My daddy gave me my first billfold when I was about six. It was a simple leather one. He had put my name in it, along with a dollar. I thought I was rich.

Daddy explained the importance of keeping my billfold safe so my money would not be lost. As I aged and learned the value of money, I came to appreciate the need to safeguard my billfold against loss or theft. Money is too hard to earn to be handled nonchalantly or carelessly.

A fellow contacted me about an auction he had attended. He purchased some things and was surprised when the cashier told him to make his check payable to the executor of the estate for which the auctioneer was selling and not to the auctioneer. The fellow said that in 15 years of buying at auctions he had only seen this arrangement a few other times. He had read in my column about a seller not feeling that an auctioneer had earned his commission. This caused the reader to question whether such an arrangement would not cause an auctioneer distress over the possibility of not being paid for his work. He wondered why this procedure was used, what reason would justify it, and why the auctioneer would agree to it. He asked for my view.

My initial reaction is the obvious one. This auctioneer was either satisfied with this money arrangement or certainly was not so dissatisfied that it kept him from accepting the business and conducting the auction. That much we can ascertain. Beyond this, we are left to speculate on why the procedure was implemented since we do not have the facts to know.

There is one other point that we can determine with near certainty from these sparse facts, however. That is the purpose that was underlying this payment procedure. It surely traces back to the advice my daddy imparted to me when he gave me that billfold all those years ago. It is the importance of safeguarding money. This is the purpose for which the reader was asked to pay the executor directly for purchases made.

This scheme enabled the executor to maintain strict control over the auction receipts. The reader wanted to know what reason might justify the use of this procedure. Several explanations come quickly to mind.

First, we do not know the identity of the executor, but I would venture this person is a professional or a seasoned businessperson. My guess is an attorney. Whoever the executor is, the person seemed to be acutely aware that: (a) an executor owes a fiduciary duty to an estate; (b) it is critical for an executor to protect an estate’s assets (such as this money); (c) an executor works under the jurisdiction of a court and must answer to that court; and (d) an executor can be held financially liable for wrongdoing or a negligent mistake that damages an estate. Since there is nothing new about someone charged with holding funds allowing that money to disappear through error or theft, it appears this executor wanted to carefully guard against that possibility. The executor did that by taking this ultra-safe approach to preserving

the money generated from the auction.

Second, did this auctioneer have a bank trust or escrow account? This is the proper type of account in which a seller’s sale receipts should be deposited. If the auctioneer did not have such an account, the procedure described would be an obvious choice for a prudent executor to pick to shelter auction revenue. Any deposit of auction proceeds into a bank account other than a trust or escrow account would result in the proceeds being commingled with other money. This would be improper, dangerous, and expose the proceeds to potential loss. By example, auction funds deposited into an auctioneer’s personal account could: (a) become part of the auctioneer’s “estate” in a bankruptcy, whether initiated voluntarily or involuntarily; (b) be subject to levy by a creditor of the auctioneer trying to collect on a money judgment; (c) be subject to a pre-judgment attachment; (d) be wrongly withdrawn by a partner, spouse, or other person authorized to access the account; (e) be seized by the bank under an “offset” agreement with the auctioneer-depositor; or (f) be seized by local, state, or federal government under a tax levy.

Third, the executor was appointed to represent the estate by the terms of the decedent’s will. Some wills are very detailed, down to identifying a certain auctioneer to sell assets. Perhaps this will was that specific and provided the details for how the auction was to be conducted, including the procedure for collecting the sale proceeds.

Fourth, a more likely scenario than a provision in a will is that a court ordered the auction and gave the terms for conducting it, including the provision that all purchase-money payments be made directly to the executor. Under this scenario, the executor and auctioneer merely followed the directive laid down by the judge. It is also quite possible that the auctioneer’s commission was subject to review and approval by the court before it could be paid.

Fifth, the reader assumed that the money was bypassing the auctioneer because checks were made payable to the executor. Maybe – but maybe not. It is also possible that the auctioneer was vested with authority to negotiate the checks on behalf of the estate, or that the executor endorsed these instruments over to the auctioneer to deposit into the auctioneer’s trust or escrow account. It could also be that the executor required the auctioneer to open a special bank account just for this auction and that is how the funds were designated for deposit into that account.

Sixth, perhaps this payment arrangement was the auctioneer’s idea. This could be the case if the auctioneer did not want the responsibility, burden, and work associated with receiving, handling, disbursing, and accounting for the sale receipts. Another explanation could be that the auctioneer knew there would be a problem in his receiving the money because he was involved in a bankruptcy action, or was the subject of a creditor’s collection efforts.

Seventh, most auctioneers work on a selling commission that is calculated as a stated percentage of gross sales made and collected – but that is not a fast rule. This procedure could have been used because the auctioneer was working for a flat fee to be paid by the estate and had no need to possess the sale proceeds.

Finally, whether the additional security that this procedure afforded the estate was the idea of the executor, a judge, or the auctioneer, we do not know. Whichever the case, no one should be criticized for being cautious. A lot of auction consignors have lost money because they were careless. Probably none has ever lost money for being too careful.

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Steve Proffitt may write to him in care of this publication.