Named An Executor? What You Need to Know

Editor’s note: Assunta “Susie” McLane is a longtime columnist for Rethinking65. Read more of her articles here. 

It’s hard to forget the day I received a call from a long-time client who could not even find the words to share that their spouse had passed away. I listened and let them share all they were feeling. We talked about all the good times they had together and how dearly missed they will be. We then gently discussed next steps and responsibilities as the executor of their late spouse’s estate.

I could hear it in their voice that it felt overwhelming. This was not a task they wanted to take on, especially not while they were mourning the loss of their loved one. At that moment, it was apparent that we had to take this slowly and we came up with a plan that felt much more digestible and manageable.

Advisors who understand what an executor legally must do can help alleviate the confusion and burden clients feel when they are named as one in a will. It’s also possible a client will want to name you as their executor of their estate — another important reason to know the responsibilities of the role.

A Big Job for Estates of All Sizes

An executor of an estate is trusted with fulfilling the final wishes and settling the affairs of the decedent. This position is very important and demands a great understanding of not only legal and financial matters, but also the ability to balance empathy and decisiveness.

As the executor navigates through the legal procedures and family dynamics, they bear the responsibility of ensuring that the deceased’s assets are distributed equitably and in accordance with the law.

In the last year, we have received more questions like this not only from our clients but from others seeking help who are not our clients.

This highlighted to us that as advisors we can support our clients through the process so it feels less burdensome. It is important to understand that an executor has responsibilities and often these responsibilities are the same regardless of the size of the individual’s estate.

Here are the basics your clients need to know.

Appointing the Executor

Even if the executor has been asked in advance to take that role (highly recommended), those responsibilities don’t begin immediately upon the death of the decedent. Typically, the process begins with probating the will. This involves filing paperwork with the courts, validating the descendant’s will in court, and notifying beneficiaries. This process varies by state, but typically, the will and death certificate are presented to the court. Assuming everything is in good order, the court will then issue letters of testamentary to the executor. The executor may then begin executing on behalf of the estate.

Collecting Assets and Paying Debts

Once the executor has been appointed by the court, they need to begin taking inventory of the decendent’s assets. This includes the decendent’s properties, investments, insurance policies, retirement accounts and personal belongings, to name a few. The assets in accounts where beneficiaries have been designated will pass directly to those beneficiaries; the executor will not need to collect those assets.

The executor will also need to ensure all debts have been identified, to the best of their knowledge. This may include medical expenses, credit card payments, taxes, home expenses, funeral fees and professional fees.

This process can be overwhelming and time-intensive depending on the complexity of the estate. Advising the client that they may have to monitor the descendant’s mail for statements and review the prior tax return could be helpful to get them started.

The executor will then need to open an estate account and transfer the descendant’s individual bank and investment accounts into the estate account. The estate account will collect future proceeds and pay for any remaining debts and expenses. The executor must also ensure a final income tax return is filed. Depending on the size of the estate, estate tax returns and inheritance tax returns may need to be filed. Any taxes that may be due will be paid from the estate account.

The executor would be best advised to work with an attorney and accountant to determine the estate’s tax liabilities. If this is not properly handled, the executor may be personally liable for unpaid taxes.

Distribution of Assets

Once all debts and taxes have been paid, the executor can begin distributing all remaining assets to the beneficiaries according to the terms of the will. But before doing so, the executor should provide the beneficiaries with an accounting of all that has been paid from the estate thus far. This can be as simple as providing a bank statement of the estate account or as detailed as a formal accounting provided to the surrogate court for approval.

The executor must keep very detailed records. The executor begins distributing assets after beneficiaries have approved the accounting and they have signed a refunding bond, a document that approves the executor’s actions detailed in the accounting and requires the beneficiary to return a portion of the estate should unanticipated tax or other liabilities arise.

Being Proactive

If someone names you or your client as executor while they are still alive, ask them for a copy of the will, trust documents and all other estate documents to retain for your records. It is also important to have a conversation to make sure you understand their wishes and your responsibilities.

Early discussions can save the family from future headaches and heartaches. As an advisor, you can play a crucial role by helping facilitate these conversations with families.

Being an executor is a big undertaking and can be complex. Executors should consider working with the proper professionals to ensure they take all necessary steps and are not in breach of their duties. As their advisor, offering guidance, support and resources to clients can help them navigate the process with confidence and ease. This is another great way to solidify an even stronger relationship with your client.

Assunta (Susie) McLane, CFP, is a managing director and senior wealth advisor with Summit Place Financial Advisors in Summit, N.J.