What Does an Executor Do?
By Liza Hanks
Finch Montgomery Wright
If you have been named as the executor of a loved one's estate, you may not know what to do. Although it is a great honor to be named, it can also fall squarely into the no-good-deed-goes-unpunished category: it's a big responsibility, and one that carries significant liability. If you are struggling with your role as executor, here are some guidelines that I hope you will find useful.Responsibilities of the Executor
If you’ve been named as the executor of someone’s estate, you don’t have to be an expert in legal or financial matters. You do, however, have a very real responsibility to act with impartiality, honesty and diligence. As an executor, you have a fiduciary duty to act with absolute good faith and honesty on behalf of the deceased. This is true whether or not an estate must go through a probate proceeding before it can be distributed. If you are serving as an executor, but the decedent left a living trust behind, your job is simpler. The Trustee will deal with the bulk of the assets, but you are still responsible for the things governed by the Will (often tangible personal property) and for the payment of taxes.
In terms of real-world application, being an executor of an estate subject to probate means you will have to:Find and Manage Assets
It is the responsibility of the executor to compile a list of all of the deceased person’s assets, and manage them properly until the probate process is complete. If you’re fortunate, the deceased has provided a complete and thorough list of all of his or her assets. If you are dealing with most people however, your job will involve some detective work, since many people do not leave things in order when they die. This can involve digging through piles of unopened mail, dealing with unpaid taxes, shredding hundreds of boxes of useless paper, and cleaning out years worth of useless records.
Here's what you'll probably need to find and organize:
- Real estate
- Investment accounts
- Retirement accounts
- Bank and savings accounts
- Insurance policies
- Cars, boats, RVs and other vehicles
Finding and managing assets can prove difficult without a comprehensive inventory, along with a list of all account numbers, institutions and other relevant details. And if the decedent didn't leave a list like that, you are going to have to compile it because the court requires an inventory be filed listing all estate assets.Handling Day-to-Day Details
Once you've been appointed as the executor, it’s your responsibility to handle the day-to-day details of administering the estate. This includes things like:
- Terminating leases
- Notifying credit cards of the death
- Telling banks that the deceased has passed
- Notifying government agencies, such as the Social Security Administration, Medicare, the Department of Veterans Affairs, and the post office
You’ll need to set up an estate bank account that will hold money that is owed to the deceased person, such as paychecks or stock dividends. You can also use this estate bank account to pay for continuing expenses, such as mortgage payments, homeowners’ insurance and utility bills. To open it, you'll need to get a tax identification number (EIN) from the IRS for the estate. Your accountant or attorney can get you this number after you've been appointed by the probate court.
When you use an estate bank account, keep very thorough track of every penny that goes in and out of the account. Note where it came from, where it’s going, and why. If the family is unhappy, they may inquire about the disposition of these funds, and being able to show that everything is accounted for can head off confrontations and disputes - and legal liability.Pay Debts and Pay Taxes
The executor must pay all outstanding debts and taxes with the estate funds. The executor must notify creditors if there is a probate by publication in a local newspaper and by notifying all known creditors (and by just paying the bills as they come in). Creditors then have 4 months to come forward and demand payment for outstanding debts by filing a creditor's claim with the court. The executor must pay these debts using the estate’s funds, or deny the claims. If the estate doesn’t have enough capital to pay the debts outright, the executor may have to sell property in order to settle debts.
The executor also has the task of filing a final income tax return for the decedent, covering the calendar year from January 1 to the date of death. The size of the estate may also dictate the filing of an estate tax return, and the payment of any required estate taxes based on the value of the estate. As the executor, you're also going to have to determine if the decedent is current on both state and federal taxes. Often, if a decedent was ill for a long time, it will turn out that many years of back taxes are due. It's going to be your job to get those taxes paid.Distribute the Deceased Person’s Property
After settling debts and paying outstanding taxes, the executor finally has the task of distributing the deceased person’s property according to the terms of the Will when the probate ends and the court issues its final order. If there is no Will, the estate goes to the family members who are entitled to inherit under California's intestacy laws. If there is no probate, no court order is necessary, but the terms of the Will or California's intestacy laws still govern the distribution of the assets.
If an estate is well-planned, being an executor is a routine process that doesn’t create much burden on the person serving in this role. In a poorly-planned estate, or one for someone with a chaotic life, though, being an executor can be difficult. If you are dealing with being an executor and have questions about it, feel free to contact me at email@example.com or call me at 650/327-0088. You can also download my book, The Family's Guide to Wills and Estate Planning, for free.