Every few years, your parents update their wills and trusts, and one year they ask you: “Will you be the executor of our estate?” While it’s flattering to be trusted with the responsibility, do you know what an executor actually does?
What Does an Executor Do?
An executor is a person who manages the assets of a deceased person, and has a fiduciary duty to act in the best interest of the estate. This includes settling unpaid bills, tax debts, and other debts. After all outstanding debts are settled, the executor then ensures that the remaining assets are distributed appropriately.
An executor does not need to have any expertise, but does have a fiduciary duty to the estate. This means that you must act with honesty, fairness, and diligence on behalf of the deceased. An executor of an estate may perform one or all of the following duties:
- Locate the will and trust documents of the deceased party, and obtain copies of the death certificate. Each financial institution will require a copy of the death certificate before allowing you access to funds or close accounts.
- Determine if the will should be filed in probate. Typically, any assets with a designated beneficiary will pass to heirs directly and do not require probate.
- Identifying what assets were owned by the deceased that are now in the estate. You are responsible for managing assets until they are distributed, and this includes deciding whether certain assets should be sold to pay outstanding debts.
- Deciding who inherits what assets, whether in whole or in part, and contacting beneficiaries. If no beneficiaries have been named, or the deceased died without a will, state law dictates how the assets are distributed.
- Notifying debtors and creditors, banks, and the SSA (Social Security Administration) of the death.
- Creating a separate bank account for the estate to accrue income received after death and to pay expenses. The bank or financial institution may want to retitle checks to signify that the check is from the estate of the deceased.
- Ensure that a final income tax return is filed for the year of death for both federal and state taxes. If the deceased has a large taxable estate, you may be required to file a tax return within nine months of the date of death.
- Make sure that all assets and property are distributed properly according to the beneficiary designations in the will or trust documents.
Working down the list, it’s not uncommon for an executor to consult with legal and tax professionals to ensure that the estate is being managed properly.
The amount of time it takes to finalize an estate varies with the complexity of the estate. The average estate execution can take a year or more, so be sure you’re able to make that sort of commitment before accepting the responsibility of being the executor.
Information sourced from Modera financial advisors in Boston.
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