Keys to being a great executor

Few financial requests carry as much emotional weight as this one. Asking someone to serve as executor of your estate—or being asked to do this crucial job—implies deep affection and personal trust. But it’s also a long-term commitment with serious legal and financial responsibilities. Whether you’re choosing an executor or thinking of serving as one, you need to understand what the position entails and whether you are the best fit, says Rebecca Sterling, Director, Senior Wealth Strategist, UBS Financial Services.

In simple terms, an executor has legal responsibility for the finances of someone who has died, including accounting for all of that person’s assets, paying any debts and taxes, and distributing bequests to beneficiaries according to the wishes expressed in a will. How do you know whom to choose or whether to serve? Consider these three crucial factors:

While much depends on an estate’s size and complexity, settling it is likely to take at least a year and could last several. “This can be a second full-time job,” Sterling says. “In the beginning, it can consume hours and hours a day.” That’s especially true if the person who created the will had complicated wishes about distributing assets or if a beneficiary decides to contest the will. Consider who will be willing and able to devote time and attention to the process.

Key takeaways:

  • Serving as executor of an estate is an honor but also a responsibility, the duties of which may surprise you.
  • As a fiduciary, the executor is responsible for maintaining the value of the estate for the beneficiaries.
  • A first-rate team, including the Financial Advisor of the person who has died, as well as an estate attorney and an accountant, can make the process easier.

The responsibilities

Among the biggest surprises for executors is how much they’re responsible for and that they are legally and financially liable for how well they do the job. As a fiduciary for all beneficiaries, the executor must look out for their financial interests. While there’s no obligation to grow the size of an estate, if executors make poor decisions that diminish its value, “they could have to make the estate whole out of their own pocket,” says Patti S. Spencer, a Pennsylvania trust and estate attorney and author of Your Estate Matters. Says Sterling, “You are expected to act in the highest standard.” Some wills, Sterling notes, provide for directors and officers (D&O) insurance, paid for by the estate, to shield the executor from some liability.

 

An executor’s tasks range from immediate concerns (making sure wishes for the funeral are carried out) to far-reaching decisions on valuable assets. One of the first, most vital tasks is to get a sense of the estate’s overall assets and to notify potential creditors, banks, Social Security and others of the death. The executor must also pay any outstanding debts and bills, including mortgage or rent, insurance premiums and taxes. Someone who dies midyear will still owe income taxes for the preceding months, Sterling notes. And while many estates will be exempt from federal estate tax, which for 2016 applies only to estates valued above $5.45 million, taxes on estates worth more than that are due nine months after death.

Where to get help

If you’re choosing an executor, you can give that person a head start by making sure your account information, insurance papers and other documents are well organized and easily accessible (including passwords for online accounts) and by having a knowledgeable team ready to assist. With a comprehensive view of your assets, your Financial Advisor can help the executor make key decisions about allocating or liquidating assets. Whether you’re choosing an executor or acting as one, a key part of the team is an attorney, who “should provide the executor with a road map and hold that person’s hand through the entire process,” Sterling says, to help ensure that the executor doesn’t overlook key tasks. While the executor may choose any attorney, the one who helped draw up the will and other estate documents may be the best choice. An accountant with special knowledge of the estate can also be a big plus.

Emotional demands

Finally, if you serve as executor, you’re likely to face considerable emotional challenges—especially if you are one of several siblings who may benefit from the estate. There could be disagreements about everything from whether to sell a vacation home to the proper valuation for a family business.

A Financial Advisor and attorney “can be neutral third parties, letting beneficiaries know, this is what the will says, and this is what the law says.”

Rebecca Sterling

“The other beneficiaries will be there, looking over your shoulder and no doubt thinking they could have done a better job,” says Spencer. Involving people from outside the family can help, Sterling says. When the executor and beneficiaries meet to discuss the details of the estate, a Financial Advisor and attorney “can be neutral third parties, letting beneficiaries know, this is what the will says, and this is what the law says.”

Under the best circumstances, choosing an executor or agreeing to serve as one can deepen bonds of love or friendship amid some of life’s most personal, important decisions. In either case, taking time to prepare and to understand the commitment can only make the experience more meaningful.