At some point in the estate planning process, your client will need to select an appropriate executor to carry out their wishes. Here are some things they may not know about the executor’s duties as well as some guidelines to help them choose the right person for this important task.
Executors often don’t have a realistic understanding of what they’re getting into when they accept the position, if they are even consulted beforehand.
Much of the problem can be traced back to the testator, the individual who has executed the will. They designate an executor and assume that the person has the ability, acumen, stability, time and desire to fulfill the executor’s duties.
Many testators don’t ask the executor if they are interested in and capable of serving in the position. In addition, the designated executor may be reluctant to decline the request. This is a mistake.
I am reminded of a situation in which the deceased person was a single father of minor children, and his brother was his only close family member.
The decedent named his brother as the executor because he believed the executor must be a family member. The brother was named the guardian of the children for the same reason.
The problem was the brother didn’t know how to manage his own affairs, let alone someone else’s. The result could have been disastrous for the decedent’s children because they were the beneficiaries of the estate. Fortunately, responsible and close friends of the family intervened.
Depending on the size of the estate and the complexity of the decedent’s life, the executor’s role can be a thankless job.
Before naming an executor, the testator should understand the role, think about the qualities of the person who can handle that role, and then discuss it fully with that person so everyone understands the expectations and what is needed to undertake the job.
One of the most frequent mistakes is an executor’s failure to communicate adequately with the decedent’s family, friends, heirs and loved ones.
People generally want to be kept up-to-date and to understand reasons why certain things have been done or not done. This can go a long way toward ensuring peace and family harmony at a very emotional time.
For example, in the absence of specific directions, the executor has the power to distribute the assets as he or she sees fit.
Yet certain beneficiaries may have particular interests in specific assets such as heirlooms and collectibles that the executor may not be aware of. If the executor unwittingly distributes that item to another heir who is not as emotionally tied to the item, it can easily create acrimony.
The easiest solution is to sit down with the heirs, determine their preferences and have a discussion.
Another common problem occurs when the heirs are dissatisfied over the length of time required to finalize the estate, especially if one of the heirs is also the executor.
This may be caused by the ignorance of the other heirs about the estate probate or administration process, and perhaps a feeling that the executor is taking advantage of their position to profit over the other heirs.
The easiest way to resolve this is to have regular update meetings with all parties who have an interest in the decedent’s estate. Providing a regular summary of what has been done with the estate and the rationale behind it will allow for reasonable and amicable discussions to be had before tempers flare.
Failing to hire and bring in experts as quickly as possible also can become a major headache for executors.
Experts can include an estate attorney and an accountant as well as the decedent’s financial advisor, business and real estate appraisers, and insurance professionals, among others.
For example, imagine if an executor valued the decedent’s home based on values seen on a real estate agent’s website or an internet search. Is that value based on comparable sales? Does the website know that the house was renovated recently? Does the internet know that an investor is buying up the block to build an apartment complex or a shopping mall? Does the website know that there has been significant criminal activity in the area recently?
Of course, the answer to all these hypothetical questions is no. The only way to get a real value of the property is to engage a local appraisal company that is familiar with all of these issues.
Sometimes executors are pressured to make distributions too soon. Frequently, executors are family members and heirs to the decedent’s fortune in addition to serving as executors. As a result, they succumb to the demands made by fellow heirs expecting an inheritance. Money has a habit of changing a lot of people’s attitudes.
But an executor’s job isn’t simply to distribute wealth. Their job is to make sure that all debts and liabilities are discovered and resolved satisfactorily, and to handle and close out the decedent’s day-to-day affairs. Distributing assets too soon may result in insufficient assets to pay off creditors.
That may leave the executor personally liable for the debt; so it is clear that adequate reserves must be maintained to ensure the payment of all of the decedent’s debts prior to a complete distribution of the estate.
The list of the executor’s duties is very long. Those duties include:
» Dealing with attorneys and the court system to probate the will and transfer assets.
» Finding and marshaling all of the assets. This requires going through all of the decedent’s personal belongings, records and documents, as well as dealing with various institutions such as banks, brokerage houses, insurance companies and the decedent’s employer.
» Determining the value of the assets, which may involve dealing with various appraisal concerns.
» Safeguarding those assets, such as guarding and boarding up a home until it can be disposed of.
» Dealing with all of the decedent’s creditors. These range from the hospital where the decedent was treated to the funeral home to the more mundane utility bill.
» Continuing business ventures while the estate process is proceeding, or managing rental property and landlord-tenant affairs.
» Winding up the decedent’s last affairs, such as turning off utility service, selling the home, and closing out credit cards and various accounts.
» Dealing with accountants and the tax authorities to file tax returns and clear any tax situations such as income and estate taxes.
» And finally, dealing with heirs who may be grieving and predators seeking to take advantage of the death.
Many of the duties of the executor may also involve personal responsibility and liability. As you can see, this isn’t an easy job. In many cases, no one will be thanking the executor, but instead will be finding fault with their actions.
That is why a thorough understanding of the job is required and the person must have the capabilities and fortitude to tackle this major responsibility. Help your client to choose wisely as you help them plan their estate.