In today’s society, fiduciary duty and estate planning live in a gray area, resulting in many dispute cases surfacing over the executor’s fiduciary duties, some requiring the use of a CPA expert. From a legal perspective, there is no clear consensus about who constitutes the best executor; only that the choice depends upon individual circumstances. The executor (or trustee) assumes five main functions: collecting the assets, which involves taking an accurate inventory; managing the estate such as using funds to pay bills, collecting money owed, buying and selling assets; dealing with taxes; closing the estate; and distributing the assets. Choosing a person who will capably administer all of these roles is one of the most important decisions to be made. This decision involves the application of art over science.
The complexities of estates and estate planning have given rise to multiple dispute litigation matters over the past years. One example of a case involving an outside executor of an estate is the Cailloux Case, famous for its jury award of $65.5 million. Floyd Cailloux, the owner of a valve manufacturing company, appointed independent executors of his estate, a “Bank” and an “Attorney.” Also, he established a trust for his wife and children. The Floyd and Kathleen Cailloux Foundation, created in 1994, would receive 92 percent share from the estate or $60 million. An officer of the Bank was the director of the Foundation. Floyd’s wife and children filed suit against the Bank and the Attorney, claiming that the Attorney had conspired with the Bank “to formulate an estate plan favoring a family foundation which one of the bank officers directed and served as a board member.” Trial resulted in a $65.5 million verdict in favor of the Cailloux family finding the Attorney had failed to disclose all important information and breached its fiduciary duty toward Kathleen Cailloux (Floyd’s widow). Even though the jury verdict was reversed on appeal, the case crystalizes the significant exposure faced by executors and related professionals.
The above example illustrates the fact that fiduciary duty and estate planning are not science and involve a great deal of careful planning and thoughtful decision making. Many different shades of gray exist when testator’s choose the best executor, whether it be a family member or a bank.
For more information regarding our Forensic Accounting assistance involving executors and estates, contact Glenn Newman at 215.972.2354.
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