When someone dies and leaves a will, an executor will oversee the will’s property distribution provisions and settle the estate’s accounts. If you are ready to prepare a will, or someone has approached you about becoming an executor, you may be wondering about what that role entails; even if you have been an executor before, the prospect can still be daunting. In the following paragraphs we will introduce what an executor is, and what he or she does.
How Do Someone Become an Executor?
When writing a will, the drafter will often identify who the executor of the estate will be. If there is no will, a court will appoint as an administrator a person to accomplish the same tasks as an executor. The procedure for estate disposition without a will is called intestacy, and is a separate topic from this one. For our purposes here, we will use the term "executor" to describe situations in which a will exists.
Note that being named as an executor does not compel a person to become one, or to remain one if you initially accept the appointment. The proposed executor can decline the designation, or resign from it, or hire professionals like accountants and attorneys to assist.
What Does an Executor Do?
An executor serves as the agent of the estate for as long as it takes to conclude its affairs and close it. The executor must act as a fiduciary to the estate, meaning that he or she serves as an agent of the estate and is not only legally bound to avoid conflicts of interest with it but must promote the estate’s best interests.
Being named as an executor does not entitle a person to any property right or interest in the estate, or to any proceeds from the sale of any estate assets. State law typically provides for executor compensation from the estate in the form of a fee for services.
What an executor does depends heavily on the nature, size and complexity of the estate. The larger the estate in terms of property holdings and other value, the more complex concluding its affairs is likely to become. If the estate property includes a farm or a business, this can introduce special use valuation rules that might significantly affect their tax treatment. If the deceased had possible legal claims against others, such as personal injury claims, these can lead to a survival cause of action. If the deceased was a defendant in a lawsuit, damages claims of the plaintiff can shift to the estate. In these situations, the executor can call upon professional help like accountants, bookkeepers and attorneys, who can be compensated from the estate instead of the executor.
Generally, regardless of the size or complexity of the estate, executor responsibilities break down into the following categories: probate considerations, marshaling the property of the estate, settling the estate's accounts and distributing estate property. Let's take a closer look at each.
Probate Considerations
Probate concerns the legal issues connected with administering the will or, if there is no will, going through the process of intestacy. The probate process includes some of the other categories we will discuss in more detail below. Some of the specific probate matters that you can encounter include:
Probate is common, but not always applicable to an estate. Most states exempt smaller estates from the probate process based on their dollar value, or provide for simplified probate procedures for such estates. Also, not all estate property is subject to probate. For example, property owned by both spouses is ordinarily exempt from probate, and other property that cannot be transferred through a will (for example, living trusts) is also not subject to probate.
If probate is necessary, it can take several months or even a year or more to complete. Court costs and other legal expenses can be paid from the assets of the estate.
Marshaling the Property of the Estate
The property of an estate can consist of land (real property), tangible items (such as cash, cars, furniture, jewelry) and intangible property such as bank accounts, bonds, stocks, and other financial instruments). Before property can be included or excluded from probate or distributed to one or more beneficiaries, it needs to be identified and included in the estate. Ordinarily the executor will open a bank account for the estate into which any amounts owed to the estate and monies from the sale of estate property will go.
Creating an Inventory
It is the executor's responsibility to perform a careful inventory of all estate property and where necessary to recover that property from others. Many states require you to file an inventory in court, and performing a good inventory will help with recordkeeping, distributions, and eventually closing the estate.
Maintaining Estate Property
Given the length of time it can take complete the disposition of an estate, the executor will need to preserve estate property that requires physical or financial maintenance. For example, property that the estate was paying for on installments – for example, mortgage payments and related insurance premiums – needs to be kept current until the asset can be sold, transferred to a beneficiary or otherwise accounted for.
Settling the Estate’s Accounts
NotificationsThe executor or should notify government agencies and businesses with whom the deceased person had accounts of his or her death. Examples of government agencies include the Social Security Administration, the Department of Veterans Affairs, and Internal Revenue Service, and the Centers for Medicare and Medicaid Services. Companies that should be notified include utilities, credit cards, financial institutions, and any organization with which the deceased had a subscription account.
Paying Valid Claims against the Estate
If the deceased person had any debts or tax obligations left unpaid, the executor must identify all creditors with claims against the estate and to the extent possible pay them from the estate's assets. This includes filing all necessary tax returns, paying bills, settling credit account balances and other financial obligations (including funeral expenses, costs associated with probate, attorney fees, and other expenses connected with closing of the estate). It may be necessary for the executor to identify estate property to be sold to meet these obligations to creditors.
Distributing Estate Property
Once the estate's property has been inventoried and collected, and obligations of the estate paid, the next task of the executor is to see to the distribution of the remaining assets to beneficiaries identified in the will and under law as appropriate. Sometimes this can require making additional adjustments to the estate, like selling property or the creation of one or more testamentary trusts.
Wrapping Up
Representing an estate as its executor can, particularly with larger estates, become more than one person can handle. Locating and securing estate assets, assessing their value, handling any challenges to the will (or having no will at all), and dealing with any legal claims the decedent may have been involved with before death can all become time-consuming and even anxiety-producing.
Engaging an attorney to assist the executor is not a legal requirement. But doing so can reduce the risk of problems developing in or out of probate that could delay closing the estate or frustrate the intent of the deceased. Speaking with an attorney experienced in wills, trusts, and estates can give the executor a better idea of whether to retain an attorney for the estate.
This blog was originally posted at www.ssrlawoffice.com.
How Do Someone Become an Executor?
When writing a will, the drafter will often identify who the executor of the estate will be. If there is no will, a court will appoint as an administrator a person to accomplish the same tasks as an executor. The procedure for estate disposition without a will is called intestacy, and is a separate topic from this one. For our purposes here, we will use the term "executor" to describe situations in which a will exists.
Note that being named as an executor does not compel a person to become one, or to remain one if you initially accept the appointment. The proposed executor can decline the designation, or resign from it, or hire professionals like accountants and attorneys to assist.
What Does an Executor Do?
An executor serves as the agent of the estate for as long as it takes to conclude its affairs and close it. The executor must act as a fiduciary to the estate, meaning that he or she serves as an agent of the estate and is not only legally bound to avoid conflicts of interest with it but must promote the estate’s best interests.
Being named as an executor does not entitle a person to any property right or interest in the estate, or to any proceeds from the sale of any estate assets. State law typically provides for executor compensation from the estate in the form of a fee for services.
What an executor does depends heavily on the nature, size and complexity of the estate. The larger the estate in terms of property holdings and other value, the more complex concluding its affairs is likely to become. If the estate property includes a farm or a business, this can introduce special use valuation rules that might significantly affect their tax treatment. If the deceased had possible legal claims against others, such as personal injury claims, these can lead to a survival cause of action. If the deceased was a defendant in a lawsuit, damages claims of the plaintiff can shift to the estate. In these situations, the executor can call upon professional help like accountants, bookkeepers and attorneys, who can be compensated from the estate instead of the executor.
Generally, regardless of the size or complexity of the estate, executor responsibilities break down into the following categories: probate considerations, marshaling the property of the estate, settling the estate's accounts and distributing estate property. Let's take a closer look at each.
Probate Considerations
Probate concerns the legal issues connected with administering the will or, if there is no will, going through the process of intestacy. The probate process includes some of the other categories we will discuss in more detail below. Some of the specific probate matters that you can encounter include:
- proving that the will is valid
- identifying the estate's property and determining its value, and
- paying any taxes due from or debts owed by the estate
Probate is common, but not always applicable to an estate. Most states exempt smaller estates from the probate process based on their dollar value, or provide for simplified probate procedures for such estates. Also, not all estate property is subject to probate. For example, property owned by both spouses is ordinarily exempt from probate, and other property that cannot be transferred through a will (for example, living trusts) is also not subject to probate.
If probate is necessary, it can take several months or even a year or more to complete. Court costs and other legal expenses can be paid from the assets of the estate.
Marshaling the Property of the Estate
The property of an estate can consist of land (real property), tangible items (such as cash, cars, furniture, jewelry) and intangible property such as bank accounts, bonds, stocks, and other financial instruments). Before property can be included or excluded from probate or distributed to one or more beneficiaries, it needs to be identified and included in the estate. Ordinarily the executor will open a bank account for the estate into which any amounts owed to the estate and monies from the sale of estate property will go.
Creating an Inventory
It is the executor's responsibility to perform a careful inventory of all estate property and where necessary to recover that property from others. Many states require you to file an inventory in court, and performing a good inventory will help with recordkeeping, distributions, and eventually closing the estate.
Maintaining Estate Property
Given the length of time it can take complete the disposition of an estate, the executor will need to preserve estate property that requires physical or financial maintenance. For example, property that the estate was paying for on installments – for example, mortgage payments and related insurance premiums – needs to be kept current until the asset can be sold, transferred to a beneficiary or otherwise accounted for.
Settling the Estate’s Accounts
NotificationsThe executor or should notify government agencies and businesses with whom the deceased person had accounts of his or her death. Examples of government agencies include the Social Security Administration, the Department of Veterans Affairs, and Internal Revenue Service, and the Centers for Medicare and Medicaid Services. Companies that should be notified include utilities, credit cards, financial institutions, and any organization with which the deceased had a subscription account.
Paying Valid Claims against the Estate
If the deceased person had any debts or tax obligations left unpaid, the executor must identify all creditors with claims against the estate and to the extent possible pay them from the estate's assets. This includes filing all necessary tax returns, paying bills, settling credit account balances and other financial obligations (including funeral expenses, costs associated with probate, attorney fees, and other expenses connected with closing of the estate). It may be necessary for the executor to identify estate property to be sold to meet these obligations to creditors.
Distributing Estate Property
Once the estate's property has been inventoried and collected, and obligations of the estate paid, the next task of the executor is to see to the distribution of the remaining assets to beneficiaries identified in the will and under law as appropriate. Sometimes this can require making additional adjustments to the estate, like selling property or the creation of one or more testamentary trusts.
Wrapping Up
Representing an estate as its executor can, particularly with larger estates, become more than one person can handle. Locating and securing estate assets, assessing their value, handling any challenges to the will (or having no will at all), and dealing with any legal claims the decedent may have been involved with before death can all become time-consuming and even anxiety-producing.
Engaging an attorney to assist the executor is not a legal requirement. But doing so can reduce the risk of problems developing in or out of probate that could delay closing the estate or frustrate the intent of the deceased. Speaking with an attorney experienced in wills, trusts, and estates can give the executor a better idea of whether to retain an attorney for the estate.
This blog was originally posted at www.ssrlawoffice.com.
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