02 Oct Fiduciary Felon Fine? Who Said “Crime Doesn’t Pay”?
As of September 1, 2023, Texas law permits (although not mandatory) a court to approve a convicted felon to serve as an executor of an estate. Prior to that date, the only way a felon could serve as an executor (the one who: (1) gathers up the assets of the deceased, (2) pays all debts, taxes, etc. of the deceased and (3) distributes in accordance with the terms of the will after the court confirms the validity of the will) is if his or her felony was expunged (had his or her civil rights restored) or if the felon received a pardon by the governor.
However, the new law hinges on whether a judge believes the convicted person has turned his or her life around and become an upstanding citizen. The judge would also probably look at how long ago the felony occurred and the nature of the felony. For example, if the felony was a financial crime, it is highly unlikely a judge would permit the felon to be appointed as an executor. In fact, it would probably take unusual circumstances for a Texas judge to permit a felon to serve as an executor – no matter what type of felony. However, if the person making the will (the testator) had only one child who had already been convicted when the will was made and that child was the sole beneficiary, this would be an example where the court may permit the felon to serve as an executor.
Also, the judge would have to make sure the felon would otherwise qualify as an executor. Qualifications requires that the person: (1) cannot be convicted of a crime of moral turpitude (dishonesty, fraud, deceit, misrepresentation, deliberate violence, depraved or immoral act), (2) cannot be a minor or be incapacitated, (3) be a U.S. citizen, (4) have a resident agent be appointed if the executor is not a Texas resident, or (5) be a suitable person since anyone the court finds unsuitable, etc. (such as a crime conviction such as theft that wasn’t enough to reach the level of a felony) might not be qualified.
Furthermore, wills often permit compensation be paid to the executor (since the executor has to pay all the bills, taxes, debts and expenses after collecting all assets – which could even require lawsuits) before distribution of assets to the beneficiaries named in the will. If the will is silent as to the amount of compensation, then under the Texas Estates Code, the standard compensation is a five (5%) percent commission on 1) all amounts that the executor or administrator receives; or 2) pays out in cash in the administration of the estate. However, Texas law does not permit compensation to an executor for cash on hand at the decedent’s death, including checking accounts, savings accounts, certificates of deposit, money market accounts, collecting life insurance policy proceeds (unless difficult to obtain), or paying out cash bequests to beneficiaries. The executor might be able to get more than five (5%) percent commission if the type of work involved is difficult. For example, if the executor manages a business, farm, or ranch, the executor can apply to the court for more than the standard fee. On the other hand, an interested party may request the executor be paid less than the standard compensation if the executor was not careful. If the will simply says the executor is entitled to “reasonable” compensation, sometimes executors check with banks or trust companies to see what such institutions normally charge annually, and then try to reach an agreement with the beneficiaries as to what is reasonable. It is probably best that the testator (the one who makes the will) be clear as to compensation (i.e., 2% not to exceed $5000). If the executor is also a beneficiary, it would be better to receive funds as an inheritance (which there would be no tax) as opposed to receiving the executor’s fee which is subject to income tax.
So, who said “crime doesn’t pay?” Some felons who can act as executors could be paid pursuant to this new law.
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