If a loved one asks you to be the executor of their estate, think carefully before you accept this responsibility. While you have the option of declining the request, the person reaching out likely considers you to be responsible and detail-oriented. An executor of an estate typically helps file paperwork, close accounts and distribute assets.
Consider the following points as you prepare to be an executor of an estate:
— Responsibilities of an executor
— Potential conflicts
— Locating assets
[Read: Estate Planning Tips to Keep Your Money in the Family.]
Responsibilities of an Executor
An executor helps finalize a deceased person’s finances and assets. An executor of an estate must follow the instructions in the will to administer the estate. Here are some of the many responsibilities of an executor:
— Locate important documents.
— Request copies of death certificates.
— Make funeral arrangements.
— File the will in probate court if necessary.
— Set up an estate account.
— Notify organizations of the death.
— Pay off debts.
— Manage and distribute assets.
— File a tax return.
An executor’s starting point is locating important documents, including the will. You may have to ask for help finding the necessary information. “As an executor, you’re acting in a fiduciary capacity,” said John Cocklereece Jr., an attorney at Bell, Davis & Pitt in Winston-Salem, North Carolina, in an email. “Your efforts are directed toward the interests of the stakeholders in the estate, principally the creditors and heirs of the estate.” Depending on the estate’s size, you may decide to hire an attorney to help with the legal requirements.
If you are asked to be the executor before your loved one passes away, read the will and make sure you understand the terms and know the locations of the assets and liabilities. Make note of account information, including passwords and the answers to security questions. “Have a conversation with the to-be decedent about their desires regarding their estate plan and important family dynamics,” Cocklereece said.
To be the executor of an estate, you must meet certain requirements, which can vary by state. “A sole executor typically has to be a U.S. citizen, although a noncitizen can act with a U.S. citizen as co-executor,” said Patricia J. Russell, an attorney at Twomey, Latham, Shea, Kelley, Dubin & Quartararo in Riverhead, New York, in an email. “Anyone convicted of a felony is not permitted to act as executor, even if they are named in the decedent’s will.”
Plan for at least six to 12 months to carry out all the administrative work related to the estate. “You will not be working every day on the estate, but there will be times when your attention to estate work is necessary,” Cocklereece said. “If you don’t have the time, don’t agree to serve.”
Executors may be compensated for their work. “Most states have statutory commissions that the executor can collect,” Russell said. “The executor should be aware that these commissions are considered as earned income for their services and must be reported on their personal income tax returns.”
[Read: How to Manage an Inherited IRA.]
Potential Conflicts
Due to the number of parties involved, complications can arise. For instance, some of those receiving distributions may object to the divisions laid out in the will. “If a will bequests unequal amounts to the decedent’s children or disinherits one or more children, the executor should be prepared for an objection to the will,” Russell said. It may be necessary to lock up the house or other possessions until you are ready to distribute them to avoid arguments or beneficiaries taking items not assigned to them, per the instructions in the will.
Emotions can also create tension, especially if you were close to the decedent. “Not only are you processing the grief, now you’re taking on a task that is time-consuming,” said Randa Hoffman, founder of Radiant Wealth Planning in Newport Beach, California, in an email. It might be difficult to sort through the financial terms and details. “To top it off, you might have siblings and family members that are attacking you for what you’re doing, even if what you’re doing is exactly what you should be doing,” Hoffman said.
[READ: What Holding Cryptocurrency Means for Your Estate Plan.]
Locating Assets
In addition to collecting as much information as possible about assets, look for them in unexpected places. “Go to your state’s unclaimed property website and do a search to see if any assets have been escheated to the state,” Hoffman said. When Hoffman checked for a client whose father had passed away, he found $300,000 in cash waiting to be claimed.
Thoroughly search the home before putting the property up for sale. “My client found old stock certificates tucked away in the back of their father’s sock drawer,” Hoffman said. Another client found the deed to the home in a bread box. “It’s amazing what people use as their secret hiding spot,” Hoffman said.
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How to Prepare to Be an Executor of an Estate originally appeared on usnews.com
Update 09/20/24: This story was previously published at an earlier date and has been updated with new information.
