Gregory S. DuPont
Choosing Your Executor Requires Careful Consideration
Settling an estate is no easy matter. Therefore, before you rush to select your executor, it is important to gain a basic understanding of the general duties of an executor.
Sometimes, an unplanned technicality may result in the administration of an estate lasting for months or several years. Commonly, remainder beneficiaries will call or write the executor or executrix asking, “Why is this taking so long?” The answer may not be simple.
Decisions. . .Decisions. . .Decisions
Over 40 written decisions must be made within about a nine month span. Even making no decision is a decision. The enormous responsibility your executor assumes until your estate is finally settled in probate court consumes a great amount of time and effort.
“My son. . .my daughter. . .my best friend will do it,” most people declare at the attorney’s conference table when discussing their last will and testament. However, you will not be around to watch the hours of bookkeeping and mail collections, or the time spent in probate court or in the attorney/accountant/trust officer/financial advisor’s office. In addition, if the will is successfully contested, your well-intentioned provisions may never reach fruition.
The executor is responsible to:
- Find the most recent legally signed last will and testament (avoiding drafts, photocopies, will files on computer disks, unsigned handwritten or signed unwitnessed last minute testaments);
- Locate any “Letters of Instructions” listing a distribution schedule for heirlooms, keepsakes, jewelry, honors and awards, specific items of furniture or machinery and family treasures;
- Request a local bank to set up an account in your name, including the words, “the Estate of,” to deposit monies sent to you following your untimely death;
- Communicate with all potential beneficiaries in writing and, subsequently, secure assents after they approve the final accountings;
- Notify Federal and state departments and agencies, charitable institutions or organizations, insurance or investment companies who have been sending you income or principal on a contractual basis;
- Send written notice to credit card companies to close your outstanding accounts;
- Inform Social Security and apply to receive a potential $255 death benefit;
- Prudently review investable assets to safeguard the financial interests of both income and remainder beneficiaries of the estate, particularly sensitive to preservation of principal;
- Arrange and receive fair market valuations (sometimes as many as three in some states) from independent appraisers of property you own solely and jointly;
- Publish a newspaper announcement to alert potential creditors;
- Collect, verify, and liquidate all outstanding leases, liens, debts, mortgages, notes, personal or noncorporate business loans, bills, and any outstanding financial obligations or indebtedness;
- File a 40-page Form 706, itemizing every asset you own, including assets you may have owned 36 months prior. And, with the possibility that another asset may be discovered years later (e.g., stock certificates hidden in a basement safe), an amendment may have to be timely filed with the probate court; and,
- File the last federal and state income tax return.
These are only a few of the duties an executor routinely performs in the course of settling an estate.
Your nominee must also have good diplomatic skills and patience. Answering the questions of your surviving relatives can be time-consuming and exhausting, especially when the probate process becomes lengthy or when someone suddenly realizes your total estate distributions, in actuality, may result in unequal distributions to your children.
Large estates frequently prearrange for two personal representatives. One is usually an individual you trust to be a spokesperson for your intentions, and who will confirm distributions are finalized in accordance with your wishes. The other representative is usually a bank or financial institution who will handle the monetary and record-keeping arrangements, investment decisions, collections and payments, pay taxes, and keep account records to be filed annually with the probate court.
If you die without a will (intestate), your estate will be distributed according to state laws of intestacy (statutes may differ significantly among states). The probate court appoints an administrator to perform the executor’s duties and the court is solely responsible in a fiduciary capacity to arrange for the settlement of the estate. Administrators, personal representatives, and executors receive fees of a percentage of your estate, although when a family member agrees to serve, it is not uncommon for the fee to be waived.
After decades of acquiring valuable assets in your estate and building a family of children and close friends and leaving treasures and heirlooms from previous generations, your choice of executor is most important. Selecting a person who is attentive to detail, mindful of financial considerations, and aware of your financial records and lifestyle may avoid misinterpretations of your intentions that are usually irrevocable after the receipt of the tax closing letter, final assents by beneficiaries, and distribution of your entire estate.
Your choice of an executor is not a light one. Very difficult decisions have to be made and elections must be timely filed to receive beneficial tax treatment. You should consult with your financial, tax, and legal professionals before selecting or reviewing your choice of executor(s).