During your estate planning process, you will ultimately get to the point where you need to pick an executor for your estate. The executor is the individual who will manage the affairs of your estate and ensure that your estate plan is implemented properly, in the way that you intended. Picking an executor is not an easy decision, as there are many requirements for a competent executor, and family members are often not the best choice. In general, a financially knowledgeable, trustworthy person or third party professional who has a background in business, accounting or law is the best choice for an executor.
What Does an Executor Do?
The executor of an estate has many responsibilities for estate management that can sometimes extend for several months depending on the size and complexity of a particular estate. An executor essentially administers your estate and handles the distribution of assets to your beneficiaries, carries out your final wishes, and takes care of any remaining tasks for your estate until it is closed. Obligations for an executor can include the following:
Filing Paperwork – Executors will usually need to handle the filing of court paperwork and legal paperwork as needed.
Determining Whom Inherits Property – The executor will usually have the sometimes complicated task of determining who inherits the property of the estate owner. Usually this will be determined by the will but there may also be trusts that need to be distributed.
Filing and Paying Taxes – There must be a final income tax return filed for the estate and any unpaid federal or state taxes are paid by the executor.
Dealing with Probate Court – Lengthy probate court proceedings may be necessary in some cases if the estate is large and there are inheritance issues, and the executor would normally need to attend those proceedings.
Manage Daily Affairs – The daily affairs of the estate are usually managed by the executor, which may include interacting with government or business entities, replying to mail, managing and arranging child care and various other obligations.
Paying Bills – The executor usually handles any bills that are due, including rent or mortgage payments, utility bills and other bills as needed.
Choosing an Executor
You will have the choice of paying for an executor with a portion of the assets of your estate, or choosing an individual who is willing to be an unpaid executor.
Paid Executor – A paid executor will usually be an attorney or financial institution, and they are typically paid from the remaining funds of an estate. They are not allowed to charge more than the fees that they mention upfront that are written into the will, however they may be legally able to hire other professionals for assistance with estate management as outlined in the will.
Unpaid Executor – An unpaid executor will usually be a trusted friend or family member, and this choice is a good option for smaller estates. An unpaid executor will usually also be able to hire financial professionals to assist with matters as needed.
An unpaid executor is most likely going to be a family member who may have an interest in your estate and may not be the best choice for an executor. A paid executor will likely be unbiased because they will not have any interest in your estate, as they are only legally able to collect the fee mentioned in your will. Often times, hiring a paid executor makes sense for a larger estate, as the cost of a paid executor may not be an issue for these estates.
For smaller estates, an unpaid executor may work just fine. Unpaid executors should be mentally stable and have a good fundamental financial knowledge. It is generally not a good idea to select a close family member as an unpaid executor, as a grieving family member may also not be in the proper condition to handle an estate after the owner’s death, even if he or she would normally be competent otherwise.
How Much Time Will It Take the Executor?
The total length of time that it will take to close an estate completely depends on several factors, and the amount of work per week can vary tremendously. In general, an executor should be willing to spend at least a few hours each week on an estate at minimum after the initial estate proceedings have been dealt with.
Complicated estates or estates with several liabilities or other issues will take more time per week to manage. If there are probate court proceedings, they can take up to a year or longer, however most probate court proceedings are completed within 3 to 6 months. If there are challenges to assets during probate court, the proceedings will be extended, and if there are property claims and debts, the overall process of closing the estate will take longer.
Should You Choose More Than One?
Naming two co-executors for an estate is generally a bad idea, as there can be conflicts that may arise or other problems that result in delays. Both co-executors will have to attend estate proceedings and sign documents together, and it is not an efficient way to handle an estate closing.
If there are two executors for an estate, the second executor should be an alternate executor who will serve if the primary executor is unable to perform his or her duties. This is a good idea because circumstances can change and the original executor may not want to do the job or may not be available to perform the tasks required.
Can an Executor Be Sued?
Executors can be sued during estate proceedings or afterward. They are sued normally when one of the beneficiaries thinks that the executor made a mistake with the estate distribution, and it is certainly a risk for potential executors to consider. Beneficiaries may also feel slighted by not receiving the assets that they feel they were entitled to. They may allege that the executor had a conflict of interest in the estate, or make other allegations.
In some cases, lawsuits against executors are warranted, such as when property or assets are mismanaged or distributed incorrectly based on the estate owner’s wishes. As a result of this risk, picking a highly competent and trustworthy executor is important for you, to avoid any mismanagement of your estate that can result in financial losses or legal problems in the future.
With the large responsibility that an estate executor has, there should be a lot of thought behind the decision of whom you pick to be your executor. If you have any doubts about the person’s trustworthiness or ability, you may be better off hiring an attorney at a flat rate or another capable party without any interest in your estate. Don’t make the mistake of picking an executor based on your loyalty to them without considering their background in finance and ability to handle estate matters.
Updated: March 28, 2014