So, a loved one has asked you to be an executor of their will — the person in charge of managing their estate — in the event of their passing. The first question that likely popped into your head: What does an executor of a will do?! Suffice it to say that, even in the simplest situations, there’s a lot to consider. It’s not a decision you should take lightly.
Serving as an executor of someone’s estate (or personal representative, as the financial pros call it) requires ample time and energy, as well as meticulous attention to detail. Since this isn’t a request one typically expects, here’s everything you need to know straight from Deborah Cartisser, a senior wealth advisor at Twelve Points Wealth Management.
The Basics
Estate admin typically entails two categories: Filing taxes on behalf of the decedent/their estate, and probate issues, which involve distributing funds to beneficiaries as documented. But before you agree to the responsibility, Cartisser poses some helpful questions to ask:
- What is written in the will?
- Who are the recipients of the assets?
- Are there any contentious relationships?
- Has anyone been left out of the will deliberately?
- Does the estate owner anticipate any issues among the beneficiaries?
- Are there any unusual or difficult-to-value assets?
- Has the estate owner made a list of all the assets and all the institutions from which they draw income or benefits?
“Spend time with the estate owner in advance so you understand all that is in the estate, account numbers and contact information for each institution that holds assets, and how each asset is titled,” she suggests. “Are assets held in joint name, in single name with a transfer on death, or in trust? Be sure to get clarity on this while the estate owner is alive.”
She adds that before you accept the role of personal representative, it’s important to find out if you need to fill out an estate tax return for either federal or state in addition to the decedent’s final tax return. “Does the decedent have a CPA you can enlist to prepare both the final tax return and the estate return if needed? Keep in mind that not all CPAs prepare estate decedents’ returns,” which might require hiring one who does.
Signing on the Dotted Line
When you get all the info you need and agree to take on this title, you’ll want to enlist the help of a legal pro, who’ll be paid out from the estate. An attorney will help you with the probate process and get “letters testamentary” produced by the court. These letters authorize you as the executor/personal rep of the estate. “You will need to send copies of these documents to every account custodian or for every piece of property in the name of the decedent,” explains Cartisser.
She adds, “No matter how simple the estate settlement, you should have a professional working alongside you to help provide guidance and to ensure you are proceeding correctly. Manage expenses by staying organized and remembering that all correspondence with the attorney is billed by the hour.”
Also, you’re on the hook for ensuring any expenses — including attorneys’ and accountants’ fees — are reasonable and justified. “You will need to follow up on all paperwork to ensure instructions are properly followed,” says Cartisser.
When the decedent dies, the process begins.
A personal rep will then “file the will with the probate court, notify all the beneficiaries in writing, publish a death notice so that any creditors can be informed of the death, create an inventory and valuation for each asset, pay debts of the decedent, and file all taxes,” which Cartisser notes must occur within nine months of the person’s death. “Once taxes are paid and you have obtained a release from the taxing authorities, the personal rep distributes the assets to the beneficiaries.”
The personal rep must also collect any benefits or distributions owed to the decedent. This includes obtaining a date of death statement for each account.
If you haven’t picked up on it yet, this process requires diligent record-keeping and good accounting to ensure the estate balances out with no leftover dues or funds owed. “The personal rep should maintain a file for every account and track all the conversations as well as dates correspondence is mailed to the different custodians,” says Cartisser.
For tangible items like real estate and collectibles, Cartisser says you’ll also need to hire a professional to appraise these assets, and it’s worth pointing out that different states could have specific requirements or laws you’ll need to adhere to.
“All assets will need to be transferred out of the deceased’s name into a new estate account. The personal representative will also need to gather the assets and pay the debts of the decedent. You will need to create a list of all the assets and create an accounting for all the activity since the date of death to record on the final tax return. It’s a good idea to cross-reference the prior year’s tax return to ensure you have not missed any accounts or sources of income owed to, or owned by, the decedent,” Cartisser adds.
The Potential for Problems
Cartisser says, “You are personally liable for any actions made in bad faith, or conducted as part of mismanagement or breach of fiduciary duty,” which means you have “the obligation to act in the best interest of the beneficiaries of the estate at all times.” That means you can be sued personally for any missteps. “Read the will to determine if there is language offering you any protection while serving in this role.”
Money also has a way of bringing out nastiness even when you might not expect it. “Avoid any issues calling your professionalism into question by being exceptionally organized,” suggests Cartisser. “Have a tracking system to record all activity pertaining to each account and every asset held in the estate.”
Your attorney can work with you to determine if any part of the will is contestable. Still, before you even make it to that point, Cartisser recommends that you “meet the estate planning attorney who drafted the will and review the most recent draft. Get information about family members and any issues the attorney finds noteworthy.”
Record notes on every conversation and keep as much correspondence as possible with all parties in writing, she adds. “Communicate with the beneficiaries in writing, informing them of the process, timing, and expectations as each step unfolds. Let them know that typically distributions are not made until after the taxes are paid and a release of the estate is given by the taxing authority.”
Don’t dawdle, either. Cartisser recommends that you “get started immediately, gathering statements from each account as of the date of death.”
The Final Word
Taking on this task will be time-consuming and requires attention to detail every step of the way. “If you don’t have the time or you sense that the beneficiaries may be difficult, consider declining the appointment,” Cartisser cautions.
It’s a major undertaking rife with potential complications, so making an informed decision is the move to help protect you legally and also emotionally during what could be a tumultuous, stressful time.
