What Is an Executor?
An executor of an estate is an individual appointed to administer the last will of a deceased person and carry out the instructions to manage the affairs. They are appointed either by the testator or a court. Executors ensure all assets in the will are accounted for and transfer these assets to the correct beneficiary. Assets can include financial holdings, such as stocks or bonds, real estate, direct investments; or collectibles.
Key Takeaways
- An executor administers a person's estate upon their death.
- An executor may be named by the testator or by a court.
- The primary duty of an executor is to carry out the wishes of the deceased person based on instructions spelled out in their will or trust documents.
Executor Duties
The executor must be over 18 without prior felony convictions and can be a friend, family member, or a professional like a lawyer or accountant. The executor's duties include:
- Estimates the estate's value by using either the date of death value or the alternative valuation date, as provided in the Internal Revenue Code (IRC).
- Ensures that all of the deceased's debts are paid, including taxes.
- Publishes an official notice to creditors.
- Fulfills the legal obligation to meet the wishes of and act in the interest of the deceased.
Acting as Executor
- Ensure the testator has a list ofassetsanddebts, including bank accounts, investment accounts, insurance policies, and real estate.
- Know where the original will and the asset list are being held and how to access them.
- Know the names and contact details of attorneys or agents named by the testator, and what their function is.
- Discuss the testator's wishes for a funeral or memorial service, including instructions for burial or cremation.
- Discuss the will with the testator and, if possible, with the beneficiaries to minimize problems in the future.
- Have a copy ofall documents.
- Gather this information as soon as possible afteragreeing to be the executor.
Estate Planning
Executors are key in estate planning for individuals and beneficiaries. Estate planning is how an individual’s assets will be preserved, managed, and distributed after death. Individuals have various reasons for planning an estate, including preserving family wealth, providing for surviving spouses and children, funding education, or leaving their legacy for a charitable cause. Major estate planning tasks include:
- Completing or establishing a will or trust
- Limiting estate taxes by setting up trust accounts in the name of beneficiaries
- Establishing a guardian for living dependents
- Naming an executor of the estate to oversee the terms of the will
- Updating beneficiaries on plans such as life insurance, IRAs, and 401(k)s
- Planning funeral arrangements
- Establishing annual gifting to qualified charitable and non-profit organizations to reduce the taxable estate
- Naming adurable power of attorney (POA) to direct other assets and investments
Retirement account beneficiary designations for 401(k)s and IRAs override will and trust directives.
Disputes
- Multiple Executors: Designating multiple executors adds greatly to the amount of paperwork and can spark disputes. One or more may lack the financial ability to deal with creditors or understand estate tax matters. if co-executors agree to allow only one individual to serve, the others waive their appointment. This waiver works well when co-executors trust the person who is the sole executor. An alternative may be to allow a bank’s trust department to handle the job which may be best suited for large estates.
- Intrusive Heirs: In some families, heirs descend on adecedent’s home to claim the contents or valuables, contrary to the deceased's wishes. The will may give latitude to an executor in making these disbursem*nts to heirs such as distributing property or selling property and distributing cash. The executor may need to secure the home and other assets and inform heirs that this is the law.
Personal Liability
Acting as an executor requires a time commitment. Contacting agencies like the Social Security Administration tostop Social Security benefits, the IRS, or state tax authorities for income tax and death tax matters is the role of an executor.
An executor can allow an estate attorney to handle many of these matters. However, the attorney will bill for their time and cost the estate money. A CPAor other tax preparers can work on the decedent’s final income tax return for the estate. An executor must pay taxes owed before disbursing inheritances to heirs.Additionally, many states imposedeath taxeson estates.
Executors must explain to heirs eager to receive their inheritances that they can not make disbursem*nts until all claims against the estate are settled.
Is an Executor the Same As a Trustee?
The two roles are similar, but an executor carries out one's will, often under the supervision of a probate court; while a trustee is responsible for one's trust. In some cases, the two may be the same individual, although they don't have to be.
Can an Executor Also Be a Beneficiary?
Yes, and it is not uncommon for a will's executor to also be a named beneficiary.
What Is a Gift Given in a Will Called?
A gift named in a will is known as a bequest or a legacy.
The Bottom Line
An executor is the individual who carries out one's last will, ensuring that the stipulations and wishes of the deceased are carried out properly. Subject to probate court oversight, this will often include disbursing the estate's assets, paying any taxes due, and covering outstanding debts.
