When a business owner passes away, there are inevitably additional concerns for the estate. For instance, should the business be closed, or should the business continue to be operated by surviving family members? How should the company's assets be distributed among heirs? Experienced New York elder law attorneys can assist in making these difficult decisions and minimize the risk of problems like what occurred in recent Georgia case involving just this situation.
In a recent decision from the Georgia Supreme Court, James Myers, Sr. died, leaving his son, Anthony Myers, as his executor. Unfortunately, Anthony began using estate assets for personal gain, and soon his brother brought an action in the probate court to return the misappropriated funds and to remove Anthony as representative. The Supreme Court found that indeed Anthony had mishandled the estate. The following are some of the important lessons for executors.
The language of a company's operating agreement or articles of organization control what should happen upon an owner's death
One of the biggest problems in the case of Myers v. Myers was Anthony's continued operation of his father's company, Buckshot Properties, LLC, following his father's death. James Myers, Sr. was the sole member of the LLC. According to the company's operating agreement, upon the death of any member of the LLC, the company was to be dissolved and its assets distributed per his will. This means that the company's assets would be eventually distributed to Anthony, his brother, and his mother, per the terms of the will. Sadly, this is not what Anthony did. Instead, he continued operating the business. The Court found that because the company specifically required dissolution, Anthony had no right to continue operating the business following his father's death. Therefore, it is important to always obtain the decedent's business documents and have them reviewed by an attorney to ensure how it is to be handled during probate.
What the executor did amounted to a "conflict of interests," because he was a fiduciary for the estate
In Myers v. Myers, Anthony made 5 big mistakes that cost him dearly.
1. The executor improperly used the estate's truck for personal reasons
The law does not permit a representative to use estate property for personal reasons unless he or she compensates the estate. While there are often exceptions to this rule, such as where the will expressly permits it or the court has given permission, an executor should not assume it is okay to use a decedent's vehicle.
2. The executor improperly used the company's funds to perform maintenance on the house.
Although one would think it is perfectly fine to use the decedent's funds to maintain the estate property, this was not the case. Since the business was supposed to be closed, continuing to operate the business and use its funds in this way was improper.
3. The executor failed to pay rent to the estate for using estate property
While no doubt many adult children may feel they are entitled to live in a parent's house following the parent's death, this is definitely not always the case. Instead, since the property became an estate asset, Anthony was wrong to use the property for any reason without paying the estate rent.
4. The executor failed to keep accurate records of rent paid to the estate
The decedent owned rental properties, which were managed by his company, Buckshot Properties, LLC. The executor made a critical error by not keeping accurate record of all the money paid by tenants. This made it difficult for the court to determine just how much money should have been in the estate for distribution to the other heirs, and as such, it was improper.
5. The executor used estate funds to pay personal bills
Quite possibly the biggest error Anthony made was misusing the estate's money. This is a common mistake for surviving heirs and executors. Here, Anthony used thousands of dollars to pay personal bills with his father's assets. This is almost never acceptable.
The lesson to be learned from the Myer case is that an executor owes a duty to the estate and its beneficiaries to handle the assets with care and keep good records. Once an executor starts co-mingling funds, misusing estate funds, and ignoring his or her responsibilities, there can be unintended consequences, such as years of prolonged litigation against loved ones. While New York probate law may differ from Georgia in many ways, these general lessons should be a constant reminder to follow the law and seek competent counsel early.
from Usa Insurance News http://ift.tt/1MxtH5f
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