What Does the Executor of an Estate do?

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What Does the Executor of an Estate do?An executor of an estate has several obligations for managing and closing an estate, and the role can be time consuming depending on the size of the estate. The executor has the job of protecting the assets of the estate until they are distributed to the specific beneficiaries that the estate owner intended.

Executors also have the responsibility of making sure that debts owed by the estate are paid and that any outstanding taxes are paid as well. They have several other estate management duties that may arise such as handling day-to-day tasks of the estate, paying taxes, and other duties. The length of time that an executor may be required to close out an estate can vary anywhere from a few months to a year or longer, depending on probate court proceedings and other factors.

 

Collecting Assets

The executor of an estate is required to collect the assets of the deceased estate owner and distribute them to the intended beneficiaries. The executor holds the assets for security until they can be distributed to the proper beneficiaries. If the estate owner had a large estate, the process of collecting and distributing assets can be time consuming. In some cases, the assets may be hard to locate and this can cause additional delays. Assets must be collected promptly and valued by the executor or appraisers so that the estate’s estimated worth can be determined.

 

Distributing Assets

Asset distribution is one of the more complicated tasks for an executor, and great care must be taken during this particular step of the estate closing process. Distribution must go to the specific beneficiaries as outlined in the estate owner’s will. If there is no will for the estate, then the property must be distributed based on state inheritance laws. The executor must keep very careful records of the total assets of the estate and how they will be distributed, as they are potentially liable for mistakes made during asset distribution.

 

Manage the Estate

The task of managing the estate can have a large range of obligations depending on the size of the estate. Executors are usually required to pay the debts of the estate and manage daily affairs. Daily affairs can include dealing with insurance companies, replying to mail, ending agreements, and communicating with financial agencies. If any payments needs  made for insurance premiums, mortgage payments, utilities or other payments the executor would normally handle that as well.

During the process of managing the estate, the executor may set up an estate bank account to handle the payments required for day-to-day affairs, so that there is a central source to make payments from, and so that there is a clear record of how the estate’s funds are being used. The executor must ensure that any premiums, bills and debts are paid promptly as there can be serious financial consequences to the estate if they are not paid on time.

One of the most important tasks of the executor is to score the value of the estate’s assets including any real estate, vehicles, jewelry, furniture, art and other physical property. The executor may be able to do that task or they can hire an appraiser if they are not sure of the value of particular items. The executor should also value financial accounts as well as investments.

 

Deal with Debts and Taxes

The executor must pay debts as a part of the closing of the estate. The executor will work with creditors to pay off debts or set up payment plans using the estate’s assets, and if there are probate proceedings the executor would notify creditors of these proceedings as well. In many cases before beneficiaries receive any inheritance creditors must be paid, and the executor will have to manage when and how they are made.

The executor usually prepares the final income tax return and pays any taxes owed by the estate with the assistance of an accounting professional. There may need to be a business tax return filed as well which can be more complicated than an individual tax return. The return is filed for the estate’s income starting from the beginning of that tax year until the date of the estate owner’s death. A state inheritance return may also need to be filed in combination with the federal tax return.

 

Close the Estate

Closing the estate requires of the obligations of the executor met and probate proceedings concluded. The process of closing the estate can take several months, and long probate proceedings can complicate an estate closing. The executor is required to do everything necessary to close the estate including:

  • Distributing any remaining assets to the proper beneficiaries
  • Ensuring that all remaining creditors have been paid or that payment arrangements have been made for them
  • Setting up trusts for remaining assets as outlined in the will
  • Filing the final report of all expenses, debts and taxes paid, and other financial transactions of the estate
  • Receiving tax clearance from the IRS to close the estate

The executor would also manage the liquidation of any physical property that may be necessary in order to pay debts or taxes. The estate cannot be closed until all debts and taxes have been paid and the IRS has cleared the estate.

 

Although it is an honor to serve as an executor for the estate of a friend or family member, the job can certainly be complicated. Being an executor requires a good fundamental knowledge of finances, taxes and legal matters, and the duties of an executor are very important for the proper closing of an estate.

Mistakes with asset distribution, delays with insurance premium or bill payments, or other mistakes can result in significant financial losses to a particular estate. As a result, estate owners should always pick an executor with the proper financial background and trustworthiness to reduce the chance of mistakes.

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| Your Tribute Founder

Jason Ropchan is the Founder and CEO of Your Tribute, an online resource for Funeral and Grief information and products. He has more than 15 years experience in the funeral industry developing and marketing funeral technology. He has worked with thousands of funeral homes worldwide to help them provide online memo...