Question
A widow, with 2 sons, has cancer and will pass away within 3 months. The eldest son is named executor of her estate. The 2 sons want to sell her car and cash in her only asset (an IRA worth $90K) now and split the cash. The widow's house is under water and she owes $60 in credit car debt. The 2 sons plan on telling the credit card compannies there are no other assets (they have already stripped the house of everything). Question: Can the eldest son be held liable by the credit card companies/mortgage company for improper handling of the estate?
Answer
After an estate is opened, the personal representative (sometimes called "executor") can certainly be liable if he improperly uses estate funds for his own benefit rather than paying valid claims. If assets are sold to avoid known creditors BEFORE death that may amount to a fraudulent transfer and be set aside.
No matter what the expected life span, decisions during one's lifetime should be made in the best interests of the principal (i.e., the widow with cancer) which may or may not be the same as the wishes of the children/heirs. It is not clear whether the dying individual designated an attorney-in-fact or whether a guardian has been appointed. If not done to avoid creditors, lifetime gifts may be a prudent part of an estate plan. However, depleting assets in the manner described can create problems and specific legal guidance may be necessary.
After someone passes, the personal representative has a legal obligation to disburse funds in accordance with the law. Certain obligations, like probate taxes, personal representative commissions, etc. The law specifies how funds get doled out if the estate is insolvent (that is, has greater debt than assets.
The above post contains general information and shouldn't substitute for specific legal advice. The particular facts of your situation may affect how the law applies to you.
