You might be asked to be the official executor of an estate, or you might be asked to merely help one of your parents with his or her executor tasks for the estate of your other parent. Either way, here are some things to keep in mind if you find yourself facing this new role.
What skills do you have?
Optimally an effective executor is organized, tactful, patient, ethical, careful and committed to doing the best possible job. If you are asked to be a co-executor, you should ask yourself whether the two of you can work well together, and/or allocate responsibilities for the job. The more organized you are as an executor, the less time and cost will be required by an attorney and accountant.
As an executor, you don’t need to have the skills or expertise of an attorney or an accountant. You can, and most likely should, hire those as well as other professionals, as needed. These people will be paid from the estate, not from your personal checkbook. To keep costs down, you will be the hands and feet for your professionals, recommends Richard Talbert, local estate planning attorney and CPA. “Keep in mind, that for you to be able to manage the estate, you must be appointed as an executor after the will has been admitted to probate. Just being named in a will as executor does not automatically make you the executor or give you the powers of an executor to act on behalf of an estate. This is why you should seek the advice of legal counsel to take steps to be appointed and officially become the executor of the estate.”
Do you have the spare time?
Serving as an executor takes between six months and a year, sometimes longer. While it may not be a full time job, your executor duties and time involved may come in spurts. Will you have the extra time to devote to this job and to meet the deadlines?
Even if you delegate to professionals, being an executor can be time consuming. “Getting together tax information for the accountant will still have to be done for filing final tax returns,” says Talbert. “If a house needs to be sold, someone will need to sort and clear out the personal items. Vehicles and houses still have to be kept insured until sold or distributed. Medical insurance and medical bills will still have to be dealt with.”
The situation and you.
If you have already been helping manage this person’s financial affairs, stepping into the role of executor or executor’s assistant may be fairly smooth. You might already know if the person’s affairs are messy or tidy. You may already know where the will is stored, what the investments involve, what insurance policies to locate and similar other issues.
A Durable Power of Attorney ends at a person’s death, explains Talbert. If you have been working with one, you cannot keep using it for legal matters after a person dies.
If the person lives in another state, you will need to find out if there are any restrictions related to executors. For example, California has no restrictions on out-of-state executors; but North Carolina, like Texas, requires a nonresident executor to appoint a resident agent. Some states require an executor to post a bond to assure their job is done properly.
Can you or should you try do anything ahead of time?
If this person develops a terminal illness or condition, should you try to do any advance work? That depends upon the person’s wishes, psychological factors that may affect the person as they approach death, his or her family, and your relationship with the family. If you are a member of the family, you might seek permission to speak with the family estate attorney, CPA, and investment advisor.
Your advance preparation could be as simple as contacting these professionals to introduce yourself, and asking if there are any issues that can be handled immediately or prior to death. For example, if the person has not taken all of this year’s IRA required minimum distribution (RMD), you could discuss with the CPA when this should be done in light of the current situation. You could talk with the investment advisor about whether there is sufficient liquidity for medical and funeral costs, recommends Talbert. “Also inquire whether there are any tax losses that need to be taken by selling securities that have a value less that original cost, or if it is advisable to hold securities that have appreciated in order to get a new basis adjustment to fair market value at date of death.” Talking with the estate attorney might bring to light some estate planning steps the person could still take to reduce estate taxes, or to contain the cost of administering an estate and its assets.
Some estates are small enough or have been structured so that the assets can be passed on without going through probate. However, there are other situations that will require you to hire one or more experts. Here is a short list of some of those situations.
Accidental or intentional death
Person owns or co-owns a business or real estate
Threat to contest the will or a trust
The filing of state or federal estate tax returns
Person leaves a trust that you do not feel qualified to handle
Assets are to be divided among beneficiaries in the will, and it is difficult to either value or divide the assets equitably
The decedent was receiving long term care assistance from the State (Medicaid)
There are questions or issues as to what is separate or community property, especially if a spouse is not the sole beneficiary
If you think you might be hiring, or helping the executor hire, a professional, you might start thinking about whom those professionals might be. Thinking ahead will enable you to have more time to carefully consider the best professional for the needs. Settling the estate may involve tax matters, real estate titles or liens, mineral interests, community property issues, or business interests, says Talbert. “As executor you are liable for properly administering the estate, paying valid debts and claims, filing appropriate tax returns, keeping the estate insured, protected and preserved, and making distributions in accordance with the will after the debts and claims have been satisfied.” Being an executor is more than an honorary position, and should not be accepted lightly. It comes with duties, responsibilities and potential liability.