Surcharge Actions: When Heirs Seek Damages from a Mismanaging Executor

An executor is responsible for managing a deceased person’s estate. When an executor mismanages estate assets, breaches fiduciary duties, or causes financial harm, heirs may pursue a surcharge action to seek damages. Surcharge actions provide a legal remedy to hold executors accountable and help recover losses caused by their actions. Here is what to know about surcharge actions.

What Does an Executor Do?

An executor is the person appointed to manage and settle a deceased person’s estate according to the terms of the will and applicable laws. The executor’s primary role is to protect the estate’s assets, handle financial matters, and ensure that property is properly distributed to beneficiaries. This responsibility requires the executor to act in the best interests of the estate and its heirs.

An executor’s duties typically include:

• Locating and valuing estate assets
• Opening an estate account to manage estate funds
• Paying outstanding debts, expenses, and taxes
• Maintaining and protecting estate property
• Keeping accurate financial records of all transactions
• Communicating with beneficiaries and providing necessary updates
• Following the instructions outlined in the will
• Meeting court requirements and filing necessary documents when required
• Distributing remaining assets to beneficiaries 

Why File a Surcharge Action?

Beneficiaries or other interested parties may file a surcharge action when an executor fails to properly manage an estate and causes financial harm. A surcharge action seeks to hold the executor accountable for losses resulting from breaches of fiduciary duties, negligence, or misconduct. Common reasons for filing a surcharge action include:

• Mismanaging estate assets: An executor has a duty to protect and properly manage estate property. If the executor fails to maintain, invest, or handle assets responsibly, resulting in avoidable losses, beneficiaries may seek compensation. For example, allowing valuable real estate to deteriorate instead of maintaining or selling it within a reasonable timeframe may reduce the estate’s value.
• Self-dealing or conflicts of interest: An executor cannot use their position to benefit themselves at the expense of the estate or beneficiaries. A surcharge action may be appropriate if an executor sells estate property to themselves or a related party for less than fair market value or uses estate funds for personal expenses.
• Failing to follow the will or court instructions: Executors must follow the terms of the deceased person’s will and comply with legal requirements. If an executor makes unauthorized distributions, ignores beneficiary rights, or acts outside their authority, they may be held responsible for resulting damages.
• Causing unnecessary financial losses: Executors must make careful decisions to preserve estate assets. If poor judgment, negligence, or failure to act causes financial damage—such as failing to pay property taxes, resulting in penalties, interest, or loss of property—the executor may be required to reimburse the estate for those losses.

Frequently Asked Questions 

What remedies are available in surcharge action?

The most common remedy is a financial judgment requiring the trustee to repay money lost because of poor management, improper decisions, or a breach of fiduciary duty. This may include lost assets, unauthorized payments, lost income, missed investment growth, repair expenses, and interest on the amount owed. If a trustee used their position to personally benefit, the court may also require them to give up any profits they gained from that conduct.

In addition to being made whole, beneficiaries often want to prevent these issues from continuing. A surcharge claim is often filed along with a request to remove the executor. The court may remove them to prevent further damage.

Is an executor the same as a personal representative?

An executor and a personal representative generally refer to the person responsible for handling a deceased person’s estate, but the terms can have slightly different meanings. An executor is someone named in a will to manage the estate, while a personal representative is a broader term that may include both executors and court-appointed administrators. Many states use “personal representative” as the official legal term for anyone appointed to oversee the probate process and administer estate assets.

How can executors reduce the risk of surcharge claims?

Executors can reduce the risk of surcharge claims by fulfilling their fiduciary duties and keeping thorough records throughout the estate administration process. Helpful best practices include:

• Following the terms of the will and applicable probate laws.
• Maintaining detailed records of financial transactions and estate decisions.
• Communicating regularly with beneficiaries and responding to reasonable requests.
• Avoiding conflicts of interest and any appearance of self-dealing.
• Paying estate debts, taxes, and expenses on time.
• Seeking guidance from legal or financial professionals when complex issues arise.
• Preserving estate assets and making prudent decisions that protect their value.

How can an executor facing a surcharge action defend himself?

An executor can defend against a surcharge action by:

• Demonstrating proper management of estate assets: The executor can provide records showing that assets were protected, expenses were reasonable, and financial decisions were made responsibly.
• Providing documentation and records: Bank statements, receipts, valuations, tax records, and communications with beneficiaries can help prove that the executor handled estate matters appropriately.
• Showing good-faith decision-making: An executor may defend actions by explaining that decisions were made based on the information available at the time and with the intent to benefit the estate.
• Proving losses were not caused by misconduct: The executor may show that financial losses resulted from factors outside of his control, such as market changes, unexpected repairs, or third-party delays.
• Challenging the damages claimed: The executor can dispute the amount of losses alleged and present evidence that the claimed damages are inaccurate or unsupported.

Contact an Experienced Trust and Estates Attorney 

If you believe an executor has mismanaged an estate or caused financial harm, you should contact an experienced trust and estates attorney. Your attorney will figure out whether the executor has mishandled estate assets, failed to follow the will, or caused unnecessary financial losses. A surcharge action might be your best bet to hold the executor accountable and seek repayment for losses.