How to Manage the Responsibilities of Being an Executor
If you have been named executor of an estate, take the responsibility as a compliment. The person who named you as executor trusted you and believed you would be the right person to manage their final financial affairs.
At Davie Kaplan, we regularly work with executors to cover all the bases and ensure that the wishes of the deceased will be carried out. We’ve found that to be successful, executors need to understand the responsibilities of the position and take methodical steps to complete those responsibilities to best meet the wishes of the deceased and provide closure for their loved ones.
What Are the Responsibilities of an Executor?
The executor of an estate is in charge of gathering the assets of the deceased person, paying off any remaining debts, filing the final tax return, and if needed, ushering the estate through the probate process.
An estate executor must act as a fiduciary, or personal representative, of the deceased, and must pay any remaining debts as well as distribute assets as described in the will. Just because you’re named executor, that doesn’t mean you are required to take on this responsibility. You can turn it down, and in that case, another executor will be appointed. Some wills may specify a payment to the executor for their service; and in some states payments to executors may be based on a percentage of the estate’s assets.
We recommend the following steps to successfully manage all these responsibilities.
Start with the will. If the deceased person had a will, it is usually a good starting point for determining their final wishes. Reading the will may reveal information about specific assets and accounts.
Create a list of assets. In the best estate plans, the deceased person leaves a written list of all assets including financial institution names and account numbers. However, most people do not leave such a list, so it’s up to the executor to find out what assets are available and where they are located. In some cases, it can take months or years to locate and gain access to every account.
If the deceased person still receives paper statements for bank and investment accounts, you may be able to find most of the asset information by collecting their mail for a few months. However, because many people now get electronic statements, this isn’t always effective. One strategy is to examine a recent tax return, as it will include income reported from various accounts.
Create a list of debts. Before distributing any assets to the beneficiaries of the deceased, the executor must use those assets to address any outstanding liabilities or debts. Keep in mind that the executor may be held personally liable for unpaid debts of the deceased person if they distribute assets to beneficiaries before paying those debts. In addition to regular monthly bills, look for credit card statements, property tax statements and other potential liabilities.
Update financial accounts. To update bank accounts, investment accounts and retirement accounts, you will need a copy of the death certificate and a letter of testamentary. Letters of testamentary are issued by the surrogate court and show proof that you have been appointed as executor and have legal rights to access the account.
Any accounts that are titled with the name of the deceased and another person’s name will automatically belong to the joint owner. Any accounts with a designated beneficiary or a “payable on death” beneficiary will automatically go to the named beneficiary, superseding the will.
Unfortunately, many people forget to update beneficiary names on their accounts after going through a divorce or other life-altering changes. If an account’s beneficiary is the ex-spouse of the deceased person or another individual that seems like a mistake, an executor has no recourse. The funds will be distributed to the named beneficiary.
Oversee the probate process. Accounts with named beneficiaries and any assets included in a trust will not have to go through the legal probate process. However, real estate, investment accounts and other assets may be subject to probate. It’s a good idea for the executor to speak with a probate attorney to get advice on how to best manage the process. Davie Kaplan regularly works alongside probate attorneys and can provide referrals.
Manage the home and other real estate until sold or distributed. The executor must maintain the home and other real estate of the deceased throughout the probate or settlement process. That may include making repairs, mowing the lawn, paying property taxes and utility bills, and overseeing the sale of the home.
Also, as executor, you may have to police the home and its contents. For example, family members may want to rush into the home of the deceased and grab the items they feel entitled to, but the executor must prevent that from happening. He or she is responsible for making sure all the home’s contents will be distributed correctly as determined by the will.
File the final tax return. The executor is also responsible for filing the final tax return for the deceased person for the year of death. This return is different from a regular tax return, so it’s a good idea to get help from a tax professional. At Davie Kaplan, we have worked with many clients to file final tax returns and we are available to help.