The Importance of the Role of the Executor of an Estate
Many people put a great deal of thought into designing an estate plan and deciding how they want to distribute their assets to family and friends after they are gone. However, few people realize that an estate plan is only as effective as the people they select to carry out the plan in the role of executor of the estate. It is important to choose the proper individual to serve as the executor because the job has many responsibilities. If the person serving as executor is not prepared to discharge these duties faithfully, serious problems can result.
The Duties of the Executor
The executor has a variety of duties. These duties start with opening the estate. This requires filing paperwork with the county to begin the probate process. It also involves notifying creditors that the estate is open. Failure to notify creditors properly can lead to problems with beneficiaries, heirs or creditors.
Inventorying the estate assets and managing the estate are also important duties of the executor. The executor needs to take an accurate inventory of the estate’s assets, including property, bank accounts, and retirement accounts, as well as any other investment accounts and personal effects. This process can be very time consuming, depending on the size of the estate.
The executor is also responsible for paying (with estate assets) any outstanding bills that the deceased owed at the time of his or her death, as well as collecting any money that was owed to the deceased and putting it into the estate for distribution to the beneficiaries. Additionally, if the deceased owned a business, it is up to the executor to carry out such duties as payroll distributions and the purchase or sale of business assets as needed.
The executor needs to calculate any estate taxes due on the estate and file an appropriate return, including payment for the tax. Additionally, the executor is responsible for filing a personal income tax return for the last year of the deceased’s life and making sure that the estate pays any taxes due or receives any refund the deceased would have received.
Closing the Estate and Distributing Assets
The executor will have to prove to the probate court that he or she has properly notified and paid all the deceased’s creditors from the estate assets. Additionally, the executor must provide proof that he or she has satisfied all tax liabilities associated with the estate and the deceased’s final year.
After closing the estate, the executor has the responsibility of distributing the estate’s assets according to the terms of the will. If the executor handles this job poorly and does not explain things well, he or she faces potential lawsuits from heirs or beneficiaries who wish to contest the will – potentially dragging out the time and expense of the probate process.
Issues to Consider When Selecting an Executor
Because of the difficulties inherent in the role of executor of an estate, it is vital that a person choose the appropriate individual for the job when creating an estate plan. There are several questions that a person needs to ask when selecting an executor. Getting clarity on the answers to those questions will help in choosing a person able to carry out the duties successfully. The beneficiaries of the estate plan can then receive the estate assets in a timely manner.
Should you choose a family member? The benefit to having someone in the family serve as executor is that the person is probably familiar with the testator’s asset and wishes for those assets. However, family members may not have the skills necessary to serve as an executor, in which case it is advisable to select a professional for the role, such as an individual advisor or a bank or trust company.
A person may be tempted to select an acquaintance who is close to him or her in age to serve as executor. However, as the testator ages, he or she needs to consider whether someone younger may be better able to carry out the duties and the likelihood that the testator’s first choice for executor will predecease the testator.
People with more than one child may be tempted to name all of their children as executors, but unless the children all live very near one another and can work together without fighting, naming more than one person may cause many problems. All the executors’ signatures will need to be on all documents associated with the business of the estate, which could cause hassle and delay if the executors live a great distance from one another or do not get along.
Cost Considerations and Making a Decision
Executors have the right to be reimbursed for their time from the estate assets. Some states limit the amount that an executor may charge for his or her work, often linked to a percentage of the value of the estate. Family members may be more likely to waive fees and only seek reimbursements for actual expenses such as travel.
Choosing the right person for the job of executor demands a great deal of careful thinking because of how complicated the job can be. It is important that a person creating an estate plan consider all of the aspects of the job when selecting an executor for his or her will so that the executor will be able to settle the estate fairly and efficiently.