What are the duties of an executor?
Wednesday, 28 August 2019
When making your will, you may be stumped about who to choose as your executor, or even what an executor is exactly.
In simple terms, the executor of an estate is someone who is named in a will to carry out the terms and decisions of the will according to your desires. An executor is also called a personal representative in some states.
Choosing an executor
Choosing an executor is one of the most important decisions you'll make for your estate to ensure the process of managing your estate goes smoothly.
An executor can be a trusted family member or friend, preferably someone who is in good health and is skilled in financial matters. Some states require the individual appointed as executor of an estate to be a resident of the same state. If you have someone in mind who lives out-of-state, contact your county clerk to find out what your options are.
When selecting an executor, here are some questions to consider:
- Do they have the time? Estate administration can be very labor intensive. (gather assets, paying bills, securing the property etc.) For an individual, being an executor is like having a second job.
- Do they have the skills? People who can't manage their own checkbook, have financial difficulties of their own, or have no idea how to organize financial information are not a good candidate to be an executor.
- Do they have the temperament? Picking one child to be your executor gives that person a lot of power and discretion and could put a tremendous burden on the individual and create disharmony in the family.
- Do they understand the rules? Each state has specific laws on executor's responsibilities along with timetables for them to perform their duties i.e. publishing death notifications, inventory, filing estate tax returns. A lot of individual executors, once they get into the estate administration, find the tasks so daunting they consult attorneys for help, which is much more expensive. It's important to follow the probate code strictly, if you misrepresent the value of any assets, you could be held accountable by the IRS or by the beneficiaries.
Banks with a trust department and trust companies can also provide executor services for a fee and alleviate any tension or concerns about selecting a friend of family member.
"Estates with assets of $2 million or more are likely to have complex tax issues and special assets which require significant time and attention during the estate administration process," says Donette Stubblefield, BBVA Houston wealth market executive and former chief fiduciary officer.
"Such a large time commitment is often difficult for an individual who must balance fulfilling the duties of an executor with his or her own personal and professional obligations," she says. "A corporate executor has both the broad experience, and the time, to administer the estate with full attention to all aspects of the administration."
Duties of an executor
An executor is a legal representative for your estate. As such, they can be found personally liable if they mismanage the estate in a way that results in a loss for its beneficiaries. The responsibilities typically include:
- Filing the will with the local probate court. When the time comes, it's the executor's duty to find, read, and interpret your will. They then file the will with the probate court, even if probate isn't a necessary step for your estate.
- Notifying organizations of the death. Contact banks, lenders, credit card companies, business partners and the Social Security Administration.
- Setting up a separate bank account for the estate. This will simplify the process of managing any incoming payments or bills that come to the estate during the probate process.
- Filing assets with the court and distributing them. In some states, the probate court requires a detailed list of the estate's assets. When the time is right, the executor may distribute those assets as dictated in the will or to pay off remaining debts. If there are any assets left undistributed, the executor may be tasked with disposing of them, typically by selling them.
- Maintaining assets until they're distributed or disposed of. The probate process can take a while. During that time, the executor has a duty to preserve and manage the assets so they don't fall into a state of disrepair. This includes personal property, the house and other tangible assets.
- Paying the estate's liabilities. In most cases, the estate will have debts and/or taxes due. The executor should follow the state's law of notifying and paying creditors. They will also file a final income tax return. Depending on the size of the estate, estate taxes may also come into play.
- Managing other duties as dictated by the probate court. Based on the needs of your estate, there may be other responsibilities beyond those listed above. It may be in your executor's best interest to hire an attorney to assist with the process.
Stubblefield offered a few examples of what an executor should NOT do. For instance, Stubblefield says:
- Don't pay the decedent's bills too quickly, Federal and State taxes take priority.
- Don't play the stock market with estate assets in an attempt to increase the value of the estate. "The executor has a duty to safeguard and protect the estate assets. To speculate is not within the defined role of the executor," she says.
Appointing an executor is an important decision — regardless of the size of your estate. Knowing that a qualified person is managing your affairs can give you and your beneficiaries peace of mind.
The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or financial advice. You should consult your legal, tax, or financial consultant about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates.
|Securities and Insurance Products:|
|ARE NOT DEPOSITS||ARE NOT FDIC INSURED|
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