In this article, we explain the duties of executors and trustees to beneficiaries and heirs of estates in Illinois.
What is the Difference Between an Executor, an Estate Administrator, and a Trustee?
An executor is an individual appointed by a will to manage a deceased individual’s estate for the benefit of the beneficiaries of the will and heirs. An estate administrator fills this same role in the absence of a will or in the absence of a named executor in a will who is willing and able to act. A trustee is an individual or entity who is responsible for managing the assets owned by a trust for the benefit of the beneficiaries named in the trust, according to the terms of the trust. In this article, we will refer to these three roles collectively as an estate’s “personal representative.”
What is a Fiduciary Duty?
A fiduciary duty is a legal responsibility that the law places on people in positions of trust with respect to other individuals. Fiduciary duties can take many forms, which we will describe below. The personal representative of an estate has a fiduciary duty to the beneficiaries of that estate.
What Fiduciary Duties do Executors, Administrators, and Trustees Owe to Estate Beneficiaries in Illinois?
Personal representatives are legally required to carry out the terms of a will or trust with the highest degree of fidelity and good faith. This is a general rule, but there are also several specific duties that personal representatives have to estate beneficiaries, including:
- Duty of Loyalty: The personal representative is required to act only for the benefit of the beneficiaries. He or she is not permitted to use his or her position as executor, trustee or administrator to benefit himself or herself or any other third party.
- Duty to Act Impartially: The personal representative may not favor one beneficiary over others. A trustee should do his or her best to reach consensus on any conflict between beneficiaries entitled to receive an income from the trust and beneficiaries entitled to the remainder of the trust at some future time. If consensus is unattainable, the trustee should seek instruction from the court as to how to act, if the trust or will is ambiguous.
- Duty to Exercise Reasonable Care: The personal representative has the duty to invest and manage estate assets in the same manner as a prudent investor, subject to the terms and purposes of the trust or will. This standard is applied to the estate’s assets as a whole, as opposed to particular investments. This allows the trustee the freedom to diversify investments. While case law requires personal representatives to invest conservatively, it also allows them the freedom to implement current investment strategies. The personal representative is entitled to rely on the advice of a financial professional in the same manner that a prudent investor would. This provides some protection from personal responsibility. However, the personal representative is still required to be prudent in his or her supervision of the investment advisor.
- Duty to Preserve Property: The personal representative is required to use reasonable care and diligence to preserve and protect the property of the estate. The personal representative is required to gather, manage, and maintain estate property, keep the property insured, and avoid the property being forfeited.
- Duty to Account: The personal representative is required to keep clear, current and accurate records of the trust or estate’s assets and liabilities as well as any receipts or disbursements. The personal representative will be personally liable for any injury to the estate caused by his or her failure to keep good records. To the extent that records are unavailable, any disputes as to the propriety of the personal representative are resolved against him or her. Trustees are generally required to provide an annual accounting to any trust beneficiaries entitled to receive income from the trust. Trustees must also provide an accounting to beneficiaries upon termination of the trust.
- Duty to Manage Claims: A personal representative has a duty to prosecute claims that the estate or trust may have against third parties and either defend or settle claims against the estate or trust. The personal representative is required to defend the will or trust against will or trust contests, unless it would be clear to a reasonable person that the challenge is valid and that resistance would be futile.