The following article covers the role of the executor of an estate a/k/a the executor to a will. Choosing the right person for the job is crucial to make sure your directions are followed.
It should be noted at the outset that a will does not avoid having to go through a probate administration. Proper estate planning, including the preparation of a living trust, is often required to maximize your estate.
What Does the Executor of an Estate Do?
When making a will, testators express their last wishes regarding, among other things, what they expressly want to happen to their possessions and final remains after death. The will identifies assets, bequeaths property to designated heirs, and addresses issues of personal importance to the testator – such as how treasured pets will be cared for.
But, the will itself is only a document. There must be an individual who takes the necessary actions to implement its terms – someone the testator can trust to ensure that his or her last wishes are carried out. The person upon whom this responsibility is conferred is known as the executor.
Being appointed as the executor of a will is an honor. In naming an executor, the testator is putting great faith in that person, essentially saying, “I know I can count on you to take care of my affairs after I’m gone.”
In addition to meeting the requirements of state eligibility laws, an executor should be literate in financial matters, trustworthy, and – ideally –familiar with the testator’s economic situation. Often, close friends and family members are named as executors, whether or not they are ideally fit to be given such responsibility.
Most people only serve as an executor once or twice in their lives. So, going in, it may seem like a daunting task, especially if you are grieving over the loss of a loved one.
But, in truth, most of estates are not overly complex, and you usually don’t need a background in law or finance to serve as an executor. You will, however, need to have a good idea of the obligations and responsibilities involved in the role.
Definition of an Executor
The short definition of an executor is the person charged in a will with administering the decedent’s estate. The position may also be referred to as the “personal representative,” “executrix” if the designee is a woman (though this term is used less frequently now), or, if the decedent left no will, i.e. died intestate, then the person in charge of distributing the estate would be the “administrator.”
Duties of an Executor
An executor’s duties begin almost immediately upon the decedent’s death and continue until all assets have been distributed and the estate is formally closed. Depending upon the complexity of the estate, settling an estate can take as little as a few months to as long as a few years. As a general rule, expect it to take at roughly 12 months to settle an estate.
In carrying out all responsibilities, an executor acts under what is known as a “fiduciary duty,” a duty to act honestly and diligently and to generally put the interests of the estate above the executor’s own interests.
The executor’s fiduciary duty requires he or she safeguard all assets until they are distributed and make a sincere, good-faith effort to honor the decedent’s wishes to the fullest extent allowed by law.
Executor’s Action Items When the Testator Dies
Upon learning of the testator’s death, an executor’s first task is to locate and review a copy of the will. The executor determines if the will must be formally approved in court and identifies the appropriate local government office where it needs to be filed (usually, the county probate court or office of the fiduciary).
If unsure whether court approval is necessary, or if any terms of the will are unclear, the testator should consult with a lawyer. Executors are authorized to hire attorneys, accountants, and other necessary professionals on behalf of the estate, and the fees can be paid from estate assets.
After the will is filed, the court or other government office will enter an order officially sanctioning the executor’s appointment. At that point, the executor has legal authority to act as the personal representative of the estate and to deal with third-parties on its behalf.
Estate Bank Account
Early in the estate administration process, the executor should open a separate bank account in the estate’s name and transfer any of the deceased’s funds to the account.
Any incoming payments for debts owed to the deceased are deposited in the account, and the executor has discretion to liquidate estate assets (unless the asset has been specifically bequeathed).
The account can be used to pay any mortgage payments, utility bills, insurance premiums, professional fees, or other expenses necessary to maintain the estate during administration.
Identify Decedent’s Property
One of an executor’s most important, and sometimes difficult, tasks is to identify and catalog all of the decedent’s property. This can require some detective work.
Hopefully, the decedent identified all major assets either in the will or in a separate list, but it may be that assets were acquired after the will was drafted or that certain items were inadvertently or intentionally left out of the will.
To ensure everything is properly administered, the executor should review the deceased’s personal records for any bank or other financial accounts, safe deposit boxes, and life insurance policies with a potential death benefit and take temporary custody of all valuable personal property. Identifying all digital assets, such as websites and social media accounts, are also a critical aspect of the executors role
As part of the fiduciary duty, an executor must safeguard all estate property until it can be distributed. Personal property should be kept in a safe, secure location, and real estate should be maintained in good condition.
The executor has the duty to manage any investments and tend to any business interests while the estate is pending.
If the deceased was involved in any court cases at the time of death, the executor assumes control of the litigation on behalf of the estate and makes any other necessary court appearances for the estate. The proceeds of any lawsuits or legal settlements become property of the estate and are distributed according to the terms of the will, if applicable, or state succession laws.
Handling Claims Against Estate?
Before assets can be distributed to beneficiaries, the executor must provide notice of the decedent’s passing to any interested parties. This includes beneficiaries, creditors, the Social Security Administration or other office from which the decedent received benefits, and any financial institutions with which the decedent had accounts.
As with assets, identifying creditors may also require some investigation. Once notified, creditors have a few months to submit claims for payment from the estate.
In some states, the executor must publish a legal advertisement in a local newspaper putting creditors on notice that the estate has been opened.
When a creditor submits a claim, the executor may either pay the claim using estate assets if the claim is deemed valid or contest the claim if it is doubtful.
If the claim is contested, the creditor has the right to challenge the executor’s decision in court.
Additionally, the executor has authority to negotiate with creditors, who may be willing to accept less than the full amount of the claim under certain circumstances.
The same as any living person, an estate has an obligation to pay taxes. And it is the executor who is responsible for paying applicable taxes from estate funds.
The executor files the decedent’s final income tax return, and, in the event the estate is earning income during administration, the executor files a return on the estate’s behalf.
If estate taxes are due, the executor is also responsible for paying those.
As of 2018, the federal estate tax exemption is $11.2 million, so most estates do not have to pay estate taxes.
However, some states have estate taxes with lower thresholds.
If there is any doubt, the executor is responsible for hiring an accountant or appraiser to determine the precise value of the estate and whether estate taxes are due.
Filing an Accounting
After creditor claims and taxes have been handled, the executor files an accounting of the estate with the probate court or other applicable government office.
The accounting identifies estate assets and payments made and requests court approval to commence distributions. Once approved, the executor begins making distributions according to the terms of the will.
Distributing the Estate’s Assets
The process for distribution will depend upon the nature of the assets.
For personal property with no title, the executor simply turns over possession to the beneficiary.
Real estate and personal property with a title will require signing over the deed or title.
Financial account balances, cash, and life insurance death benefit proceeds (which have probably already been deposited or transferred into the estate’s bank account) are paid out to beneficiaries from the estate account.
If the decedent does not have a will, or if certain assets are not addressed in the will, assets are distributed according to state intestate succession laws.
Some assets, like jointly owned property or accounts with a “payable on death” designation, will have already automatically transferred to the beneficiary outside of the probate process.
Because the job is so time-consuming, executors are entitled to a fee for their work, paid by the estate.
The amount of the fee will either be provided by statute or in the will and must be approved by the probate court in consideration of the complexity and amount of work necessary.
Executors can, and often do, waive the fee, especially if the executor is also a beneficiary under the will. The fee reduces the size of the estate, and is treated as income to the executor, so it might, from a tax perspective, make more sense to waive the fee and receive a larger inheritance.
While serving as an executor can require substantial effort, the role should not be viewed as overly intimidating. With a willingness to put in the time and work, professional advice when necessary, and a little research on the responsibilities and duties of the job, most people are capable of competently serving as the executor of an estate.