What You Need to Know as an Executor

Matthew D. Hoffman

You have recently been named the executor of an estate — but, like many people, you might not be familiar with the scope of the task that you’re undertaking and the important information you need to know.

An executor is the person responsible for managing the administration of a deceased individual’s estate. Being named an executor is not a task to be taken lightly; it might involve a lot of time and effort, depending on the size of the estate.

Even if the estate is small, there are still important duties that must be carried out correctly, such as settling of the estate, paying any debts or taxes on behalf of the estate, and making sure that the people named in the will receive their inheritances. Your chief responsibility is to ensure that the instructions in the will are properly followed.

The average estate administration takes one year; however, you might not need to work full time on it depending upon the complexity of the estate.

Here are some of the specific tasks that must be completed.

Locate important documents required to settle the estate

If there is a will and you don’t have it or it hasn’t been brought to court, you might need to find it among the deceased’s belongings. If you only have a copy of the will, you might need to obtain the original from the attorney who drafted it.

As the executor, you’ll also need to obtain the original or a certified copy of the death certificate. Note that you might need several original or certified copies for various institutions such as banks, investment firms, life insurers, the U.S. Department of Veterans Affairs, and the Social Security Administration. Most states charge a fee for the original death certificate as well as for certified copies.

Consider hiring an attorney

You aren’t required to do so, but mistakes can be costly. The executor might be personally liable if an error is made with the estate or payment of taxes. Your state may have its own estate tax and income tax requirements for estates. An attorney experienced in estate planning can provide guidance and ensure that deadlines are met.

Apply for probate

The executor must file the will with the probate court and receive letters of testamentary. A letter of testamentary is a legal document issued by a probate court that gives an executor the power to act in a fiduciary manner on behalf of the estate. A key task for the executor is presenting the letter of testamentary along with the death certificate in order to handle estate business and show that you have the authority to act on the estate's behalf. If there’s no will, you receive letters of administration providing legal authority to act on behalf of the estate. This officially begins your work as executor.

Set up a bank account

The executor is required to keep the estate’s money separate from their own. This account will be used for any money that is owed to the deceased and delivered after death, such as final paychecks, stock dividends, or payment of debts owed to the deceased. It will also be used to pay any ongoing expenses such as utilities, mortgage payments or insurance premiums.

Notify all interested parties

You will need to notify the beneficiaries of the will as well as any potential heirs such as children, siblings or parents who might or might not have been named in the will. This can be one of the most difficult aspects of your job because of the mixed emotions concerning a person’s death and the internal family dynamics which you might or might not be aware of.

You will also need to place an advertisement for potential creditors in the local newspaper.

In addition, as the executor, you are responsible for canceling or closing accounts and credit cards that are still open. If the deceased was receiving Social Security benefits, the Social Security Administration needs to be notified as well.

Manage the deceased’s property

You will need to take inventory of the deceased assets and liabilities. As executor, you might want to enlist the help of a neutral third party to avoid potential disagreements among family members or other heirs. Another responsibility of the executor is to protect any property from loss, so you might need to change the locks on real property or secure heirlooms until they are distributed or sold. In addition, some property may require an appraisal in order to determine the value for tax purposes.

Pay debts and taxes

Once creditors have been determined, the executor must pay the deceased’s debts from the estate funds. The estate usually pays any reasonable funeral expenses first. Other debts might include probate and administration fees as well as any valid claims filed by creditors. Tax returns must be filed within the time frame required by law. Taxes due will include estate taxes and income taxes.

Distribute assets and property to beneficiaries

After the estate debts and taxes are paid, the executor is responsible for making sure the beneficiaries receive what they are entitled to according to the will. You might be required to sell property to fulfill legacies in a will. You might also be obligated to set up any trusts required by the will.

Retain accurate records

It’s extremely important for the executor to keep accurate records of everything you do regarding the estate. You will have to create a final accounting, which the beneficiaries must review before the distribution of the estate can be finalized. This accounting should include any distributions and expenses as well as any income earned by the estate.

File the final accounting with court

After the final accounting has been approved by the beneficiaries and the court, the court will close the estate.

Serving as an executor can involve a lot of work and requires you to recognize the responsibility which has been entrusted to you. However, you’re entitled to compensation for your services subject to approval of the court. Remember that any compensation you receive is considered income, so you will need to declare it on your tax return.

Matthew D. Hoffman, CFP ^®, ChFC ^® is Chief Client Services Officer and is also an officer of MMBB [www.mmbb.org] serving as Corporate Secretary. Matthew Hoffman has worked extensively in the financial services industry. Prior to joining MMBB, Hoffman was a vice president at JPMorgan Chase and a financial advisor in the private client group at Merrill Lynch.