What's Involved in Being an Estate Executor?April 03, 2014
Acting as an executor of an estate can involve a great deal of work depending on the amount of and nature of the assets.
Being asked to be an executor of an estate is an honor and a big responsibility. This is a decision that should be carefully contemplated before accepting. Acting as an executor of an estate can involve a great deal of work depending on the amount of and nature of the assets.
Executors can be faced with managing investment portfolios, running a business, or dealing with real estate located across the country. These duties require a knowledge of numerous and complex issues – and is not for the lighthearted!
Many people agree to be named as an executor for a relative or friend out of a sense of duty. They often find themselves mired in a task that is more difficult and overwhelming than they expected. What’s more, executors are bound by law to observe a strict standard of care in fulfilling their duties and can be held personally liable for their mistakes. In addition, the executor is often the one dealing with the divergent interests of the family members. Inheritances tend to bring up old wounds between the beneficiaries, and the executor is usually the referee.
Below is a list of typical executors’ responsibilities that can help you make an informed decision about whether to agree to be named executor. Here are some possible duties that an executor must fulfill:
- Inform various people of the death. This includes family members, employers, business partners, insurance companies, attorney and accountant.
- Cancel accounts. This includes the deceased person’s credit cards, utilities, banks and other creditors.
- Have the will probated. Usually, this means having a lawyer petition the court to probate (or approve) the will. Once the will has been probated, the executor has the power to administer the estate - in other words, to perform the rest of the duties on this list.
- “Marshal” the assets. This means finding all of the deceased person’s assets, which may not be easy. (Imagine trying to quickly locate every asset you own right now, such as car registrations, stock certificates, account statements, deeds, pension benefits, mortgage papers, and IRA papers. Now imagine trying to do this for someone else.) This is especially more difficult in today’s electronic age if the decedent has not left a list of user names and passwords.
- Value the Assets. Assets need to be valued both for estate tax purposes and to provide heirs with a tax basis. (Under the tax law, the tax basis of an asset in an heir’s hands is generally the “date of death value.”) Some assets, such as business interests, require an appraisal prepared by a qualified expert.
- File tax returns. Depending on the size of the estate, tax returns that need to be filed might include federal and state estate and death tax returns, the decedent’s final income tax return, a final gift tax return, and an income tax return for the estate.
- Prepare a probate court accounting. Generally, you will need a professional for this.
- Handle the debts. After determining what the estate owes, an executor pays the debts out of an estate bank account. Often, this may involve negotiations with creditors where there were contracts in place that need to be terminated.
- Distribute the estate’s remaining assets in accordance with the deceased person’s wishes.
- Manage the Assets during the administration. There are rules in each state on how and when the assets can be distributed to the beneficiaries. The executor is responsible for managing the assets in a prudent (legally defined) manner during this time.
Advice: To ensure that your own assets will be more easily located after death, it’s a good idea to prepare a post-mortem letter. This is a document you can prepare yourself to tell executors and heirs where everything is located to carry out your instructions.
These are just some of the duties an executor may have to perform. Although it is an honor to be asked by a friend or relative to serve as an estate executor, don’t hesitate to decline if you aren’t sure you can handle the task. If you do decide to accept, make sure that the will has a provision to allow you to hire and pay for professionals to help you carry out your duties.
Questions? Contact us.