It can be an overwhelming endeavor to take on the role of executor of an estate. While the initial assignment might seem like an honor, the reality of the role naturally triggers many questions. In order to execute the role to the best of your ability, you’re going to need thorough answers about what comes next.
How an Executor of an Estate Is Chosen
To garner the role of executor, it’s not enough to have your name listed in a will. You don’t actually have the authority to act as the executor unless the will is first filed with the probate court, in addition to a petition that requests the court to appoint you as the nominated executor. That court appointment is what officially begins the probate process.
First, the court is required to review the will for validity. In addition, all named heirs and beneficiaries must receive notice so they have the chance to object to the nomination. The process takes about 45 days, after which the official court documents (also called Letters of Authority) are issued to you. These letters mark the beginning of your work as executor of an estate.
Does the Executor Handle All the Decedent’s Assets?
As executor, you are a fiduciary whose duty is to be responsible and loyal to the will’s beneficiaries. You aren’t, however, responsible for those who may have been named as beneficiaries in other policies, such as life insurance. The executor of a will is only required to manage the assets that are governed by the will.
You’ll need the probate Letters of Authority to grant you access to assets such as the decedent’s bank accounts–particularly any that were in his or her name only at the time of death. It will be your responsibility to manage and protect those funds according to the guidelines set forth in the will, and for the named beneficiaries.
However, if beneficiaries are set to receive life insurance proceeds as designated by the policy, the executor doesn’t have a right to interfere with any payments that the insurance company makes to beneficiaries for death benefits. Benefits such as life insurance pass outside of a will, so that means the executor of an estate has no control over or responsibility for those funds.
Paying the Decedent’s Debts
As executor of an estate, you’ll be responsible for paying any legitimate and known outstanding debts the decedent left behind. These debts include:
- Credit card balances
- Funeral expenses
- Legal fees
- Medical bills
- Tax liabilities
In general, debts must be paid off before beneficiaries receive any assets allocated to them in the will. Sometimes, it might be appropriate for beneficiaries to receive a partial distribution, but it’s best to ensure all debts are paid before distribution occurs. It’s also ideal to wait for at least twelve months from the time of death since creditors are given one year to file claims against an estate. If you disperse the funds too early–before creditors file their claims–you could be held liable for the outstanding debts. However, if creditors wait until after the one-year mark to file their claims, those aren’t enforceable.
How to Effectively Protect Estate Assets
If you’re the executor of an estate, it’s possible to be held liable for failing to adequately preserve and protect assets that are under your control. It’s akin to protecting an unoccupied family home from theft or damage. In order to protect the home, you’ll winterize it so the pipes don’t freeze, lock and secure the windows and doors, and make sure the taxes and utility bills are paid on time. You’ll also ensure the insurance company knows the property is vacant so you can keep the homeowner’s policy in force.
Consider how to protect investment accounts, as well. You’ll need to work alongside financial professionals to make sure the account is appropriately invested. Perhaps the decedent’s investment portfolio was high-risk to achieve high growth; you may now choose to invest more conservatively in order to reduce the risk for the beneficiaries. If you don’t evaluate these financial decisions, then you could be held liable for poor investment decisions.
Tax Returns the Executor Is Responsible For
As executor, you must handle filing the decedent’s final income tax return for the year they died. Their estate will be responsible for paying and reporting any income generated after their death. You will need to report this information on IRS Form 1041. It may be necessary to file more than one tax filing, depending on how long the estate administration process takes.
It will also be important to take care of the estate tax, or death tax, return. If the decedent’s assets were greater than $11.7 million (federal) or $1 million (in some states, such as Massachusetts) in 2021, then a death tax will be due nine months from their date of death. Keep in mind that this tax only applies if the decedent’s income was above the referenced thresholds. This return may be prepared by either a CPA or the estate attorney.
Once the estate tax is filed and paid, those actions trigger the release on any automatic liens placed on the decedent’s real estate. Before you can sell the home or land, it’s essential to first clear the tax lien. You can do this by either paying the tax liability or signing and recording an affidavit that states no estate tax is owed.
How Much Information Do the Beneficiaries Need?
Wondering how much information should be shared with beneficiaries? As executor, you’ll be required to account for:
- All assets under your control
- The income generated by those assets during the time of your oversight
- Any expenses and debts you have paid from those assets (such as taxes)
- Specific amounts distributed to each beneficiary
You will need to provide the beneficiaries with this accounting, and you may also need to file it with the court. This protects you from liability, particularly when none of the beneficiaries object. In addition, the beneficiaries may request a copy of the will so the court can review its terms.
As executor of an estate, your work and time commitment is notable. It’s important to note that some individuals thrive in the role of executor, while others feel burdened and would not like to repeat the experience. Because of this, it’s important to have a strong legal team behind you. It can be helpful to delegate your executor responsibilities to independent professionals who can assist you through the process.
Looking for more information on what happens during the estate administration process? Take a look at our sister company Borcher Trust Law’s free ebook, What to Expect After a Death. You can download your copy here.