What people sometimes don’t realize is the importance of having a good executor. Even if attorneys are hired by the executor to handle filings and taxes, the executor still has the ultimate legal responsibility to make sure things are done —on time and done right.
In the Virginia Escher case, the deceased appointed her cousin as executor. The cousin was a housewife with no business or legal experience and had never even been in a lawyer’s office before. When Mrs. Escher died, the executor turned to the lawyer who prepared the will and was assured by the lawyer that she would “Take care of everything.”
When the executor took on the job she did not know that her cousin, who lived very modestly, had a $12.2 million estate. She also didn’t know that the lawyer who said she would take care of everything was suffering with brain cancer.
When it came down to it, the lawyer neglected to file an estate tax return and neglected to pay the federal and state estate taxes. The bill from IRS was $1.2 million in penalties and interest, in addition to the original taxes that were due. The executor and the lawyer were sued for malpractice and a settlement was made out of court that would allow the executor to try and get the penalties and interest refunded.
The State of Ohio agreed to refund the penalties, the IRS refused. The executor had to sue to try and get some relief, but the federal court said that reliance on counsel is not an adequate excuse to avoid late payment penalties and interest. The decision is currently being appealed.
The moral of this case is that an executor should be chosen carefully. The other part of the moral is that an executor should not necessarily agree to accept the position just because they were appointed —even by a relative.