Potential Problems When an Estate Beneficiary Also Serves as the Executor
Disagreements sometimes arise when a family member dies and the survivors are left to handle the distribution of the estate. This can particularly be the case when one of the family members is the executor of the estate and also stands to receive a part of the inheritance. A claim of self-dealing could arise – the other family members may view what the executor does as taking advantage of his position and acting for his own interests rather than the interest of the estate and the other beneficiaries. That’s what was involved in this case.
The decedent died owning a substantial amount of Iowa farmland. Her will indicated specified that the land was to remain in the family for the purpose of farming, and gave the defendant (her youngest son and executor of her estate) an option to buy the land on contract at the value established for “Iowa Inheritance Tax purposes.” The defendant executed two real estate contracts, selling the land to himself. The plaintiff, the defendant’s sister (and also a beneficiary of the estate), argued that her brother engaged in self-dealing. The defendant said that might have been the case, but that he was merely following Mom’s will.
The court determined that, while self-dealing may have been allowable under the will in this situation, the defendant did not properly comply with state law. Under Iowa law, for an executor to engage in self-dealing notice must be given via court order to all interested persons under the will, and the executor must not profit by more than what is permitted under the terms of the will. In addition, the will must expressly excuse the executor from the notice requirements. Here, Mom’s will expressly required that written notice had to be given to all of the heirs before the executor made any transactions.
The trial court ruled that the executor was engaging in self-dealing, but approved the sale of the real estate. The court’s opinion was reversed on appeal on the basis that the executor failed to follow proper Iowa probate procedure and failed to follow the specifics of the decedent’s will. Doyle v. Kerns, No. 7-487/06-1540, 2007 Iowa App. LEXIS 1202 (Iowa. Ct. App., Nov. 15, 2007)
The Center for Agricultural Law and Taxation does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. The Center's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.