If you are asked to serve as the executor of Will, think carefully about the decision before accepting the position. Acting as an executor or administrator of an estate can involve a great deal of work, depending on assets and the complexity of the estate. For example, an estate with a large investment portfolio, property in more than one state, significant non-liquid assets, or a major stake in a business means far more responsibility than a modest estate.
Many people agree to be named as an executor for a relative or friend and then find they are left with a task that is more difficult and overwhelming than they expected. Many people also think that they must name their child as executor and this may not always be the best choice. Executors are bound by law to observe a strict standard of care in fulfilling their duties. Depending on state law, you can be held legally liable for negligent handling of the estate. When choosing an executor, one must think about the types of responsibilities they must fulfill and choose someone who will remain level-headed through a sometimes lengthy ordeal.
|Q. Who Can Be an Executor?
A. It depends on state law. In New York, an Executor must be at least 18 years old and mentally competent. Like many states, NY prohibits people who have felony convictions from serving as an executor. Typically an executor cannot be a non-resident alien, that is a person who is not a U.S. citizen and does not live in the U.S., unless they are named a co-executor and it is approved by the court. A NY Probate (Surrogates Court) Judge can also reject a potential executor found to be unqualified because of “substance abuse, dishonesty, improvidence, a want of understanding,” or who is otherwise unfit to serve in the Surrogate’s discretion.
A person does not need to be a New York State resident to be an executor of a New York estate. However, for practical reasons, it is sometimes best to appoint someone who lives near you. Most Wills name an alternate executor, in the event the executor is deceased, incapacitated, cannot serve, or refuses to serve. You may name co-executors (two people to serve) but it is important to remember that they must act together on all matters related to the estate. This may prove to be cumbersome, especially if both executors do not live near one another or do not get along.
Use the list of typical executors’ responsibilities below to make an informed decision about whether to agree to be named executor or who to name as your executor. Here are some possible duties that an executor must fulfill:
- Inform various people of the death. This includes family members, employers, business partners, funeral home, attorney, accountant, financial advisor, Social Security Administration, and DMV.
- Have the Will probated. Usually, this means having an attorney petition the court to Probate (or approve) the Will. A court must approve the appointment of the executor and issue “Letter of Testamentary” before the executor has the power to administer the estate (ie. perform the rest of the duties on this list). If there is property in more than one state, there may need to be multiple probate proceedings.
- Cancel accounts. This includes the deceased person’s credit cards, utilities, subscriptions, banks and other creditors.
- Collect or marshal the assets. This means finding all of the deceased person’s assets, which may not be easy. Imagine trying to quickly locate every asset you own right now, such as car registrations, stock certificates, savings bonds, account statements, deeds, pension benefits, mortgage papers, life insurance policies, digital accounts, and IRA papers. Now imagine trying to do this for someone else! Note: Not all of the decedent’s assets will be governed by the Will. Assets that are jointly held, payable on death, have a specific beneficiary designation, or are in a trust may not go through probate.
- Have assets valued or appraised. Assets need to be valued both for estate tax purposes and to provide heirs with a tax basis. (Under the tax law, the tax basis of an asset in an heir’s hands is generally the “date of death value.”) Some assets, such as business interests, require an appraisal.
- File any tax returns. Depending on the size of the estate, tax returns that need to be filed might include federal and state estate and death tax returns, the decedent’s final income tax return, a final gift tax return, and an income tax return for the estate.
- Make an accounting of the assets. You will need to provide the court with a full list of all probate and non-probate assets. (This is typically done with assistance from an attorney.)
- Handle the debts. After determining what the estate owes, an executor pays the debts out of an estate bank account. In some cases, you may need to sell some of the assets, such as real property, to pay debts or make distributions. Note: An executor is not personally responsible for debt that exceeds the value of the estate.
- Distribute the estate’s assets. You are responsible for distributing the remaining assets in accordance with the deceased person’s wishes. If substantial time elapses before the assets are distributed, you may have to manage the assets. Note: If there is no Will, or the Will is not found to be valid for whatever reason, the assets will be distributed in accordance to the laws of intestacy in that state.
- Deal with family conflict. Dealing with a death can be a difficult time for some family members and conflict and disputes can arise. Probate takes a minimum 7 months from the date of court appointment for simple estates and larger estates average 12 to 24 months. The process can take even longer if there are disagreements, litigation, or certain family members are cut out. There may also be non-probate assets (that pass outright instead of through the Will) that may not be split evenly thereby causing conflict.
|Q. Can an Executor Get Paid to Serve?
A. Yes, most executors are entitled to compensation, either by the terms of the Will or under state law. Typically executors are paid a flat fee, on a reasonable hourly basis, or a percentage of the value of the probate estate. When not specified by the Will, New York Surrogate’s Court Procedure Section 2307 sets out guidelines for an executor’s commission as:
(a) For receiving and paying out all sums of money not exceeding $100,000 at the rate of 5%.
Many people feel uncomfortable asking for payment after the death of a loved one. It is far better to agree on if and how executor’s fees will be charged in advance, preferably during the estate planning process so expectations are clear. You can dictate in your Will if you do or do not want your executor to be compensated, and how they will be compensated. Sometimes an executor is given a specific item such as a piece of jewelry, a painting, the car, or first right to purchase property for the successful completion of the job.
There is nothing wrong with waiving the fee for serving as executor. You can still get reimbursed for travel or other expenses necessary to fulfill the duties. Any commission received as executor is taxable to you as earned income and must be claimed on your personal income tax return (1040). If you are the executor and also a beneficiary under the Will, consult with your tax adviser as to the more favorable option. And if terms are not clear on executor compensation, consult with an attorney before you start paying yourself for your services. An executor can be sued for breach of fiduciary duty, mismanagement, improper administration, or negligence.
These are just some of the duties an executor may have to perform in the course of estate administration. If there is Will contest or estate tax audit, the executor must oversee those processes too. The authority of an executor terminates only when the estate has been completely administered (or the executor dies, resigns, or is suspended or removed). Although it is an honor to be asked by a friend or relative to serve as an estate executor, remember that being an executor requires a commitment to working on behalf of the estate beneficiaries for months or even years. In some cases you may want to serve as a co-executor with a professional adviser (attorney, accountant, etc.) or a corporate fiduciary (bank or trust company) that has the expertise needed to handle some of the responsibilities.
At the Herzog Law Firm, our experienced Estate Administration attorneys and team of paralegals are here to walk you through the process and answer your questions. Even if the Will or estate plan was not done with our firm (or there was no Will altogether), we can still be of assistance after the death of a loved one. We regularly deal with estates, both big and small, where the original drafting attorney is deceased, moved, retired, is no longer in private practice, too busy, not responsive, or simply not experienced in estate administration. We also have an estate litigation department to deal with any problems such as Will contests, paternity claims, pursuing action against unscrupulous executors and defending executors from false allegations. While being an executor is a lot of work and responsibility, it can also be a rewarding experience. We are here to help – give us a call at 1-800-777-7581.
For more information on the Estate Administration Process, how long it takes and costs involved – Attend one of our Let’s Talk Workshops on “What is Probate and How to Avoid”.