How to Choose an Executor or Successor Trustee with Your Atlanta Estate Lawyer

How to Choose an Executor or Successor Trustee with Your Atlanta Estate Lawyer

 

 

Atlanta Estate Lawyer

The decision of who to appoint as your executor or trustee is a huge one, and we’ve talked about it a bit in the past.  Still, it’s important to make sure that you have the information you need to make the right choice with your Atlanta estate lawyer.  This person will hold incredible responsibility for overseeing what becomes of your estate, and you want your choice to reflect this.

It’s not unusual to name your spouse as the executor or trustee, but there are certainly other options.  You may determine that one of your adult children is a good choice or prefer to have a family friend in charge.  In some cases, you may even place an attorney in the role.  No matter who you choose, you’ll want to also list an alternate in case there is some reason your first choice is unable to take care of the duties required.

Some things to consider when choosing your executor or successor trustee:

  • The process of closing an estate can take a very long time, so you want to choose someone who will be committed to following through.
  • The person chosen will have access to your finances, and there are opportunities to abuse the trust placed in him or her.  For this reason, among others, you want to choose a representative in whom you have complete trust.
  • There are many details and conflicting interests that will need to be managed during the process, so you want to choose someone who is organized and able to juggle these responsibilities.
  • Dealing with the estate requires working with a wide range of people and institutions.  The person you choose to represent you must be able to clearly communicate with all of them.
  • Because there are a lot of financial considerations to be made, it’s also best to choose someone who is responsible with money and has a decent grasp of how to manage it.
  • The person chosen will likely need to spend time in your home or business, going to court, meeting with attorneys, etc.  For this reason, estate lawyers in Atlanta will often recommend you choose a representative who is physically available, possibly even someone living in the area.

Finally, you want to ensure that the person you name to handle your estate is willing to take on the job.  It’s best to discuss the responsibilities and expectations with him or her to make sure it’s something the person feels up to taking on.  Spouses or children may feel like they would be unable to do the job in the midst of their grief, others may just not want the responsibility.  By discussing it with them before having your Atlanta estate lawyer name them in your documents, you won’t be adding an extra burden to someone who isn’t able to accept it.

Image courtesy of Ambro / FreeDigitalPhotos.net

So…What Exactly Does An Executor Do in a Georgia Probate?

So, you’re thinking about estate planning…

In my Cobb County probate and estate planning practice, after naming guardians for their minor children, I ask my clients who they would like as their executor…

Or maybe, someone you know has asked you to be their executor…

If either of these scenarios sounds familiar, it might be a good idea to know exactly what an executor does under Georgia law before you make a commitment either way.

Being an Executor – An Honor and a Burden

The executor of an estate in Georgia is charged with taking care of a person’s final business on earth.  You are responsible for protecting the deceased person’s property until all the taxes and debts are paid and making sure that everyone else receives what they’re entitled to under the estate.  That can be a huge task or a small one, depending on the size and complexity of the estate. 

As an executor, you don’t have to be a legal expert or an accountant but you do have to be honest, impartial and detail oriented.  As an executor, you’re charged with a “fiduciary duty” (which means a duty to act in good faith and honesty) in all business of the estate.  If you fail to carry out this “fiduciary duty”, you could be held legally liable for that failure.  This is a serious consideration when deciding who to name as your executor or whether or not to accept appointment as the executor of someone else’s estate.

Again, depending on the size and complexity of the estate, you could feel like Switzerland in the middle of warring factions for a long time until everything is settled.  Make sure your nerves are up to the task before you sign on.

The Daily Business of the Estate

Executors have a lot of work to do to settle an estate, regardless of the size.  Some of the things you would be responsible for are:

·           Finding and managing the deceased person’s assets until they’re distributed to the heirs of the estate.  You may be asked to make decisions on whether or not to sell certain assets or keep them in the estate.

·           Determining whether or not the will needs to be sent through probate.  If there is a surviving spouse, many of the assets that were jointly owned may pass on to the spouse without the probate process.  Always consult an estate planning lawyer to determine what needs to be done.

·           Determining who actually inherits property.  If you’ve been named as an executor, chances are that your loved one left a will.  That makes this part of the process much easier.  If your loved one died without a will, you could have a serious chore ahead of you.

·           Take care of any necessary court filings.  Even if the probate process is not necessary, the will still needs to be filed with the probate court.  If it turns out that the estate does need to go through probate, you could have a substantial list of filings to take care of.

·           Handling the day-to-day grind.  This could be a laundry list of little details that need to be taken care of to close out an estate.  You could be cancelling credit cards, notifying the Social Security Administration and Medicare of the death, stopping mail deliveries from the Post Office, determining who takes care of pets, and the list goes on.  Make sure you have the time and the ability to handle all these daily details before you agree to the task.

·           Setting up a bank account for the estate.  If you don’t have signature authority on the decedent’s bank accounts (and you probably won’t), you will need to set up an account to take care of the expenses involved in wrapping up the estate.  Any insurance payments, stock dividends or final paychecks will go into this account to pay ongoing bills such as a mortgage or property insurance until the estate is settled and the assets are distributed.  A word to the wise – keep thorough records of all sums coming into and going out of    this account to head off any potential problems with heirs to the estate.  

·           Paying taxes. Yes, a final income tax return has to be filed for the deceased person and it will cover the period from the beginning of the tax year until the date of death.  If the estate is a large one, state and federal estate tax returns will need to be filed as well.

Being an Executor Requires Commitment

Take another look at the list of duties we just gave you.  Stop and seriously think about all the things that would go into settling your estate – who needs to be paid, what needs to be sold, who gets what – and then make a decision on who would be the best person you know to handle all that.  Once you have someone in mind, talk to them about it at length.  Show them our list and make sure they’re okay with handling this much detail in someone else’s life before you name them as your executor (or before you agree to be the executor of someone else’s estate).

Call us to schedule your Georgia Family Treasures Planning Session today.  As part of our Georgia Family Treasures Planning Session, we will sit down with you and go over a list of what needs to be done with your estate and give you an unbiased opinion on your options for an executor. Our Georgia Family Treasures Planning Session is normally $750, but this month I’ve made space for the next five people who mention this article to have a complete planning session with me at no charge.  Call us at 770-425-6060 today and mention this article.

Guidelines for Individual Executors and Trustees

After an individual’s death, his or her assets will be gathered, business affairs settled, debts paid, necessary tax returns filed, and assets distributed as the deceased individual (generally referred to as the "decedent") directed. These activities generally will be conducted on behalf of the decedent by a person acting in a fiduciary capacity, either as executor (in some states called a personal representative) or as trustee, depending upon how the decedent held his or her property.

As a first step, it is helpful to know the meaning of a few common terms:

  • Fiduciary – An individual or trust company that acts for the benefit of another. Trustees, executors, and personal representatives are all fiduciaries.
  • Grantor – (Also called "settlor" or "trustor") An individual who conveys property by means of a trust; the person whose wishes are expressed in the trust.
  • Testator – A person who has made a valid will (a woman is sometimes called a "testatrix").
  • Beneficiary – A person for whose benefit a will or trust was made; the person who is to receive property, either outright or in trust, now or later.
  • Trustee – An individual or trust company that holds legal title to property for the benefit of another and acts according to the terms of the trust.
  • Executor – (Also called "personal representative"; a woman is sometimes called an "executrix") An individual or trust company that settles the estate of a testator according to the terms of the will.
  • Principal and Income – Respectively, the property or capital of an estate or trust and the returns from the property, such as interest, dividends, rents, etc. In some cases, gain resulting from appreciation in value may also be income.

As a general rule, the administration of an estate or trust after an individual has died requires the fiduciary to address certain routine issues and follow several standard steps to distribute the decedent’s assets in accordance with his or her wishes. These guidelines focus on activities that occur in an estate or trust immediately after the individual has died.

Understanding the Will

It is very important to read and understand the will or trust so that you will know:

  • who the beneficiaries are;
  • what they are to receive and when
  • how many years the trust will be ongoing; and
  • who, if any, are your co-fiduciaries

Does the will give everything outright, or does it create new trusts that may continue for several years? Does a trust mandate certain distributions ("All income earned each year is to be paid to my wife, Nancy") or does it leave this to the trustee’s discretion ("My trustee shall distribute such income as she believes is necessary for the education and support of my son, Alan, until he reaches age 25")? The document often imparts important directions to the fiduciary, such as which assets should be used to pay taxes and expenses; and the document will usually list the fiduciary’s powers in some detail.

Most fiduciaries retain an attorney who specializes in the area of trusts and estates to assist them in performing their duties properly. An attorney’s advice is very helpful in ensuring that you understand what the will or trust and applicable state law provides.

Is a Probate Necessary?

Probate is the formal legal process that gives recognition to a will and appoints the executor or personal representative who will administer the estate and distribute assets to the intended beneficiaries. The laws of each state vary, so it is a good idea to consult an attorney to determine whether a probate proceeding is necessary, whether the fiduciary must be bonded (a requirement that is often waived in the will) and what reports must be prepared. Most probate proceedings are neither expensive nor prolonged.

Managing Estate Assets

It is the fiduciary’s responsibility to take control of all assets comprising an estate or trust. Especially when a fiduciary assumes office at the grantor’s or testator’s death, it is crucial to secure and value all assets as soon as possible. Some assets, such as brokerage accounts, may be accessed immediately; others, such as insurance, may have to be applied for by filing a claim. The usual practice is to engage a professional appraiser to value the decedent’s tangible property, such as household furniture, automobiles, jewelry, artwork, and collectibles. Depending on the nature and value of the property, this may be a routine activity, but you may need the services of a specialist appraiser if, for example, the decedent had rare or unusual items or was a serious collector. Real estate, whether it is a home or commercial property, and any business interests must also be valued. Besides providing a valuation for assets that may be reported on a court-required inventory or on the state or federal estate tax return, the appraisal can help the fiduciary to gauge whether the decedent’s insurance coverage on the assets is sufficient. Appropriate insurance should be maintained throughout the fiduciary’s tenure. The fiduciary also must value financial assets, including bank and securities accounts.

Handling Debts and Expenses

It is the fiduciary’s duty to determine when bills unpaid at death should be paid, and then pay them or notify creditors of temporary delay. In some cases, such as property or casualty insurance bills or real estate taxes, the estate may be harmed if the bills are not paid promptly. Most states require a written notice to any known or reasonably ascertainable creditors. While most bills will present no problem, it is wise to consult an attorney in unusual circumstances, as the fiduciary can be held personally liable for improperly spending estate or trust assets.

The fiduciary is responsible for a number of tax returns. First are the personal returns of the decedent: the final income tax return for the year of the decedent’s death; a gift or generation-skipping tax return for the current year, if needed; and prior years’ returns that may be on extension all may need to be filed. In addition, if the value of the estate (whether under a will or trust) before deductions exceeds the amount sheltered by the "applicable exclusion amount," which is $1,000,000 in 2003 and due to increase to $1,500,000 for 2004 and 2005.

Since the estate or trust is also a taxpayer in its own right, a new tax identification number must be obtained and a fiduciary income tax return must be filed for the estate or trust as well. It is important to note for planning that the estate or trust and the beneficiaries may not be in the same tax brackets. Thus, timing of certain distributions can save money for all concerned. Some tax preparers and accountants specialize in preparing such fiduciary income tax returns and can be very helpful. They are familiar with the filing deadlines and will be able to determine whether the estate or trust must pay estimated taxes quarterly.

Most expenses that a fiduciary incurs in the administration of the estate or trust are properly payable from the decedent’s assets. These include funeral expenses, appraisal fees, attorney’s and accountant’s fees, insurance premiums, etc. Careful records should be kept and receipts should always be obtained.

Funding the Bequests

Wills and trusts often provide for specific gifts of cash ("I give my niece $50,000 if she survives me") or property ("My grandfather clock to my granddaughter Nina") before the balance, or residue, is distributed. The residue may be distributed outright or in further trust, such as a trust for a surviving spouse or for minor children. Be sure that all debts, taxes, and expenses are paid or provided for before distributing any property to beneficiaries. Although it is usual to obtain a receipt and refunding agreement from the beneficiary that states that he or she agrees to refund any excess distribution made in error by the fiduciary, as a practical matter it is often difficult to retrieve such funds. In some states, you will need court approval before any distributions may be made. Where distributions are made to ongoing trusts or according to a formula described in the will or trust, it is best to consult an attorney to be sure the funding is completed properly. Tax consequences of a distribution sometimes can be surprising, so careful planning is important.

Trust Administration

Trusts are designed to distinguish between income and principal, as many of them, especially older trusts, provide for income to be distributed to one person at one time and principal to either that same person at a different time or to another person entirely. For example, many trusts for a surviving spouse provide that all income must be paid to that spouse, but only pay the spouse principal in limited circumstances, such as a medical emergency. At the spouse’s death, the remaining principal may be paid to the decedent’s children, to charity, or to other beneficiaries. Income payments and principal distributions can be made by check, or at the trustee’s discretion by distributing securities as well as cash.

Unless a fiduciary has experience in this area, it is recommended that he or she seek professional advice regarding the investment of trust assets. In addition to good investment results, the fiduciary should invest within the applicable Prudent Investor Rule that governs the trust or estate. A skilled investment advisor can help the fiduciary decide how to invest, what assets to sell to provide cash for expenses, taxes, or outright distributions, and how to minimize income and capital gains taxes.

During the period of administration, the fiduciary must provide an annual income tax statement (called a Schedule K-1) to each beneficiary who is taxable on any income earned by the trust. The fiduciary can be held personally liable for interest and penalties if the income tax return is not filed and the tax paid by the due date, generally April 15.

Closing the Estate

Estates close when the executor has paid all debts, expenses, and taxes; received tax clearances from the IRS and the state; and all assets on hand have been distributed. Trusts terminate when a date or event described in the document occurs, such as the death of a beneficiary or the date the beneficiary attains a stated age. Some states require a petition to be filed in court before the assets are distributed and an estate or trust can be closed. When such a formal proceeding is not required, it is nevertheless good practice to require all beneficiaries to sign a document, prepared by an attorney, in which they approve of your actions as fiduciary and acknowledge receipt of assets due them. This protects the fiduciary from later claims by a beneficiary. A final income tax return must be filed and a reserve kept back for any tax that may be due.

Common Questions

How do I title accounts? Each bank or investment firm may have its own format, but generally you may use, for a trust, "Alice Carroll, Trustee, Lewis Carroll Trust dated January 19, 1998," or, in a shorthand version, "Alice Carroll, Trustee under agreement dated January 19, 1998." For an estate, "Alice Carroll, Executor, Estate of Lewis Carroll, Deceased."

How do I sign my name in a fiduciary capacity? An executor signs: "Alice Carroll, Executor (or Personal Representative) of the Estate of Lewis Carroll, Deceased". A trustee signs: "Alice Carroll, Trustee".

Where do I hold the estate or trust assets? If you engage a trust company, they will open an account in the name of the estate or trust and provide regular statements showing all income and disbursements. You can open an investment account with a bank or brokerage company in the name of the estate or trust. All expenses and disbursements must be made from these accounts, and you should receive regular statements.

How (and how much) do I get paid? Fiduciary work is time-consuming and can be difficult; it is appropriate to seek payment for your services. The will or trust agreement may set forth the compensation. If they do not, many states provide either a fixed schedule to which you must adhere, or allow "reasonable" compensation, which usually takes into account the size of the estate, the complexity involved, and the time spent by the fiduciary. Executor’s or trustee’s fees are taxable compensation to you. As stated above, several states do not permit the fiduciary to pay his or her own compensation without a court order; check with your attorney before you write yourself a check.

What if a beneficiary complains? Even professional fiduciaries, such as trust companies, receive complaints from time to time. The best way to deal with them is to do your best to avoid them in the first place by following these guidelines and consulting with an attorney experienced in estate administration. Many complaints arise because beneficiaries are not kept up to date on the administration of the trust or estate. Frequent communication with beneficiaries is a must. Whenever possible, consult with an attorney who specializes in trust and estate matters when a complaint involves more than routine issues.

Can I be sued or be held personally liable? Your errors or mismanagement of a trust and estate can indeed subject you to personal liability. Common pitfalls include not paying tax or filing returns on time, improper investment choices (whether too conservative, too speculative, or favoring one beneficiary over another), self-dealing (buying assets for yourself or your family from the estate or trust, whether or not at market price), or allowing property or casualty insurance to lapse, resulting in a loss to the account. Your best protection is to get good professional advice and to fully document your actions and decisions.

How am I discharged as fiduciary at the end of the administration? What if I want to resign? Whether you stop acting because the estate or trust has terminated, or you wish to resign before the conclusion of your administration, you must be discharged, either by the local court or by the beneficiaries. In some states, this is a formal process, involving the preparation of an accounting. In others, a relatively simple document signed by the beneficiaries can be used. If you are resigning prior to the conclusion of your administration, check the document to see who succeeds you as fiduciary. If no successor is named, you may need a court proceeding to appoint a successor before you can be discharged.

SOURCE: American Bar Association

Choosing the Executor

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.

(more…)

Estate Administration

Whenever a person dies, his or her estate needs to be collected, managed, and distributed. Estate administration involves gathering the assets of the estate, paying the decedent’s debts, and distributing the assets that remain in the estate.

In recent years, state legislatures have attempted to reduce the complexity of estate administration. Currently, about 20 states have adopted some version of the Uniform Probate Code (UPC), which was designed to simplify the estate administration process and provide similarity among probate laws from state to state.

Which State Law Applies?

In some cases, an estate may need to be administered in more than one state. Generally, the state in which the decedent resided at the time of death will be the state where the decedent’s estate is probated.  However, state law governs the transfer of real estate, so if the decedent owned real estate in another state, it may be necessary to do an ancillary proceeding to probate that one piece of property in the state where it is located.  An ancillary proceeding is a scaled-down probate proceeding, which governs only the assets located in that state.  In some instances, it may be necessary to consult two attorneys, one in the state where the decedent lived and another attorney in the state where the decedent owned real estate.

(more…)

Choosing an Executor FAQ Part 4: Can an executor get help from someone besides a lawyer?

Yes. Here are some other sources of information and assistance.

  • The court. Probate court clerks commonly answer basic questions about court procedure, but they staunchly avoid saying anything that could possibly be construed as “legal advice.” Some courts, however, have lawyers on staff who look over probate documents, point out errors in the papers, and explain how to fix them.
  • Other professionals. For certain tasks, an executor may be better off hiring an accountant or appraiser than a lawyer. For example, a CPA may be a big help on estate tax matters.
  • Paralegals. Many lawyers delegate probate paperwork to paralegals. Now, in some areas of the country, experienced paralegals have set up shop to help people directly with probate paperwork. These paralegals don’t offer legal advice; they just prepare documents as the executor instructs them, and file them with the court. To find a probate paralegal, an executor can look online or in the Yellow Pages under “Legal Document Preparation” or “Attorney Services.” The executor should hire someone only if that person has substantial experience in this field and provides good references.

SOURCE: Nolo