Broadly speaking, an executor (also called a “personal representative” in some states) is responsible for managing the administration of an estate on behalf of the deceased. An executor is usually named in the will of the deceased but can also be appointed by the court. The time and effort ultimately involved with being an executor will vary based on the size and complexity of the estate, but even small estates will have important responsibilities that must be carefully managed. Most duties fall into three basic categories: probate, expenses and debts, and distributions.
The executor is responsible for offering the will for probate. An estate subject to probate cannot distribute funds without the approval of a probate judge (however, some estate plans are set-up to avoid the probate process altogether). The court must first be petitioned to appoint the executor. Any person named executor has the right to refuse the role. In this case, the will may include an alternate executor, or the court may appoint one. The executor may be required to file an inventory of all the estate’s assets with the court. It will be the executor’s job to identify and locate all assets of the estate. The attorney who prepared the will can be helpful, but there is no obligation to hire the same attorney.
Expenses and Debts
An executor will typically use the funds from the estate to pay for funeral and burial expenses. The funeral home will provide the executor with copies of the death certificate, which will be needed for tasks such as closing financial accounts and filing the final tax return. Many executors set up a bank account in the name of the estate to manage any incoming funds or pay outstanding bills. Some assets may need to be liquidated to pay the debts of the estate, since the debts of the deceased are transferred to the estate upon death. These debts must be paid before any distributions can be made to beneficiaries.
The executor is in charge of notifying creditors and government agencies upon death. This may include banks, credit card companies, the Social Security Administration, and more. The executor is also responsible for taking care of assets until they are distributed, like the maintenance of property or the investment of funds.
It is important for the executor to keep accurate financial records on behalf of the estate. The executor will be responsible for creating a final accounting, which will include distributions, expenses, and any income earned by the estate since the deceased’s passing. The final accounting must be reviewed by the beneficiaries before the distribution of the estate can be finalized.
An executor is responsible for notifying beneficiaries of the will as well as any potential heirs. Much of the probate process is focused on gaining approval of the probate court to finalize distributions. Once the final accounting is approved and all distributions have been made, the executor must file a final report with the court to officially close the estate.
If the executor mismanages the estate in a way that results in loss for the beneficiaries, they can be held personally liable. Hiring an estate attorney is not required but may help avoid costly mistakes. Since serving as an executor can be time consuming, they are entitled to compensation (subject to approval by the court). Any income earned from duties as an executor counts as income, and therefore must be declared on income taxes.
The information provided is for informational purposes only. It is not intended to be used, and should not be used, as the sole basis for legal and/or tax advice. Individuals should seek and rely upon the guidance and advice of their own legal and tax counsel before making any decisions regarding any planning, investment, tax concepts or strategies discussed herein. Individual circumstances may vary and results discussed are no guarantees of applicability or future performance.
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