "first do no harm."
Doing nothing--at all--would therein seem to become equivalent to
acting negligently.