Executor? Avoiding Mistakes and Doing It Right
Verify The Document and Get AppointedMake sure that you have identified the last will. There is nothing worse than discovering a document, probating the will and then discovering a more recent will. Conduct a thorough search. When you are certain that you have the most recent will, you should then determine whether or not a probate of the will and your appointment is necessary. For example, if all of the assets are either joint or transferred by beneficiary designation getting appointed as executor may be unnecessary.
If probate is required, consider whether or not you should act. It is much harder to resign once you have started than to renounce before you begin. If you are going to act, you will have brief process where the will is verified and you are sworn in as executor. The specifics required vary from state to state and depend in some cases on whether or not the will is notarized properly.
Before you go to the courthouse, be sure that you have the witnesses or the affidavits that your state requires.
Gather together the assets and get them valuedGather, identify and safe guard the assets and make sure that they are adequately insured.
For example, if there is no homeowner's insurance and there is a fire, you may be sued for failing to properly carry out your fiduciary duty. Make sure that automobiles, vacation homes, and other assets are also insured.
Real estate and personal property should be appraised and stocks, bonds, bank accounts and other investments should be valued as of to the date of death. Be sure to talk to the person preparing the returns as the exact way of valuing such assets does vary from state to state and for federal estate tax purposes.
For example, the DOD value is the average of the high and low for a stock on a given day but for others it is the value of stock on the close of trading on that date.
You might also consider checking with your escheat office to see if the state is holding any of the decedent's assets.
Review the document for specific bequests and giftsYour job as the executor is to carry out the decedent's wishes as documented in the will. So be sure to review the will carefully. Does anyone get a specific sum of money or a particular item such as a car or a clock? If so, make sure that the estate has sufficient assets to pay all enforceable debts, the taxes, and administrative fees before making distribution.
when you do make distribution of these items be sure to get a receipt for the items distributed and in most cases the agreement and receipt should also say that the beneficiary agrees to return or refund to you any assets that were distributed in error.
That clause will protect you if a valid debt surfaces. However, having the right to get assets back and actually getting them can be two very different things. So be sure to conduct a complete search of the records for debts of the estate.
File reports, notices, income tax and death tax returnsMany states require that you give notice to certian people such as children, spouses and other relatives. be sure that you comply with these laws to avoid later litigation. You may also want to follow state law and advertise an estate as this will often limit your personal liability as an executor after the passage of some time period.
Status reports are also often required and even when they are not required by state law it is often a good idea for you to keep the beneficiaries up to date.
Final lifetime income tax returns will be required and a state death tax return and a federl estate tax return may also be necessary. Failure to file these returns can impose interest and penalty charges against you and the estate. You should be sure that these liabilities are paid and that you have received a notice stating that the state accepted the returns as filed before distributing the assets. If a big tax bill comes back after you have distributed assets guess who is responsible?
Selling and Distributing AssetsIn many cases, the will may require distribution of assets. In others, it will be entirely up to the executor to either sell the assets or to distribute them "In Kind." Most often, executor's will want to liquidate assets and distribute the funds to the beneficiary or to trusts under the will. However, make sure that the powers granted to you by your state's laws or under the will actually allow you to take the actions that you are intending to take.
For example, in some states, the sale of real estate must be approved unless the will specifically allows it. That is also true for the abandonment of property and in some cases state approval is required before distributions to charities.
The important rule, is be sure that the document and the law allow your choice of action.
when it is time to make distribution, be sure to see the next section on eding the estae.
Ending An Estate AdministrationThere are three ways:
1) Distribute the assets without an agreement or approval. This is a dangerous. The executor is both liable for paying debts and has no contractual recourse to get the money back from the beneficiaries.
2) Sometimes required, you must account to the court and get approval. This protects the executor but is time consuming, expensive, and public and many families want to avoid it.
3) Family Settlement Agreement. In this case, the executor and the beneficiaries agree to certain terms that form a contract. These terms often include a review of the estate. Everyone agrees that they will not seek recovery against you as the executor, for claims against the estate, and that they will refund monies distributed but to which they were not entitled.
I also often advise clients to agree that some funds will be held back for a period of time and are to be distributed later once all reasonable risks of claims have elapsed.
Legal DisclaimerThe job of the executor varies widely based on state law, the document, and the facts and circumstances of the estate. In many case, the "estate checklist" of items to be completed before the estate can be considered finalized can be hundreds or even thousands of items in length. For that reason, this can only be a brief outline of some of the most important points for consideration by an executor. However, many executors are unaware of the potential personal liability involved and the extent of the duties required of them. It is my hope that potential executors and those deciding whether or not to act will find this brief overview useful in educating themselves.