Many times, Mom and Dad, in an attempt to transfer as much wealth as possible by saving trustee and executor fees, name one of their children as the executor(rix) of their wills. This sounds like an ideal situation since the siblings love one another and will do the right thing by each other. In some situations; however, this decision can lead to disaster and tear an otherwise close-knit family apart. As a forensic accountant, I have been called in to investigate the conduct of the trustee/executor, primarily to address the questions of (1) whether each sibling has received his/her “fair share” of the estate and (2) whether the trustee/executor has misused any of the funds for his/her own benefit.
In a perfect world, each beneficiary would receive their equal share (assuming the will requires it) of the assets on the same day, or close to it. However, in many instances, the beneficiaries receive their inheritance in varying fashions and timetables.
In the estate matters in which we have been hired to provide litigation support/investigative services, we have noted some of the following types of disputed items:
- One of the siblings had significant debt to parents and the executor treats their forgiveness as a distribution;
- One beneficiary “trades” some of his personally-held less liquid investments (i.e., artwork) for other assets of the estate;
- Executrix seeks reimbursements for costs which are called into question by the other beneficiaries;
- Trustee contracts with his/her spouse to fix up the family home prior to sale and siblings question the amounts paid;
- Assets known to the beneficiaries seemingly disappear at the time that estate is settled;
- Trustee is compensating himself handsomely for the execution of the estate at the objection of the other beneficiaries;
- The family home becomes the residence of one of the beneficiaries without equitable compensation to others; and
- Executor fails to provide a full accounting of all assets, estate expenses and distributions to all beneficiaries.
These examples are not meant to be an exhaustive list; only to demonstrate that there might be any number of issues that give rise to questions of equitable distributions. Many of them are subject to statutory guidance or legal interpretation, which will be explored and argued by each party’s attorney.
Forensic Accounting for Estates
We have been engaged in a number of estate litigation matters, each with its own specific nuances. Despite these nuances, we are commonly asked to perform the following tasks:
- Identify potential personal uses of estate assets;
- Investigate potential conflicts of interest between the trustee/executor and vendors utilized in the settling of the estate;
- Reconstruct the books and records (sources and uses of funds) sometimes over long time periods;
- Perform funds tracings to identify if any assets improperly left the estate; and
- Quantify the amounts each beneficiary has received based on the above analyses.
While these matters can be emotional, the heart of the disputes is typically financial. We perform the above tasks, among others, to find the truth behind the numbers. Once the truth is found, the family can work to rectify any missteps or bring it before the court to adjudicate the matter.
In some instances, we have determined that there has been no wrong-doing, only sloppy or reckless record keeping. In other instances, we have discovered that the individual with access and authority has crossed the line and breached his/her fiduciary duties. Ultimately, the comfort of knowing one way or the other might be all that the family members need – the assurance that nothing improper has occurred or a determination of what amounts are required to make everyone “whole.” The ultimate goal is for the family to be able to move forward again, together.
Karen Fortune, CPA/CFF, MAcc – Partner
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