Charlie was extremely nervous as she walked into the attorney’s conference room. She was carrying a thick, thoroughly-organized notebook of Marcia’s assets, but she had never felt so lost in paperwork than when she started going through her friend’s legal documents and financial statements. After the usual greetings, Charlie sat, plopped the huge notebook down on the table, and got right down to business.
“As I mentioned to your assistant, I’ve had a lot of trouble trying to get control of Marcia’s bank accounts to start paying bills, and the people at the bank kept recommending that I see an attorney,” Charlie said. “They kept saying I need ‘Letters Testamentary’ or something like that. Can’t you just type those up for me?”
The attorney smiled and leaned back a little in his chair, trying to put her at ease. “Unfortunately, it’s not that simple,” he said. “Letters Testamentary is only one piece of paper in a much bigger process. While we can make things as easy as possible, based on the information you already sent to us, this is not something that can simply be cleared up in a few days.”
“Well, what do I have to do?” Charlie said, frowning. “Marcia was my best friend in the world, and I absolutely adore her daughter Kelly. Since Marcia’s husband passed on a few years ago, Kelly is going to live with Marcia’s sister. My job is to make sure that Marcia’s money is managed for Kelly until she turns thirty. So how do I get started.”
“First, we need to go over the entire probate process,” the attorney said, reaching for a book about twice as thick as the notebook Charlie brought with her, “Then we need to take a more detailed look at all of the things that need to be done in that process. Finally, at least in getting started, you need to decide what you want us to handle and what you will handle yourself. Based on what you gave us ahead of time, though, it looks like Marcia was organized enough that we have all of the pieces and won’t have to do a lot of digging for information.”
Charlie’s eyes grew wide at the thickness of the opening binder and all of the forms with tiny little spaces where numbers and information were supposed to go. She knew now the job was not going to be simple, but at least it appeared that the attorney had a very organized process. And working within an organized process was something she was good at once she understood that process.
“You were referred to us by clients of ours who were friends with both you and Marcia, so they already told me about both of you,” the attorney said. “From what they told me, Marcia had a lot of faith in you and considered you bright, organized, and meticulous with details. Those are the skills needed in a good executor, so I believe we can work well with you. So let me give you the overview…”
Being named as the executor of someone’s estate is a great honor and a great responsibility. It means that they trust you to act on their behalf, to take care of any problems that may come up, and to see that their wishes are carried out after their death. It means they trust that you will be the responsible person in the room when they no longer can. Unfortunately, this also means that you as the executor must comply with the legal demands of the probate system, which can create a long and exhausting process if the estate has been poorly planned.
Responsibilities of the Executor
If you’ve been named as the executor of someone’s estate, you don’t have to be an expert in legal or financial matters. You do, however, have a very real responsibility to act with impartiality, honesty and diligence. In legal-speak, as an executor, you have a fiduciary duty to act with absolute good faith and honesty on behalf of the deceased.
In terms of real-world application, being an executor means you have to:
Find and Manage Assets
It is the responsibility of the executor to compile a list of all of the deceased person’s assets, and manage them until the probate process is complete. If you’re fortunate, the deceased has provided a complete and thorough list of all of his or her assets, including:
• Real estate
• Investment accounts
• Retirement accounts
• Bank and savings accounts
• Insurance policies
• Cars, boats, RVs and other vehicles
If the deceased was married, this process may become more complicated. Different states deal with property that is held jointly in different ways. Alternately, some states have laws that stipulate certain property automatically passes to the surviving spouse after death without going through probate. Additionally, in some cases, assets may have been transferred to the spouse prior to death.
Finding and managing assets can prove difficult without a comprehensive inventory, along with a list of all account numbers, institutions and other relevant details such as date of death balances.
Handling Day-to-Day Details
As the executor, it’s your responsibility to handle the day-to-day details of administering the estate. This includes things like:
• Terminating leases
• Notifying credit card companies and credit agencies of the death
• Telling banks that the deceased has passed
• Notifying government agencies, such as the Social Security Administration, Medicare, the Department of Veterans Affairs, and the post office
You’ll find it helpful to set up an estate bank account that will hold money that is owed to the deceased person, such as paychecks or stock dividends. You can also use this estate bank account to pay for continuing expenses, such as mortgage payments, homeowners’ insurance and utility bills but only within certain limits.
When you use an estate bank account, keep very thorough track of every penny that goes in and out of the account. Note where it came from, where it’s going, and why. If the family is unhappy with probate, they may inquire about the disposition of these funds, and being able to show that everything is accounted for can head off confrontations and disputes – and legal liability.
Pay Debts and Pay Taxes
One of the most unpleasant responsibilities of the executor is to pay all outstanding debts and taxes with the estate funds. The executor must notify creditors that there is a probate pending following the process provided by state law. Creditors then have a set amount of time to come forward and demand payment for outstanding debts. The executor must attempt to pay these debts using the estate’s funds. If the estate doesn’t have enough cash to pay the debts outright, the executor may have to sell property in order to settle debts.
The executor also has the unfortunate task of filing a final income tax return, covering the calendar year from January 1 to the date of death. The size of the estate may also dictate the filing of an estate tax return, and the payment of any required estate taxes based on the value of the estate.
Distribute the Deceased Person’s Property
After settling debts and paying outstanding taxes, the executor finally has the task of distributing the deceased person’s property according to the terms of the will. If there is no will, the estate goes to the family members who are entitled to inherit under state law. The executor may be called upon to settle disputes about the disposition of the property; it’s his job to resolve the disputes as fairly as possible, and as close to possible as in keeping with the wishes of the deceased.
If an estate is well-planned, being an executor can be a complicated, frustrating, and time-consuming process without the help of a good estate planning and administration attorney. With the right help, it can be a routine process that doesn’t create much burden on the person serving in this role. In a poorly-planned estate, though, being an executor can become a nightmare because of the lack of guidance. Make sure your own estate is thoroughly planned, and possibly avoid the probate process altogether for some assets by establishing a good Revocable Living Trust. For more information for North Carolina residents, contact our office to get a free copy of Mr. Marsocci’s book Estate Planning Basics. (Out of state residents may purchase a copy on Amazon.com).