There may come a day when you are asked to be the executor of an estate. It’s a task that comes with some serious responsibilities—the job involves a lot more than distributing money and property to the deceased’s heirs—as well as some important risks if you mismanage your duties.
So rather than immediately saying yes, first learn what the job entails. This may create some discomfort initially if it’s a family member or close friend who is asking you to be their executor. They might wonder how you could possibly consider refusing their request. However, you’ll likely all be better off down the line if you take time to consider the task and make the right decision for you.
The many details of being an executor can vary, sometimes significantly, on a state-by-state basis. That said, there are several key roles that generally are performed by most executors:
Note: Some assets require probate, while other assets are non-probate. Probate assets are any assets that pass by the person’s will. Non-probate assets are directly transferred to heirs, circumventing the need to go through the court process. Examples of non-probate assets include:
A key part of your job here is to protect and maintain the property. That might mean securing valuable art, ensuring that insurance policies don’t lapse or selling highly volatile equity positions.
You’ll also search for creditors to which the deceased owes money, as those bills will be paid from the estate and must be paid before any assets pass to the heirs.
Other expenses to be paid might include funeral costs, probate and administrative fees, and property taxes.
For your efforts, you are (in most cases) entitled to receive a fee. The amount depends on a range of factors—including, but not limited to, instructions in the will and the state in which the person died. (You can also choose not to be paid.)
If you are the executor of an estate—or if you’re thinking about making a family member the executor of your estate—be aware that there are many legal and fiduciary responsibilities that go with the position. A complication can be as commonplace as accurately filling out the appropriate forms. Estate administration requires familiarity with the process, applicable statutes and tax forms. Even if you’re extremely financially savvy, you may not be at all familiar with the elements of what it takes to be an effective executor.
Some of the key risks or hurdles you may encounter include:
Family members named as executors, for example, may not have the knowledge to ensure the process goes smoothly. The consequences can include exposing the estate to litigation as well as increasing the estate’s tax liability.
The executor needs to protect the value of the estate, as well as him- or herself legally. The executor, for instance, has to ensure the financial health of the estate. Say a stock portfolio, houses and artwork are part of the estate. It is important to protect the value of these assets before they are transferred to heirs. Failing to do so adequately can lead to the executor breaching his or her fiduciary responsibilities—and potentially create personal liability exposure.
One of the most effective ways to mitigate risks and confrontations is to keep extremely accurate records of the actions you take as executor. A detailed, itemized list of expenses you incurred in your role and the distributions you made during the process will help you demonstrate that you handled your duties accurately and responsibly. This not only helps you stay within the law, but also can help you avoid being questioned by heirs and other beneficiaries about what you’ve done. You might even consider taking detailed notes of all conversations with lawyers, bankers, customer service agents and so on—in case you are confronted about any of your interactions.
Given the responsibilities and risks involved in being an executor, as well as the intricacies of the probate process, it likely makes sense for you to consider enlisting the help of a professional—particularly if the estate is a complex one or if you’re not well-versed in the area of estate administration. Hiring a lawyer to handle everything can end up being very costly—and generate pushback from beneficiaries about the big bills being paid out—but it likely can help better ensure successful end results for all involved.
Important: If you decide to manage the entire process yourself, you can still get help through an organization such as the American Bar Association—which offers a free document called “Guidelines for Individual Executors & Trustees.”
The upshot: Think carefully about what it takes to be an effective executor—and whether you possess the time, knowledge and temperament to do the job—before simply agreeing to take on this important role.
Disclaimer: This is general advice and information that may vary based on the state in which the probate is occurring. Talk to an estate administration professional for specific guidance to determine what is accurate and relevant for your situation.
This report was prepared by, and is reprinted with permission from, VFO Inner Circle. AES Nation, LLC is the creator and publisher of VFO Inner Circle reports.
Disclosure: The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS.
Fusion Wealth Management is not affiliated with Kestra IS or Kestra AS. https://www.kestrafinancial.com/disclosures
VFO Inner Circle Special Report
By Russ Alan Prince and John J. Bowen Jr.
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