Executor of an estate. That sounds like a big title, and it is. Being an executor is a lot of responsibility and can be time consuming for over the course of a year. Before you sign on to be the executor of an estate or before you choose someone to act as one for your estate, take time to think about what the role entails and the important skills that a person needs to fulfill the role well. This article will walk you through what to think about!
What is an Executor of an Estate?
I’ve used the term executor within this article; however, the role can also be called a Personal Representative. It’s important to know that these titles are one in the same and they are used interchangeably.
An executor of an estate, or Personal Representative, is the individual that is responsible for carrying out the legal and financial wishes stated in a will.
You may be wondering if there is no will in place, what happens?A probate court judge will appoint an Administrator, who acts in a similar capacity as an executor of an estate.
I’m going to break down the responsibilities of an executor of an estate within this article further, because if you’re here you likely have one, are thinking of establishing a will, or are named in one.
The Realities of What An Executor of an Estate Sees About
- Opening the Estate
After a person passes, a filing has to be made with the local probate court. There is typically a form that has to be completed and filed along with a copy of the death certificate and a will, if one exists. The judge will review the documents and check the validity of the will.
An executor of an estate has the option to work with the probate court clerks to file the correct paperwork or can work with an attorney to have paperwork drafted and submitted. At the resolution of the filing of papers with the court, the court will then give the executor the authority to act on behalf of the estate. This gives the person the legal authority to make decisions on behalf of the decedent, sign paperwork, and more.
- Identifying Assets of the Estate
After legally opening the estate of an individual, it is important to identify all assets of the estate. Knowing what cash is on hand, either through bank accounts, investment accounts, or knowing what properties the individual had is important. In order to distribute everything, it is critical to know what “everything” is.
This can be a nightmare if assets are not clearly outlined for an executor. Think of all the passcodes and contact information a person would need to access all of your financial information. Think about the keys or codes they would need to access your safe, safe deposit box(es), mailbox, tc.
- Provide Notice to Creditors and Close Applicable Debts
Bills for debts will continue to arrive until creditors are put on notice of someone’s passing. Most creditors require a form and a death certificate be filed. In most states creditors have up to six months to file a claim against the estate. As a general rule, most debts don’t just disappear when a person dies. For more on the rules of how debts are paid off by the estate, head over to the Consumer Financial Protection Bureau for more in-depth rules.
One thing of note, in the United States one of the largest assets of most individuals is their home. It may be that during this process, if the individual still owned a home, that it would be the responsibility of the executor to oversee selling the house in order to have funds to pay debts. Even if the funds aren’t needed to pay for debts, the home may need to be sold in order to settle and close the estate, unless someone is receiving the property or joint ownership of the property is the preferred method of inheritance.
- Handling Taxes
There are both income taxes and estate taxes to think about when a person dies.
Not many people die on the last day of one year. So, if there is any earned income within the calendar year of the death, income taxes are still required to be filed and paid at the appropriate time. So, say someone passed away in May of 2021, and they had earned income during the months of January to April 2021, by April 2022 (assuming this is still the deadline) income taxes are payable.
Additionally, estate taxes may be due depending on the size of the estate.
It is the Personal Representative’s responsibility to make sure that any taxes due to local, state, or federal governments are paid, whether they be income or estate taxes.
Some may see to preparing taxes themselves. The personal representative can also hire someone to prepare tax returns, but they are responsible for ensuring that the appropriate tax documents are filed and funds are paid.
- Distributing Assets and Closing the Estate
After all assets are accounted for, tax season is concluded, and once all debts are taken care of, it’s time for the estate to be distributed accordingly. All monetary items and physical items are distributed. This may entail gathering loved ones and choosing who is going to get what physical items, managing an estate sale, it could entail donating items, and more. After all of the accounting is done, documents are filed with probate court and funds are transferred out of the estate to the appropriate beneficiaries. The court will officially close the estate.
A Couple of Critical Things to Think About When Naming a Personal Representative or Executor of an Estate
Acting as an executor of an estate gives an individual access to everything. It gives them the authority to do a lot (within legal bounds) to wind down your estate. They are paid out of the estate for their time and energy spent on closing the estate. They’re able to choose legal representatives, tax representatives, and more. It’s critical that you trust this person to follow through with your wishes and manage the process in a manner you find reasonable (no two people are the same, so they likely won’t do it exactly like you would, but close enough!). The more specific you can be in legal documents with respect to your wishes on how your estate is handled, the better. Additionally, the more you can tell them about your expectations, the better and easier it will be to do their job.
- Willingness to Serve
Being an executor can take in excess of a year from the time a person passes away to when the estate is closed. There are a lot of both professional (court filings, paying taxes, notifying debtors, etc.) things to see about and also a lot of personal things to see about (i.e. distributing items, donating clothes, etc.). Choosing someone who is willing to act in this capacity is critical to ensuring that your estate is winded down in a responsible and respectful manner. If someone is unwilling, they could notify this to the court and then the court would likely name an Administrator. So, having someone willing to serve is critical.
- Strong Relationships with those Connected to the Estate
Closing an estate can be an emotional process for an executor and also for any other individuals connected to the estate. Choosing an executor who can respect the process that others are going through to drive, and can manage the role in a diplomatic way, is critical to ensuring loved ones aren’t torn apart through the closing of the estate.
Think about it, if someone is already the black sheep and doesn’t see eye-to-eye with everyone else, putting them in this position may not be great for mending the relationships involved. There are always different dynamics within families, and being thoughtful of those when naming someone can help.
4. This Person Likely Changes Over the Course of Your Lifetime
It is easy to think that the executor of an estate is the same person across your lifetime; however, it likely changes from someone older than you, to one of your peers, to someone younger than you as you age, or at least the last two. It’s important to know this as a reminder that estate planning evolves over the course of your life time.
Let me give myself as an example. When I created estate planning records the first time around, I was a brand new parent. I had fantastic friends, but we were all still pretty young. The people I trusted most were my parents at the time, so I named Dr. Thia as my personal representative. It felt like the most responsible choice at the time.
When we updated our estate planning records a year ago, I updated my personal representative to a very close friend who is of similar age as myself. While Dr. Thia could certainly handle the doing the role today, as I’ve matured I’m not sure that’s quite fair. Asking her to manage all of the paperwork, etc., while also grieving the loss of a daughter just doesn’t feel right. Also, I don’t want to have to update my records in the next few years. While Dr. Thia is totally capable, and I expect her to be totally capable for a lot longer, we cannot know what the future holds.
There will be a point, though, that the person I named most recently likely won’t be the best choice. She is a few years older than me, and I cannot know how her health will hold up over time. At some point, it is likely one of our girls or a family member closer to our girls age that will be a more appropriate personal representative.
So take naming a personal representative seriously, but know that there is likely a cycle to how long you’re in each of the stages. If you’re starting out with estate planning at a more advanced stage in life, it likely makes sense to start with a peer or even someone younger than you.
What it Takes to Name an Executor of an Estate
Simply put, to name an executor a Last Will and Testament must be in place. There are a number of legal websites, both free and paid for, where you can create a will. Your employer may provide a legal service as an employee benefit or you may know a local attorney that you can work with to get a will created.
For a will to be enforceable and recognized by your state’s laws, the will must be signed by you, witnessed by two individuals (they typically are required to be disinterested parties – i.e. they aren’t to receive any of the estate), and notarized.
So, if you want to choose your executor, and not have a judge appoint an Administrator, a will is a must-have document in your estate plan.
Want More on Estate Planning?
Not sure what other must-have documents there are for an effective estate plan? Head over to this article about 11 Things to Include in an Estate Binder. It will walk you through legal documents, important financial records, and much more! You’ll have the executor of your estate set up for success.
If you’re ready to put together your estate plan, head over to our course page for Written Wishes, our online estate planning course, that will walk you through the estate planning process from start to finish. Sign up for the waitlist to be notified when the course is open for registration next!
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