11.09.20 | T&E Chat
If you have been named as an executor (or if you are choosing your own executor) it is important to understand the duties and responsibilities of this role. Today’s blog provides a broad overview of the process and responsibilities of estate administration. You should also understand that administering an estate responsibly requires a wide variety of skills including administrative, investment, legal, and accounting expertise. While you may not possess all of these skills, you should know that you may retain outside advisors to help you perform this complex role.
Overview of Executor’s Duties and Stages of Estate Administration
The role of an executor is to wind up the affairs of a decedent, collect the assets belonging to the decedent, satisfy the decedent’s claims, and distribute to the decedent’s beneficiaries the assets remaining after estate settlement. The course of the administration of a decedent’s estate usually passes through a number of distinct stages:
- The executor will file (or more typically, hire counsel to file) the decedent’s last will and testament with the Probate Court in order to obtain court authority for the executor to act.
- The decedent’s assets are collected, with title being taken in the name of the executor. Measures are taken to safeguard and insure the assets from loss, theft or damage.
- The decedent’s assets (g., personal property, works of art, closely-held business interests, real estate, etc.) are valued by qualified appraisers.
- The executor sets up proper bookkeeping and records for the estate and calculates the estate’s cash requirements for taxes, claims, legacies and other administration expenses. The executor may need to sell certain assets to raise the anticipated cash needed to complete the estate administration (which could last several years).
- Any debts of the decedent are paid.
- The estate assets are invested consistent with the timing of the estate’s cash needs and prudent investment standards.
- Title to specifically bequeathed and devised assets (g., jewelry, real estate, etc.) is transferred to the beneficiaries.
- Cash legacies are paid and an interim distribution to residuary beneficiaries may be made.
- The executor and the estate’s advisors will prepare a post-mortem tax plan. The plan will consider tax planning opportunities for the estate and its beneficiaries. For example, the executor will consider the selection of the estate’s fiscal year for income tax purposes, whether a beneficiary’s disclaimer would be advantageous, whether certain expenses should be claimed as an estate tax deduction or an income tax deduction, and whether to use the alternate valuation date (rather than date of death) for estate tax purposes.
- It is the executor’s responsibility to prepare and file (or to hire accountants to prepare and file) a number of tax returns, and to make any required tax payments, including (i) the decedent’s final income tax return, (ii) fiduciary income tax returns on behalf of the estate for each year of the estate administration, (iii) any outstanding gift tax returns, and (iv) Federal and State estate tax returns.
- If any tax return is audited, it is the executor’s responsibility to oversee and manage the audit.
- Upon the conclusion of administration, the executor will render an account of his or her acts and proceedings as executor. This account is a detailed report of the management of the estate, including income and principal receipts and disbursements.
- Finally, the executor will distribute the decedent’s assets according to the terms of the decedent’s Will.
While it is the executor’s duty to fulfill the decedent’s wishes as expressed in the decedent’s Will, there are more personal aspects to a person’s death that do not squarely fall within an executor’s role. For example, who should notify the decedent’s family, friends or business colleagues of the decedent’s death? Who will prepare the decedent’s obituary, organize a family meeting or a memorial service? If a friend or family member has named you as his or her executor, you will want to discuss these personal matters in advance of your friend or family member’s passing.
Please contact me or your Berdon advisor to discuss the responsibilities of an estate executor and how we can provide support to you in fulfilling this important role. You can reach me at AClapp@BerdonLLP.com.
Ada Clapp is a Berdon LLP Senior Principal with more than 25 years of experience, as a trusts and estates attorney, wealth strategist, and family office general counsel, advising high net worth individuals, fiduciaries, and family offices on a wide variety of matters. She has extensive experience advising on sophisticated income, gift and estate tax planning, philanthropy, fiduciary advisory and trust administration, family governance and family office operations.