The Duties of an Estate Executor

One of the important provisions of a will is naming an executor or personal representative of the estate.

The executor is a person or a bank selected for a position of special faith, trust and reliance. When an individual is designated executor, it is important that she and the testator both understand the requirements of the job.

During the administration of the estate, the executor will have possession and control of all the assets of the estate, with the primary duty of protecting and preserving them and investing the property in the estate in a prudent and cautious manner. Asset management includes, to the extent that the estate has excess cash, investment of the assets, whether in bank accounts, government bonds or other prudent forms of investment.

A further and more important consideration is liquidity management. If cash available to the estate is not sufficient, the personal representative is required to sell assets or borrow money on behalf of the estate to meet cash requirements as they arise. These cash requirements include payment of creditors, expenses of administration and taxes.

If these duties are not properly or competently performed, the executor may have to answer to anyone who may have been harmed as a result.

Probate or administration of the estate commences with filing the will for probate and preparation and filing of a petition for probate. After the proper documents have been filed, the judge will issue letters of administration, which are evidence of the legal authority of the executor.

The first stage of administration, after the letters are issued, is giving notice to those involved or interested in the estate. Beneficiaries will receive this required notice by certified mail; creditors by publishing a legal notice in the newspaper.

The next stage of administration is identifying, collecting, inventorying, valuing, securing and investing assets of the estate. Adequate insurance coverage of valuable property should be obtained. An inventory of all assets and their value must be filed with the court, and if the estate is of a size sufficient to require filing an estate tax return, similar information must be provided for the local and state governments and the Internal Revenue Service. The estate attorney will assist in preparing the inventory list, obtaining the asset values and preparing the necessary documents that need to be filed.

The executor must promptly arrange for and make payment of all valid claims to avoid interest expense. Any claims not filed during the period, which the state statute delineates, will not be legal obligations of the estate, and, in most instances, cannot be legally paid.

Another stage in the estate proceedings is the determination of various tax returns that the law requires be filed for the estate. The most common tax returns that will need to be filed are income tax returns for the decedent that may not have been previously filed; income tax returns for the estate if necessary; and an estate tax return, required by law to be filed if the total taxable estate exceeds a certain valuation, or to clear the title to any real estate by establishing the fact that there is actually no state or federal death tax due.

After all expenses have been paid, the final steps in the Probate Court are distribution of the estate to the beneficiaries, and the release of the executor by a final order of discharge from the Probate Court.

To close the estate after distribution of the assets to the beneficiaries, it is necessary to report to the court on all legally significant activities that have occurred in the estate, furnish evidence that creditors have been paid, certain taxes have been paid, and the remaining property has been distributed in proper shares to the persons entitled to that property. When this evidence has been presented in proper form -- the lawyer's responsibility -- the judge will sign an order discharging the executor from any obligations regarding the probate.

The final responsibility of the executor is filing any final income tax returns that the estate is obligated to file for the year in which final settlement occurs. When the estate is closed, the estate may have had taxable income for that year or otherwise be responsible for the payment of taxes. Sufficient funds must be retained by the executor to pay any taxes due.

In accepting the office and trust as an executor or personal representative, an individual agrees to be personally responsible for many. W.C. Fields told a story about a poor man who was tarred, feathered and being ridden out of town on a rail who was heard to say, "Except for the honor, I'd just as soon walk."

The executor of a will has important responsibilities, and many times they are best handled by a friend, relative or other individual who has good sense and who will retain competent professional advice. However, in many other instances, a bank or trust company is best equipped to deal with the complex issues described above, and the individual should forego the honor.

Attorney Alan S. Novick is a wills, trusts and estates lawyer.

© 2004 Scripps Howard News Service. All Rights Reserve