Can an Administrator of an Estate Be a Beneficiary?
When an estate administrator is also a beneficiary, they hold a dual role. Understand the legal standard of care required to manage an estate for all heirs.
It is legally permissible and common for the administrator of an estate to also be a beneficiary. A beneficiary is a person entitled to receive property from an estate. The person who manages the estate is called an executor if named in a will, or an administrator if appointed by a court when no will exists. Although the titles differ, their duties in managing the estate are the same.
The General Rule for Appointment
State laws not only permit a beneficiary to serve as an administrator but often give them priority for the appointment. When a person dies without a will (intestacy), statutes establish a priority order that begins with the surviving spouse, followed by adult children and other close relatives. Similarly, people who write wills frequently name these same family members as the executor. Since these individuals are usually the primary beneficiaries, the dual role is a natural outcome of the estate process.
Fiduciary Duties and Conflicts of Interest
Serving as both administrator and beneficiary creates a fiduciary relationship with the estate. This legal duty requires the administrator to act with loyalty and good faith, placing the interests of the estate and all its beneficiaries above their own. The administrator cannot use their position to benefit themselves at the expense of others and must act with impartiality.
A conflict of interest arises when the administrator’s personal financial interests could interfere with their obligation to the estate. A primary example of a prohibited action is “self-dealing.” This could involve selling an estate asset to oneself at a price below its fair market value, depriving other beneficiaries of their rightful share.
Another conflict arises concerning compensation. Administrators are entitled to a fee for their services, often calculated as a percentage of the estate’s value by state law. An administrator-beneficiary who pays themselves an excessive or unreasonable fee is breaching their fiduciary duty. All actions must be executed to benefit the estate as a whole, not the individual in charge.
Managing the Dual Role in Practice
To successfully navigate the dual role, an administrator-beneficiary must operate with transparency and precision. Meticulous record-keeping is fundamental. Every financial transaction, from the payment of a small utility bill to the sale of real estate, must be documented with receipts, invoices, and bank statements. This creates a clear audit trail that substantiates all decisions made on behalf of the estate.
Proactive and transparent communication with other beneficiaries is another important practice. The administrator should provide all beneficiaries with copies of key documents, such as the initial inventory of estate assets filed with the court and a list of all debts paid. Regular updates on the status of the administration process can prevent misunderstandings and build trust. This open approach helps demonstrate that the administrator is acting impartially.
Ultimately, the administrator must prepare a formal accounting for the beneficiaries’ review and, in many cases, for court approval. This document details all assets collected, income earned, expenses paid, and the proposed plan for distributing the remaining property. When distributing assets, the administrator must ensure their own share is calculated and paid in the same manner and at the same time as all other beneficiaries’ shares, according to the terms of the will or state intestacy laws.