Yes, an executor can legally be a beneficiary of the estate.
The possibility of an executor or executrix of an estate also being one of the estate beneficiaries is more common than you might think.
Executors are rarely strangers to the deceased. In the vast majority of cases, the executor of the estate is either a relative or close friend of the deceased.
Let’s take a look at some real-world cases where the executor is also a beneficiary of the estate.
Susan is an 89 year old widow with one daughter, Laura. In her will, Susan names Laura as the sole beneficiary of the estate. Susan also names Laura as the executor of the estate.
There is no law preventing Laura from being both a beneficiary of the estate and also serving as the estate executor. Since Susan had no other heirs, it seems perfectly reasonable that she chose Laura (her only beneficiary) to be the executor of the estate.
Jimmy is 93 years old and a widower, with two children and three grandchildren. Jimmy’s best friend and former business partner, Reynolds, is still close with the family and even continues to run the business that Jimmy and Reynolds once started.
In his will, Jimmy leaves assets to his two children and three grandchildren. He also decides to bequeath assets to Reynolds in his will.
Jimmy also names Reynolds as the executor of his estate in his will. When Jimmy passes away, Reynolds will serve as the executor of the estate and also be a beneficiary of the estate.
There is no law preventing Reynolds, a family friend (and not a blood relative) from being both a beneficiary and the executor of the estate. That is perfectly valid.
Both examples show scenarios where an executor might also be a beneficiary of the estate.
In the first example, the beneficiary/executor was also a blood relative of the deceased. In the second example, the beneficiary/executor was not a blood relative of the deceased.
That brings us to an important reminder:
You can be both an executor and a beneficiary even if you are not a blood relative of the deceased.
As we saw in the two scenarios, the possibility of an individual being both the executor and a beneficiary of the estate is not uncommon. And in some cases, there are benefits of an executor also being a beneficiary of the estate.
Let’s take a look at those benefits:
Benefits of an executor being a beneficiary
The benefits that come with an executor also being a beneficiary can be summarized by the following 3 points:
- The executor/beneficiary will likely know other beneficiaries.
- The executor/beneficiary has an interest in completing probate.
- The executor/beneficiary might decide to waive executor fees.
Let’s take a look at those 3 points in more depth:
The executor/beneficiary knows other beneficiaries
An executor who is also a beneficiary likely knows the other beneficiaries of the estate.
This can be a huge advantage for a variety of reasons.
First, the fact that the executor/beneficiary knows other beneficiaries likely means that there’s greater trust among estate beneficiaries.
Second, the executor/beneficiary can easily notify other beneficiaries of the timeline for distribution and offer updates on the probate process as a whole.
Third, the executor/beneficiary is likely aware of each beneficiary’s worries or concerns and can address those concerns individually.
If those advantages aren’t enough to convince you, consider how difficult it can be for an executor to administer an estate when the executor doesn’t know the beneficiaries at all. In that case, the executor has to establish trust with each beneficiary and create a strong professional relationship with the beneficiaries.
When the executor is also a beneficiary of the estate, a professional relationship (and sometimes even a familial relationship) has already been established between the executor and other beneficiaries.
The executor/beneficiary has an interest in completing probate
An executor who is also a beneficiary is interested in completing probate to receive the final distribution.
The final step of the probate process is to distribute assets to the beneficiaries and close the estate. When the executor is also a beneficiary, the executor/beneficiary will be one of the individuals who receives assets during the distribution step of the closing process.
Since the executor is also a beneficiary, the executor has a vested interest in receiving the final distribution of the state. The executor will not want to delay the probate process, as doing so would only mean that the final distributions are delayed.
The executor/beneficiary might waive executor fees
All executors are entitled to compensation, but an executor can waive compensation if they choose to do so.
In all 50 states, executors are entitled to receive compensation for the services offered during the probate process.
Executor compensation is either determined in the deceased’s will or by the local probate court. The calculation for payment is usually built upon a premise of “reasonable compensation” that looks at the size of the estate, complexity of assets, or number of beneficiaries involved in the estate.
Although all executors are entitled to receive compensation, an executor can refuse payment and waive the compensation.
An executor might choose to do this if they are a beneficiary of the estate and are set to receive a distribution. After all, executor fees are paid from estate assets. So the more that an executor receives as compensation, the less that beneficiaries will receive from the estate assets.
Executors might also choose to waive compensation to avoid any apparent conflict of interest.
If the executor receives a fee that other beneficiaries deem is unreasonable, the other beneficiaries could claim that the executor has been self-serving and has not acted in the best interests of the estate. This could create a legal dispute that could potentially delay the probate process.
Disadvantages of an executor being a beneficiary
There are a number of reasons why a beneficiary also serving as the executor of the estate could be a bad idea.
Those disadvantages can be broken down into the following 2 points:
- Serving as both a beneficiary and executor can be difficult.
- Conflict of interest can be difficult to avoid.
Serving as both a beneficiary and executor can be difficult
The role of an executor is like a full-time job. It can require long hours, a lot of patience, and a substantial amount of paperwork.
If you’re a beneficiary of the deceased’s estate, you were likely close with the individual. Perhaps they were a family member or a close friend.
Losing a loved one is hard, and serving as an executor while also grieving the death of a beloved family member or friend only makes the entire process harder.
For that reason, sometimes the best executor is one who was not as close to the deceased as a beneficiary might be. The executor will be able to focus on the probate process, allowing the beneficiaries to move through the process of grief at their own pace.
Conflict of interest can be difficult to avoid
An executor who is also a beneficiary of the estate might have trouble avoiding conflict of interest.
The executor will need to oversee the payment of taxes, debts, and other liabilities. All of those expenses will come from the estate assets, lowering the total distribution that the executor will receive as a beneficiary.
The executor might also feel the need to hire probate lawyers or accountants. Any expenses incurred by the executor during the administration of the estate will come straight from the estate assets.
Once again, these expenses will lower the total distribution that the executor receives.
Even the most honest of executors might feel inclined to legally cut corners in order to maintain the estate’s assets. The executor might choose to not hire a much-needed probate lawyer in order to keep assets high. And although it might be legal, that might not be the best course of action for the estate.
If an executor is also a beneficiary, the executor must remain impartial to the estate’s assets during the estate settlement process. The executor cannot make decisions that would ultimately harm the estate but benefit themselves as beneficiaries of the estate.
The best way to avoid this potential conflict of interest is to ensure that the executor is not also a beneficiary.
This will allow the executor to remain impartial, focusing on the estate settlement process without favoring the estate assets over correct procedures.
The Bottom Line
It is legal for a beneficiary of the estate to also serve as the executor.
In some cases, there are even benefits to an executor also being a beneficiary. At the same time, though, there are some potential pitfalls and risks to avoid.