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Pegasus Financial Planning, LLC

Estate Planning Pt 3: Understanding the role as executor/executrix of an estate

Blog Ty McGilberry

Estate Planning Part IIIIn our first two parts of the series, we focused on the conversations with family members and how to facilitate the discussion.  In this part, we are going to focus on understanding the role of the executor/executrix of an estate.

The most important and most stressful role in settling any estate is the role of the executor/executrix.  If you are the executor/executrix of your parents' will or you are naming someone for those roles in your will then it is important to understand what it means to fill those roles. This role is very important and requires a lot of work.  As you age it is important to consider the age of your executor/executrix and their mental and physical ability to fill the responsibilities.  Other key discussions to conduct are to communicate with the guardian of any children and the trustees listed in any trust documents.  These roles should be reevaluated more often as your relationships change and/or the family dynamics of those listed as guardian(s) of your children change.  The below are just a several of the responsibilities of the executor/executrix…

  • Open probate. This process officially begins when the court grants the proper paperwork needed for your state (keep in mind that the process is different in all 50 states).  A key step in opening the estate is getting multiple copies of needed documents that institutions will request such as the Short Certificate and the Death Certificate.  
    • A short certificate is the legal document issued by the Register of Wills that shows who is appointed as executor/executrix or administrator of an estate.
    • The official death certificate will be requested by all institutions and while you may ask them to return the death certificate there is no guarantee the request will be honored.  It is best to have multiple copies of the death certificate for 2 reasons.
      • First, multiple copies will eliminate the issue of institutions not returning the copies provided. 
      • Second, multiple copies will allow for institutions to be contacted concurrently which will cut down the time to settle the estate.
    • Find Documentation. This is the most important and can be the most difficult responsibility because depending on how organized the decedent is, documentation may be organized and easy to find or it may be unorganized, missing, or lost.  Help the executor/executrix you named by having a list of documents and contact names. This is a great planning tool.
    • Notify interested parties. In many states anyone named in the will receives a copy of the will after the proper paperwork has been filed with the probate court.  Some states require that ads are put into the local paper about the passing of the decedent.  It is important to know the laws of your state.
    • Pay valid bills and creditors. After the decedent passes, items such as the mortgage, electric bill, and outstanding credit card balances still need to be paid.  Contacting these institutions is vital to ensure that they know the person has passed.
    • Notifying the proper authorities. If the decedent was receiving social security income, pension benefits, and/or annuity payments then contacting the proper authorities is not just essential but it is the law.  As a fiduciary of the estate, failure to notify the proper authorities may lead to legal prosecution. 
    • Managing assets. Unfortunately, most people think this is the only responsibility of an executor/executrix. For assets with beneficiary designations, it is their responsibility to ensure these assets are divided according to information already on file.  For other assets such as real estate, art work, automobiles, and other property, it is important to have the assets valued if they are to be sold.  Protected assets from theft or repossessing assets taken by family members prior to the reading of the will also falls under the duties and responsibilities.  If the decedent owns a business it is the responsibility of the executor to manage the dissolution of the business and/or the transfer of the business to other partners.
    • Manage taxes. When someone passes during the course of the year, it’s important to file a tax return for the decedent.  If the decedent has income that has not been taxed then Income in Respect of a Decedent (IRD) tax is due.  This tax must be paid by either the estate or the decedents.  Examples that may be subject to IRD are income from savings bonds/accounts, untaxed distributions from individual retirement accounts, 1099 income, sales of property prior to death, rental income, and other types of income that would have been received had the decedent lived.
    • Keep accurate records. Keeping accurate financial accounting records is another overlooked yet critical responsibility.  At any time a beneficiary may challenge the records accuracy and they have the right to review the final accounting prior to the distribution of the estate.  Keeping track of distributions, expenses, paid liabilities, taxes, and any income the estate has received are just a few of the items to track.
    • Hire professionals. Hiring an attorney, a financial advisor, and/or an accountant are a few of the professionals that should be part of your team as the executor/executrix.  Having professionals in your corner can help you explain the options to the beneficiaries and can help you fulfill your fiduciary role.
    • Close the estate. Once all assets have been distributed, all liabilities have been settled, taxes have been paid, and all required parties have provided their approvals then the final step is to file the necessary paperwork with the court to close the estate.

These are several of the responsibilities of an executor/executrix but this list is not an exhaustive list of the requirements.  Communicating with the person listed in your will to fill the role is imperative.

While having these discussions can be very difficult it can also be very empowering for your family.  Use the Estate Planning Guide to help you get organized.  If you would like help in facilitating these discussions then we are here as a resource for you and your family.  Use this link to schedule a consultation today!

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