Who will be the person or institution responsible for administering your estate through probate? [This article] spells out what the executor does, but the most important thing is that you pick someone who is financially responsible, stable, and trustworthy.
The law requires an executor because someone must be responsible for collecting the assets of the estate, protecting the estate property, preparing an inventory of the property, paying valid claims against the estate (including taxes), representing the estate in claims against others, and, finally, distributing the estate property to the beneficiaries. These last two functions may require liquidating assets; that is, selling items like stocks, bonds, even furniture or a car to have enough cash to pay taxes, creditors or beneficiaries. The will can impose additional duties not required by law on the executor: choosing beneficiaries or distributing personal property, even investing funds.
Sounds like a lot of work, doesn’t it? It can be, and some of it can be complicated. However, the executor doesn’t necessarily have to shoulder the entire burden. He or she can pay a professional out of the estate assets to take care of most of these functions, especially those requiring legal or financial expertise, but that will reduce the amount that goes to the beneficiaries. Therefore, handling an estate is often a matter of balancing expertise, convenience, cost, and so on.
There’s no consensus, even among lawyers, about who makes the best executor; it all depends upon your individual circumstances.
What to Look for In an Executor
It’s important to be sure the executor is capable of doing the job. Think of the appointment as employment–not a way to reward (or punish) a friend or a relative.
The quality most desirable in an executor is perseverance in dealing with bills (especially the hospital, Medicare, ambulance and doctor charges incurred in a last illness). These often require a lot of paperwork, and payment first, then reimbursement from insurance companies. Pick someone who has the time and inclination to deal with bureaucrats and forms. Also, the executor may have to cope with relatives who may be wondering why it’s taking so long to receive their inheritance, or why their bequests are smaller than they expected. This can happen if, for example, the dead person’s money was aggressively invested in the stock market, and those stocks nose-dived after he wrote the will.
The executor will probably hire a CPA or lawyer to handle the tax returns–the income tax return for income accrued before your death, and the estate tax return as well as estate income tax return for income taxes incurred after your death. If the estate includes stocks or other investments, the executor may have to hire an investment advisor, particularly if the value of the estate has changed substantially because of changes in the market.
In most estates, no significant legal expertise is required to serve as executor; the issues are all financial. The executor will generally work with a lawyer to probate the will. Estate fees paid to the lawyer may be set by law (some states specify an hourly rate, some a fee based on a percentage of the estate). The lawyer handles all the court appearances and filings while the executor provides information and input.
The executor cannot be a minor, convicted felon, or a non-U.S. citizen. And, while all states allow nonresidents to act as executors, some require a nonresident to be a primary beneficiary or close relative; others require a surety bond or require that the out-of-state executor engage a resident to act as his or her representative.
Whomever you choose, be sure to provide in your will for a replacement executor in case the original executor dies or is unwilling to act. Otherwise the court will have to choose someone.
What if you also have a living trust? It’s generally preferable to name the same person as the executor and the trustee or successor trustee (see below). If you don’t want to do this, discuss with your lawyer your reasons. After hearing about the difficulties splitting these jobs among different people might cause, you may change your mind.
Sidebar: Consumer Tip
What lawyer should the executor hire to help with probate? It’s critical to find a lawyer who’s competent in estate law, preferably in the probate court that’s handling your will. Your executor may be tempted to use your regular lawyer, or a friend or relative who is a lawyer. But if that lawyer primarily handles business transactions, say, or practices in another state, he or she may not be familiar enough with estate law in your area to handle the job efficiently.
Copyright © 1999, 2000, 2002 American Bar Association