The Facts: Some people who have been named as executors told me their jobs were quite simple while others complained about all the time and effort it takes to administer an estate.
The Question: What are the responsibilities of an executor and why does the complexity of the process vary so much?
The Answer: The amount of time, energy and money it takes to administer an estate depends in large part on the type of assets owned by the decedent at the time of his death, how organized the decedent was when it came to record keeping and the family dynamics. Clearly if the decedent simply owned a house, had a checking account and had heirs that were close and trusting, the executor’s job will be much easier than if the decedent owned multiple pieces of property in different states, did not discuss his finances with anyone, did not keep clear or complete records of his assets and had heirs that could not agree about anything. Even if the dictates of the decedent’s Will are clear and unambiguous, the heirs can prolong the administration of an estate and increase the costs associated with the administration if they are mistrustful, uncooperative and not happy with the terms of the Will.
Putting aside the personal relationships of the heirs, all executors have the same basic responsibilities, i.e.: to identify and locate the decedent’s assets, to determine and preserve the value of those assets, to pay the decedent’s debts and expenses and those of his estate and to distribute any remaining assets in accordance with the terms of the Will. Generally the executor can only make distributions to beneficiaries under the Will after all debts and expenses have been paid.
In order to identify and locate assets, the executor must gather documents and information relating to bank and brokerage accounts, trusts, real estate and other assets in which the decedent had an interest, retirement plans and pensions, credit cards, motor vehicles owned by the decedent, tax returns and insurance policies. This list is not exhaustive and will vary depending from estate to estate. In addition to assets that pass under the Will, the executor may also play a role in locating non-probate assets such as IRA’s and assets held in trust.
Once the executor has determined what the decedent owned and has located the assets, he must determine the value of the decedent’s estate. This is important for tax purposes as well as for purposes of distribution. Valuation of accounts is relatively straightforward but, the executor may need to retain an appraiser if the decedent’s assets include antiques, collectibles, jewelry and art work.
In addition to determining the value or the decedent’s assets, the executor must preserve the value of those assets, If the decedent owned real estate, the executor must take steps to maintain and insure the property, to collect rents were applicable and to pay carrying costs such as real estate taxes and mortgages. If the decedent had credit cards, the executor should cancel the cards to avoid their unauthorized use. If the decedent was owed money or due refunds, the executor must act to collect all funds due the decedent.
After the executor has a complete picture of the decedent’s estate, he should file tax returns for the decedent and the estate. These may include both state and federal income tax and estate tax returns depending on the decedent’s circumstances.
Before making distributions to heirs, the executor is responsible for paying the decedent’s legitimate debts and those of the estate. Medical bills, funeral costs, taxes must be paid by the executor. Once all debts are paid, the executor can make a final distribution of the remaining assets to the beneficiaries in accordance with the decedent’s wishes. When distributing assets the executor should ask the beneficiaries to sign releases acknowledging that they received the assets. This protects the executor from claims of wrong doing.
In addition to the responsibilities set forth above, depending on the circumstances, an executor may have to prepare an accounting, commence an action to recover assets or retain professionals to assist with the administration of the estate. Since each estate is different and since executors have varying skills, the administration of each estate presents its own challenges. That is why it is important to choose your executor carefully and to be sure that the person you chose is willing to accept the challenge.
This article first appeared in the October 18, 2012 issue of the Times Beacon Newspapers.
Linda M. Toga of The Law Offices of Linda M. Toga, P.C. is an East Setauket, New York attorney with a general law practice focusing on estate planning, real estate, marital planning, small business services and litigation.