What Is An Executor?
An executor is a personal representative who acts for you after your death. You nominate or designate an executor in your will to settle your estate. The person chosen will act in your place to make decisions you would have made if you were still alive. The probate court has final approval, but the court will generally confirm your nomination unless there are compelling reasons not to. An executor's responsibilities typically last from nine months to three years (although, an estate may remain open for several years because of will contests or tax problems). The functions of an executor are varied, but generally your executor:
- Locates and probates your will
- Inventories and collects your assets (and sells them if necessary)
- Pays legitimate creditor claims
- Pays any taxes owed by your estate
- Distributes any remaining assets to your beneficiaries
Your executor is entitled to a fee from your estate for services rendered.
What Are The Duties Of An Executor?
Your executor acts in a fiduciary capacity. This means that he or she must act exclusively in the best interest of the estate, and exercise a high degree of care at all times. Additionally, your executor is under court supervision, subject to its control and approval.
Some states require executors to post a bond, which is later paid back to the executor from the estate (though you may be able to waive this requirement through a will provision). In addition, your executor is personally responsible for ensuring that all the proper tax returns are filed and that any estate taxes due are paid. Finally, your executor is accountable to the court and to your beneficiaries on completion of his or her duties.
How Do You Select An Executor?
Your choice of executor is a very important one. Ideally, you want someone you can trust, who has a close relationship to your family, who has some understanding of tax laws, and who has a keen sense of business (especially if you are a business owner).
Oftentimes, family members or close friends are nominated without consideration to the critical factors that should be considered in selecting an executor where your bank or trust officers may be better choices. Some of the attributes you should look for in a good executor are:
- Ability to serve
- Willingness to serve
- Technical expertise
You can name multiple executors to oversee different aspects of your affairs. However, co-executors may result in an increase in paperwork and a slowdown in the probate process.
What does a corporate Executor bring to the table that an individual is unlikely to bring?
In terms of technical expertise, the corporate fiduciary has investment expertise, trust administration expertise, and estate administration expertise. Further, as a disinterested (though not uninterested!) third party, the corporate fiduciary is naturally impartial. In terms of permanence and accountability, the corporate fiduciary provides continuity of administration (important in particular for trusts that last for generations or in perpetuity) and generally carries insurance as a cost of doing business and otherwise has the financial resources to make a claimant whole. In addition, a corporate fiduciary carries with it the benefits of continuity of administration, corporate oversight, security for bank deposits and custodial investment assets held by the corporate fiduciary, protection from fraud and embezzlement, strict confidentiality standards, ability to value unusual assets, and provide post-mortem tax planning.
Cost Effectiveness Analysis
Where the family member usually has no expertise and will need to hire professionals to coordinate the work, the corporate fiduciary already possess most or all of this organizational structure to handle trust administration and estate settlement. In addition, corporate fiduciaries often have strategic partnerships with specialists to manage real estate and closely held business interests. Because a corporate fiduciary is responsible for all of these duties, coordination is built in and, depending upon the complexity of the assets and administration, naming a corporate fiduciary may be far more efficient and less costly in the long run. There are many instances where family members tried to settle an estate or run a trust, only to decide later that things have run amok. At that point, it becomes a vastly more expensive process to right the wrong turns made by those less experienced.
When might a corporate fiduciary be less effective than a family member?
When the estate is relatively small, family conflicts are minimal, and there is someone able and willing to assume the responsibility. Also, when most or all assets are in joint name with the surviving spouse or children, or when the surviving spouse is the sole beneficiary and no stepchildren are involved, or if the decedent's only child serves as sole fiduciary, for example, as the executor of the estate, and that child is also the sole beneficiary. Even under these circumstances, however, numerous technical issues must be considered, and the fiduciary is still personally liable for his or her actions or inactions.
What if you don't leave a will?
If you leave no will, if you do not name an executor in your will, or if your executor refuses or fails to serve, the probate court will appoint an administrator (or curator). An administrator performs many of the same functions as an executor but has much less power and authority. If this happens, you have no say about who will manage your final affairs.