What You Need to Know Before Taking on Executor Responsibilities

Has a parent or senior loved one asked to appoint you as executor of his or her estate? If so, you’re probably honored to be chosen for the trusted role. But do you really know what you’re taking on?

“Being named the executor of a loved one’s estate is a role that entails tremendous legal responsibility and trust,” says Olga P. Okaty, CFP®, director of financial planning at Centerpoint Advisors, an independent wealth management firm in Needham, Massachusetts. “Understanding your obligations well in advance is essential to being able to perform your future duties effectively while still coping with the loss when, inevitably, the time comes.”

3 Things to Know Before Taking on Executor Responsibilities

The executor must perform time-consuming administrative tasks, usually while grieving and maybe even working a full-time job.

He or she must also navigate sibling rivalries or shoulder the wrath of spurned heirs at the same time.

If you’re considering acting as executor of a parent or senior loved one’s estate, here’s what you need to know before making your decision:

1. The Executor Role

The executor, also known as the “personal representative” in some states, settles the estate of the decedent, or “testator,” according to the terms of the will and probate laws, which vary from state-to-state.

The executor role can be “highly emotional,” says Okaty. At the same time, the numerous administrative tasks may be unfamiliar to the executor if he or she has never settled an estate. For this reason, the American Bar Association (ABA) recommends that an executor hire an attorney who specializes in estates and trusts to advise and assist with duties. Depending on the complexity of the estate and state laws, the probate process can take from several months to a few years.

The executor must honor the testator’s directives, even if those instructions are to the detriment of some family members or organizations over others, says Randall Saxton, an estate planning attorney with Saxton Law in Madison, Mississippi.

“The executor must act in the best interest of everyone who has a monetary interest in the estate, such as beneficiaries, creditors and heirs at law,” says Saxton. “You hold the decedent’s assets for their benefit and not looking out for your interests alone.”

2. The Duties of an Executor

Before you accept the executor role, make sure you know the extent of your duties, along with your parent or senior loved one’s directives, financial situation and relationships with family members and other parties with an interest in the estate.

Those parties could include charities, creditors or other individuals or organizations that the decedent may have supported and to whom a bequest may have been made, says Okaty.

Overall, the executor or personal representative is responsible for the following duties:

• Distribute remaining assets and settle the estate: “Estates may be closed when the executor has paid all debts, expenses and taxes, has received tax clearances from the IRS and the state and has distributed all assets on hand,” according to the ABA. “You should secure receipts from all beneficiaries to maintain as proof that they’ve received all due distributions,” says Okaty. More complex estates demand more administrative time than others. The executor may also have to make trips to courthouses, attend hearings or even file or respond to creditor or heir-related lawsuits.
• File the will with probate court (if necessary): Depending on probate laws in the testator’s state of residence and the size and complexity of the estate, the will may need to be filed in probate court. “A will may need to be filed even if the assets do not need to be probated,” says Okaty. For example, to obtain the decedent’s medical records or file a lawsuit on behalf of the estate. Saxton recommends hiring an experienced estate attorney familiar with probate laws in the testator’s state, even if the probate court doesn’t require an attorney. “Questions will come up throughout the process, so select someone who is responsive and knowledgeable,” says Saxton.
• Manage estate assets: As executor, you’ll need to open a separate checking account for the estate. This keeps the decedent’s funds from commingling with the executor’s personal assets. To open the account, banks typically require “letters of administration” or “letters of testamentary” certificates issued by the court, proving the appointment of an executor of the estate. Financial institutions also require an employer identification number (EIN) for the estate, which can be obtained directly from the IRS or with assistance from your estate attorney, financial planner or tax advisor. The executor must locate and maintain all the decedent’s property, including houses and contents, personal property and safety deposit boxes. “Depending on the state, you may be required to compile a personal property inventory,” says Okaty. “If significant art, collectibles or jewelry are involved, a professional appraisal may also be necessary.”
• Pay debts, expenses and taxes: Most states require the executor to provide written notice of the testator’s death and notify creditors if there is a temporary delay. The executor is also responsible for filing all necessary tax returns. “The executor must continue to pay bills such as car payments, mortgages and property taxes until the estate is fully settled,” says Okaty.
• Understand the will: The executor must read and understand the will and related documents, such as a trust, to determine who the beneficiaries are, amounts each will receive and whether there are co-fiduciaries. The will could also contain important information such as which assets should be used to pay taxes and expenses. You’ll need access to the original copy. “Most states will assume that a will was revoked if no original can be produced and if no witnesses can prove otherwise,” says Okaty.

3. What to Do While a Loved One Is Still Alive

Okaty recommends meeting with the testator to clarify any ambiguities, such as plans for complex assets like a family business, a family vacation home or heirlooms such as artwork, jewelry and musical instruments. Make sure the original copy of the will is accessible and safe. Also, find out whether family members have been notified about the testator’s decisions in the will.

“This will help you better anticipate future conversations and reactions and be better prepared to navigate any potential conflicts or disappointments,” says Okaty.

For more information on the duties of an executor, visit the American Bar Association’s “Guidelines for Individual Executors and Trustees.”

For information on the probate process, see “How Probate Works: A State Comparison.”

Have you had executor responsibilities? What other things should families know before taking on the executor role? We’d like to hear your tips in the comments below.

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