INTRODUCTION
Being the executor of an estate is an honor; however, it is also a challenging, time-consuming role that carries legal liability. An executor will likely work long hours for at least a year or two to settle the estate and ensure everything is handled properly. While fulfilling this important duty, the executor may face difficult decisions and, at times, could become an unpopular figure among the heirs.
DUTIES OF AN EXECUTOR
If you are considering asking someone to serve as the executor of your estate, you should ensure they understand the duties and responsibilities of the role. An executor is entrusted with the responsibility of settling someone’s affairs—an undertaking that can range from simple to complex depending on the situation.
Essentially, an executor’s job is to protect a deceased person’s property until all debts and taxes have been paid and to see that the remaining assets are transferred to the rightful beneficiaries.
Some of the key responsibilities of an executor include:
- Locate the deceased’s original signed will and any codicils, and review its terms.
- Determine if probate is necessary and, if so, retain a competent attorney.
- If probate is required, collaborate with the attorney to ensure proper paperwork is filed.
- Assemble the decedent’s assets.
- Take possession of safe deposit box contents.
- Consult with banks to identify all accounts held by the decedent.
- Transfer securities into the name of the estate, listing the executor’s name, and continue to collect dividends and interest on behalf of the heirs.
- Find, inventory, and protect personal property and other valuable household effects.
- Locate and review all real estate deeds, mortgages, and leases and manage any rental properties.
- Arrange ancillary administration for out-of-state properties.
- Collect monies owed to the deceased.
- Evaluate and supervise management of any business interests owned by the decedent.
- Inventory all assets and arrange for appraisals when appropriate.
- Determine liquidity needs, review bookkeeping records, and evaluate investments.
- Sell appropriate assets as necessary.
- Pay valid claims against the estate and reject improper claims, defending the estate if needed.
- File and pay state and federal taxes due.
- File income tax returns for the decedent and the estate.
- File a federal estate tax return (if required).
- Prepare a statement of all receipts and disbursements and ensure all professional fees are paid.
- Distribute specific bequests and the remainder of the estate to the beneficiaries.
CHARACTERISTICS OF A GOOD EXECUTOR
The law does not require your executor to be a legal or financial expert, but it does require them to act with honesty, impartiality, and diligence. This is known as fiduciary duty—the obligation to act in good faith and in the best interests of the beneficiaries.
A good executor should:
- Have the time to attend estate-related meetings and fulfill their responsibilities.
- Be able to communicate effectively and frequently with beneficiaries.
- Possess strong organizational skills and attention to detail.
- Be compassionate and able to navigate sensitive family dynamics.
- Have the ability to make difficult decisions and remain impartial.
CHOOSING AN EXECUTOR
You can name almost anyone legally competent to serve as your executor, such as a spouse, sibling, friend, business associate, or financial/legal advisor. You can also appoint a corporate executor, such as a bank trust department.
Before naming an individual as your executor, consider whether they are truly capable of handling the role. Meet with them beforehand to ensure they are willing to accept the responsibility. Due to potential legal liability, some individuals may prefer to consult with an attorney before accepting the role.
Pros and Cons of an Individual Executor
Advantages:
- An individual may have firsthand knowledge of the family’s situation and assets.
- Beneficiaries may feel more comfortable working with a familiar person.
Disadvantages:
- An individual may move away, become ill, or pass away before the estate is settled.
- They may lack experience in estate management.
- They could unintentionally (or intentionally) favor certain beneficiaries.
- They are entitled to compensation, which could affect estate assets.
Pros and Cons of a Corporate Executor
Advantages:
- A corporate executor provides long-term stability.
- Professionals at a trust department are experienced in handling estates.
- They offer impartiality, avoiding favoritism among beneficiaries.
Disadvantages:
- A corporate executor may lack a personal connection to the family.
- Some beneficiaries may feel uncomfortable working with an institution rather than a trusted individual.
- Corporate executors may follow rigid processes that limit flexibility in addressing unique family circumstances.
The Best of Both Worlds: Co-Executors
For some estates, a combination of an individual and a corporate executor may be the best solution. In this arrangement, a corporate executor handles administrative and asset management tasks, while an individual executor provides oversight and insight into family-related decisions. This setup allows for both professional expertise and a personal touch.
CONCLUSION
One of the most important estate planning decisions you will make is choosing the right executor. Carefully evaluate the duties of an executor, the characteristics of a strong candidate, and the unique needs of your family and financial situation before making your decision.
Once you have selected an executor, meet with them to discuss the role and any potential costs involved. Serving as an executor is both an honor and a burden, and it should not be taken lightly.
This article is strictly for informational purposes and is not intended as an offer or solicitation for any transaction. The information provided is not legal, tax, or investment advice. For such advice, consult an attorney or tax professional.
Investment advisory services are offered through CWM, LLC, an SEC Registered Investment Advisor. Carson Partners, a division of CWM, LLC, is a nationwide partnership of advisors. The views in this article do not necessarily represent those of CWM, LLC. Information is based on sources believed to be reliable; however, its accuracy or completeness cannot be guaranteed.
