Potential problems may arise
If you’re a beneficiary to the estate, the chances are high that you were very close to the person who passed away. Grief can cloud judgement, take over our days, and easily overwhelm us. If you’re simultaneously dealing with the stress of settling your loved one’s estate and going through probate, you may find yourself easily stressed out and looking to cut corners by getting expensive estate lawyers involved.
Another big problem that can arise from being both an executor and a beneficiary? The possibilities for conflicts of interest to arise are plentiful. An estate executor is supposed to act in the interest of the deceased and settle the estate in the most efficient way.
An executor will sometimes have to make unpopular decisions that will affect how much is left over for beneficiaries. If the estate had a lot of debt, for example, then many assets will need to be liquidated and used to pay off debt and any other outstanding costs, leaving less of an inheritance for the beneficiaries. However, being a beneficiary means that you’re actively benefiting from the estate, and are expecting to receive a certain amount of money and other assets from it. See how that could be conflicting?
An estate executor who’s also a beneficiary may find it more difficult to make the right choices for the estate. For example, an executor may need to sell a piece of property in order to cover any outstanding debt the estate might have. But if the executor grew up in that house and was hoping to take it over, then that decision might be compromised and the executor might look for ways to cover the debt that are not in the estate’s best interest.
Then there’s the matter of the executor’s fee. Usually, an executor gets paid by the estate, with the standard amount being about 5% of the estate’s value. However, if the estate executor is also simultaneously a beneficiary, then it would be wise to waive the fee, since it comes out of the estate and would reduce the inheritance that other beneficiaries would receive. While there’s no law forcing an executor who’s also a beneficiary to decline an executor’s fee, it wouldn’t be advisable to insist on it: The resulting corrosion of trust between the executor and other beneficiaries would jeopardize the executor’s authority and potentially create legal conflicts that could become lengthy and expensive. Frankly, in our opinion it’s just not worth it.