What You Need To Know About Choosing An Executor

28 Mar What You Need To Know About Choosing An Executor

An executor administers your estate and distributes your assets. It’s one of the most important decisions you’ll make when preparing a will. The executor is charged with carrying out your final wishes.

**This article talks about a will-based distribution of an estate. In contrast, an estate distributed through the trust involves a trustee, instead of an executor. Similarly to an “executor” named in the will, a “trustee” is named in the trust document as the individual who will serve as the legal representative of an estate that will be distributed to beneficiaries through the trust. Trustee’s functions and responsibilities are often similar to those of an executor – the terminology is different, but many functions are the same. Therefore, although this article refers to an “executor” throughout, it may serve as a general guideline for what a “trustee” may be expected to handle as well**

Choosing the right executor can help ensure the prompt, accurate distribution of your possessions with a minimum of family friction. An executor is responsible for:

• Filing court papers to start the probate process (this is generally required by law to determine the will’s validity).
• Taking an inventory of everything in the estate.
• Using your estate’s funds to pay bills, including taxes and funeral costs.
• Handling details such as terminating credit cards and notifying banks and government agencies such as Social Security and the post office of your death.
• Preserving, protecting, collecting and valuing estate assets.
• Preparing and filing appropriate court documents.
• Resolving any family disputes, paying debts and administration expenses, and setting up trusts under the will.
• Accounting for income and expenses to beneficiaries.
• Distributing assets to beneficiaries.
• Preparing and filing tax returns, including the final federal and state returns, and arranging for tax payments.
• Preparing and filing federal and state estate and fiduciary income tax returns.

Given all the responsibility, the ideal candidate should be someone who is honest, dependable, well-organized, good with paperwork and vigilant about meeting deadlines.

Most people think first of naming a family member, especially a spouse or a child, as executor. If, however, you don’t have an obvious family member to choose, you may want to ask a trusted friend, but be sure to choose someone in good health and younger than you who will likely be around after you’re gone.

If your executor of choice happens to live in another state, you’ll need to check your state’s laws to see whether the state imposes any special requirements. Some states require an out-of-state executor to be a family member or a beneficiary, some require a bond to protect your heirs in case of mismanagement and some require the appointment of an in-state agent.

Keep in mind that if the person you choose needs help settling your estate, he or she can call on an expert such as an attorney or tax accountant to guide her or him through the process, with your estate picking up the cost.

If, however, you don’t have a friend or relative you feel comfortable with, you could name a third-party executor such as a bank, trust company or a professional who has experience dealing with estates. Going this route may ease the burden on family and friends. A professional executor can expedite the process by anticipating possible problems.

Most family members and close friends (especially if they are beneficiaries) serve for free, but if you opt for a third-party executor, it will cost your estate. Executor fees are set by each state and typically run anywhere from 1 to 5 percent, depending on the size of the estate.

Whomever you choose to serve as your executor, be sure you get approval from the person first before naming him or her in your will. And once you’ve made your choice, go over your financial details in your will with that person, and let her or him know where you keep all your important documents and financial information. This will make it easier after you’re gone.

If you don’t name an executor, or if the person that you name in your will is unable or unwilling to serve, the court will appoint someone based on your state’s laws. This may result in someone being executor whom you wouldn’t have wanted.

The job of executor can be time-consuming and difficult. That is why you need to think twice before you make the important decision about whom you’ll appoint.