In the absence of a prior appointment, the executor is appointed either by the testator (the person who creates the will) or by the court.
• An executor is the individual who administers a deceased person's estate.
• An executor is frequently appointed by the testator prior to death, or by a court.
• The primary responsibility is to carry out the deceased person's wishes as outlined in their will or trust documents.
• This involves ensuring that the intended beneficiaries receive the assets.
• Being an executor of will is a significant responsibility with potential risks and complications.
How Executor Works
The executor is responsible for ensuring that all assets specified in the will are accounted for and transferred to the correct party (parties). Assets can include financial holdings such as stocks, bonds, and money market investments, as well as real estate, direct investments, and even collectibles such as art. According to the Internal Revenue Code (IRC), the executor must estimate the value of the estate using either the date of death value or the alternative valuation date.
Additionally, the executor of will must ensure that all of the deceased's debts, including taxes, are paid. The executor is required by law to carry out the wishes of the deceased and act in their best interests. The executor of will can be almost anyone, but is typically a lawyer, accountant, or family member; the only restrictions are that he or she must be at least 18 years old and have no criminal record.
Some people accept the role of executor with the expectation that they will not have to perform any duties for years. However, doing the job properly requires immediate action. As an executor of will responsibilities, your legal responsibility could be called upon at any time if you accept the position of executor.
Being an Executor
To be ready to serve as executor, you must:
• Ensure that the testator maintains a list of assets and liabilities, such as bank accounts, investment accounts, insurance policies, real estate, etc.
• Be aware of the location of the original will and asset list and how to access them.
• Know the names, contact information, and duties of any attorneys or agents named by the testator.
• Discuss the decedent's wishes regarding a funeral or memorial service, including burial or cremation instructions.
• Discuss the will with the testator and, if possible, the beneficiaries, in order to prevent future complications.
• Having a copy of each of all these documents.
Again, it is so crucial that you have ample time to collect all this information as soon as possible after accepting the executor-ship.
Executors and the Estate Planning
Executors play a crucial role in estate planning (executor of estate) for individuals, their families, and their beneficiaries. Estate planning is a broad term that encompasses the preservation, management, and distribution of an individual's assets after death. It also considers the management of this person's assets and financial obligations (i.e. debts) in the event that he or she becomes incapacitated.
Individuals plan their estates for a variety of reasons, including preserving family wealth, providing for surviving spouses and children, funding the education of children and/or grandchildren, and leaving a charitable legacy. The most fundamental step in executor of estate planning is the creation of a will. Other important aspects of the estate planning includes:
• Limiting estate taxes by establishing beneficiary-named trust accounts
• Naming a guardian for dependents still living
• Designating an executor to oversee the provisions of the will
• Establishing or revising beneficiaries for plans such as life insurance, IRAs, and 401(k)s.
• Setting up funeral arrangements
• Establishing annual gifts to qualified nonprofit and charitable organizations to reduce the taxable estate
• Establishing a durable power of attorney (POA) to manage additional assets and investments
It is an honor to be appointed executor of will and executor of estate, but executing a will requires more work than you might expect. Before accepting the role of executor of will, you should be aware of the potential risks. And understand how to mitigate some of these potential risks so that your role as executor runs smoothly.
"Executrix" is the feminine form for the word "executor." It specifically refers to a woman who was entrusted with the administration of a deceased person's estate and the execution of a last will and testament. The term "executrix" has been largely replaced by gender-neutral "executor"; however, it may still be found in the older wills and other documents.
Disputes With Co-Executors
When a parent has more than one adult child, it is common to name all of them as co-executors so as not to show favoritism. The executor of trust is very crucial. This arrangement may not work well for those who have been named, however. Some children may be out-of-state or even out-of-country, making it difficult to manage tasks like securing assets and selling a home. Some lack the financial means to deal with creditors, comprehend estate tax issues, and conduct an accounting audit to reassure beneficiaries that everything has been handled properly. Additionally, having multiple executors significantly increases the amount of paperwork.
For instance, forms that must be signed by all executors must be distributed to all executors (in few cases, scanned documents are acceptable that have been signed, but in others only signed originals are acceptable).
How to Solve These Disputes
Check to see if the co-executors can agree to allow only one person to serve; the others can simply decline their appointment. This waiver is effective when co-executors have confidence in the sole executor. Alternately, all of the children could decline and let the bank's trust department handle the task (the will may name the bank as a successor executor). This is an expensive option best suited for large estates. However, using an entity rather than a person as executor can reduce conflicts among the children and relieve them of a potentially burdensome responsibility.
Conflicts With Heirs
Executors are responsible for securing the estate's assets and then distributing them in accordance with the wishes of the deceased. In some families, heirs arrive at decedent’s residence even before the funeral to collect heirlooms and other valuables.
In addition, the will may give the executor discretion in distributing assets to heirs (e.g., distributing property or selling property and distributing cash). An executor may cause family strife by simply performing their duties.
How to Solve These Disputes
Secure the residence and other assets as soon as possible. Inform heirs of this legal requirement. Share information about the decedent's wishes, which may be described in a will or listed in a separate document (the separate document is not legally binding on the executor but can serve as a useful guide for asset distribution).
Time Drain
One of the most significant disadvantages of being an executor is the amount of time required to properly carry out responsibilities. Consider the time required to contact various government agencies (e.g., Social Security Administration to stop Social Security benefits and, in the case of a surviving spouse, to claim the $255 death benefit; IRS and state tax authorities for income tax and death tax matters; state's unclaimed property departments to recover utility deposits and other outstanding amounts belonged to the decedent).
Streamline the Procedure With External Assistance
An executor can delegate many of these responsibilities to an estate attorney. However, the attorney's time will be billed and will cost the estate money. Even if an attorney employs a paralegal for a variety of tasks, it can be costly. Additionally, a CPA or other tax preparers can work on both the decedent's final income tax return and the estate's income tax returns. When estates are small, these fees can leave some heirs with little or no inheritance.
In this situation, the executor should utilize the services of professionals sparingly and understand the time commitment required. Being organized (e.g., using a checklist such as this) can assist an executor in making the most efficient use of time.
Personal Liability Exposure
Before disbursing inheritances to heirs, as executor you must pay any taxes due. If you pay heirs first and there are insufficient funds in the estate's bank account to pay taxes, you are personally responsible for the taxes.
Due to the high exemption amount in 2021, many estates no longer have to worry about federal income taxes. However, many states continue to impose death taxes on smaller estates. The value of the estate for death tax purposes exceeds the value of the probate estate (assets that do not automatically pass to named beneficiaries); it includes all assets in which the decedent had an interest (e.g., annuities, IRAs, life insurance owned by the decedent).
Explaining to the eager heirs that you are not allowed to distribute their inheritances until you have settled with the IRS, creditors, and others who have a claim against the estate. (However, creditors cannot pursue the proceeds of a life insurance policy with a designated beneficiary.) Ensure you are aware of the amount of money required to pay what is owed.
What Are Some Synonyms for Executor?
An executor is a person who carries out a will's wishes and instructions. This position may also be referred to as the administrator, executor, or trustee of the will, or the personal representative, agent, or trustee of the testator. Executrix is the term for a female executor.
Is an Executor and a Trustee are the Same?
The two roles are similar, but an executor executes a will, typically under the supervision of a probate court, whereas a trustee manages a trust. In some instances, the two may be the same person, although this is not required.
Can an Executor Also Be a Beneficiary?
Yes, and it is common for the executor of will can be beneficiary. The executor can be from the same family and has the responsibility of executor of will and executor of estate. This can, however, result in accusations of perceived unfairness or conflicts of interest.
Do Executors Get Paid?
In many cases, executors are entitled to compensation for their time and effort, either in accordance with the terms of the will or under state law governing reasonable compensation. This can be a percentage of the estate's value, an hourly rate, a commission on the transactions involved in settling the estate, or a flat fee. An executor has the option to decline payment.
What is the Name for a Gift Left in a Will?
A gift bequeathed in a will is referred to as a bequest or a legacy.
The Bottom Line
An executor is the individual who carries out a deceased person's last will and testament, ensuring that the deceased's instructions and desires are carried out correctly. Typically, this involves the distribution of the estate's assets, payment of any taxes owed, and settlement of any outstanding debts. Prior to death, individuals frequently name an executor for their estate in their will, sometimes allotting them for both executor of estate and executor of will. In the absence of a designated executor, the court will appoint one.
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