Serve As Executor of an Estate
You’ve Been Appointed as an Executor of an Estate? Do You Know What Your Duties Are?
I can’t foresee anyone really wanting to be the executor of an estate of a deceased person. It usually is not the type of work that a dis-organized individual should undertake. It helps if you are a detailed and well organized individual.
The term “executor” and “personal representative” are often used inter-changeably. The bottom line is that this individual has a legal responsibility to protect all of the assets of the estate until the probate process (if required), is completed and all assets are distributed.
You have no obligation to serve as an executor of an estate. If you feel that you don’t have the time for it, or you simply have no desire to deal with certain beneficiaries, then you can decline. If the will provided for a backup executor, then that individual can serve. If not, a probate judge will appoint someone.
If you decide to serve, setting up a detailed checklist will be a big help. Most important of all, understand that you aren’t required to know everything as an executor. Be sure to get the advice of a qualified tax accountant as well as a competent estate attorney.
By doing so, the estate can be settled in an orderly manner with a minimum of stress. Here are some tips that you may find helpful.
1. You need to obtain certified copies of the death certificate
Normally, the executor of an estate has the responsibility to handle the funeral as well burial arrangements, and paying those expenses from the estate checking account.
The funeral home, in most states, will get the death certificates for you. It’s much easier to get all of the copies that you will need at that time, so be sure to order extras.
When you receive the copies, you will review your checklist. You need to notify, at a minimum, the following: Banks, life insurance companies, financial planning firm, brokerage houses, social security administration, Department of Veterans Affairs, tax accountant, estate attorney, and possibly many others.
It’s very important to promptly notify the social security administration if the deceased individual was receiving benefits. Stop the payments as quickly as possible to avoid the hassle when trying to pay any monies back. You would think that paying money back would be straight forward, but that isn’t so.
2. Get the original will and/or trust documents, if one was created
Wills and trusts are normally kept in a safe deposit box, or sometimes with an attorney. The person who notified you that you have been named as the executor would know the location of these documents. Different states have their own rules and procedures that must be followed when an individual dies. Some require that the will be filed with the Register of Wills, and some at other agencies.
Additionally, not all estates are required to go through probate. Usually, a dollar amount, and the type of asset will determine that. This is why you need to speak with an estate attorney as soon as you prepare a list of assets.
In the case of a living trust, it’s possible to avoid probate court, as long as the trust was setup properly in conformity with that states law. If the trust is able to avoid probate, then there is no requirement for a probate judge to authorize distribution of the assets.
The assets owned by the trust can be distributed just as soon as you have an accurate listing and you know who the designated beneficiaries are. The distribution of trust assets does not require the approval of a probate court. In the case of a will, it could take anywhere from six months to two years, depending on the state and type of asset.
Using a living trust instead of a will makes a lot of sense in many situations. The trust owns the property, and because a trust never dies, there is no need for a probate court.
3. Don’t hesitate to seek competent professional advice
As soon as you’re able to get the will and/or trust documents, you should be able to determine if you have a simple process or a more complicated one. If it appears to be a bit involved, or even if you have questions, you need to consult with an estate attorney and a tax accountant. Those individuals will know if you need to hire an appraiser, or perhaps some other professional. You do not want to make any mistakes that will open you to legal liability.
An experienced estate attorney can save you a lot of headaches and stress, especially if there are some beneficiaries who are pressing you for a fast distribution of assets. If the estate is being processed under a will, and requires probate, there will be no quick distribution of any assets.
However, some states exempt certain assets, such as retirement accounts. Your estate attorney will know what assets are exempt and can also advise you of the forms that are required to go through probate.
Final tax returns can be handled by the tax professional, and he/she may be able to assist you with any issues regarding retirement accounts, and other inherited assets.
Don’t try to do it all yourself… It will probably take longer and mistakes may be made. Use the professionals as much as you need to. If the estate is large and requires an appraiser, a fair market value needs be determined.
4. You may have to file letters testamentary
An estate that goes through probate court requires you to file letters testamentary that are used to legally confirm you as the executor of an estate. The term, letters testamentary, may have a different terminology in another state.
The court needs to make sure that you are the bona fide individual named in the will, and have legal authority to act on behalf of the estate. It’s a big responsibility in as much as you will be paying the bills, opening and closing of certain bank accounts, distributing various assets to beneficiaries, and also filing income tax returns.
5. Determine and protect the estate assets
In an ideal world, the deceased individual has prepared a listing of all assets, and where they are. The listing would include the location of the will and/or trust documents, insurance policies, bank accounts, any funeral plans that were prearranged, brokerage & other types of investment accounts, real property such as the home or perhaps a vacation home, any artwork or antiques, jewelry, and any business interests.
Any documentation that pertains to jewelry, antiques, or artwork, that relates to the cost, would be very helpful, especially if you are required to engage an appraiser.
This type of listing would normally be kept in a safe deposit box or perhaps with the attorney that prepared the will and/or trust. Often times, the attorney would have an asset listing that was used to prepare the will and/or trust.
As soon as you receive this list of assets, it’s very important to protect them. Never allow any beneficiary or family member to take their favorite piece of artwork or even one piece of silverware. Until such time as the creditors have been paid and definitely not until the probate process is complete, can any asset be distributed. This, of course, does not include the exempt assets mentioned above.
6. Pay taxes and bills
The executor of an estate has the responsibility of paying all legitimate debts of the deceased individual. This would include funeral expenses, income taxes, estate taxes, etc. In some cases, the final debts may exceed the value of the assets. Be aware that the potential inheritors have no liability to pay them.
In a situation where the debts exceed the value of the assets, do not pay any bills. The probate judge will set a priority on the creditors, and you will pay them the percentage set by the court.
As the executor of an estate, you also have the responsibility to determine what the normal monthly bills, income, and any debt, are. You need to review the checkbook, mail, and even e-mail, and income tax returns.
Before you can pay any bills or even deposit income, you need to open an estate account at a bank. You will be asked for various documentation to prove that you have been appointed as the executor.
7. Under no circumstances should you rush the process
Quite often, an executor of an estate wants to make all beneficiaries happy, and distributes the assets too soon. Be advised, if this is done and you miss some required legal procedure, you may be found negligent, and personally liable.
Don’t let this happen to you and don’t get in the middle of any dispute. Use the estate attorney as a buffer and let him/her mediate any disputes with the beneficiaries. These disputes can sometimes get very nasty, especially if a beneficiary wasn’t provided for in a will, and they thought they were.
You need to set up a very detailed filing system for estate transactions. Keep a copy of everything that is sent to you from anyone as well as any monies paid out.
This may seem like overkill, but if you have to prove some transaction to the court, it won’t be. Get everything well organized and the entire process shouldn’t be overly stressful.
There are many good books written for potential executors, some by attorneys, that will walk you through the process. Even if you’re handling a simple estate, I would recommend that you purchase one just so that you know what your duties and possible liability are. Your estate attorney can recommend one for you.
Gust Lenglet is the CEO of HBS Financial Group, Ltd., an accounting & tax preparation firm in Maryland. He has more than 25 years of experience in the banking and financial industry. Gust started his career as a loan officer at a major national bank, and then moved on to become controller of a multi-state law firm. In recent years, he has written many financial articles that have been published on Ezine Articles and many websites.