Trustee Vs. Executor: Who Do You Need For Estate Planning?

Unless you are the villain in a spy thriller, there's unlikely to be any intrigue surrounding the reading of your will. Sure, this is a great cinematic device, but a "surprise" announcement regarding your trustee or executor is neither funny nor mysterious in real life.

The events following your death will most likely be painful and dramatic enough as it is. You can ease some of the misery by planning ahead, and letting your chosen executor and trustee(s) know about their jobs ahead of time.

That said, sometimes the executor or trustee really do find out at the last minute. Whether you're in this situation or planning your own estate, this article is for you. You'll learn about the duties of both positions, and how to survive if you're picked to serve as either.

What's the Difference Between a Trustee vs. Executor For Estate Planning?

The executor represents the dearly departed. This person is tasked with administering and distributing the estate. For an executor to do their job properly, he or she must know the identities of any heir and have a solid comprehension of the will. Their main job is to ensure the deceased's wishes are carried out.

Trustees, on the other hand, have a more narrowly defined role: managing a trust. Not all estates necessarily have trusts, but many do. The first order of business for a trustee is to clarify which assets are held within a trust. Check out our asset checklist for estate planning to get started.

It's rare for all of a person's assets to be placed in a trust, so some may be stated only in the will or other documents.

In estate planning, trusts are used to clear up any possible confusion about where certain possessions go. A person may decide to use a trust to offer guidance and maintain more control over their estate. The trust's "job" is to literally own properties, cars, family heirlooms, or any other assets that the creator decides to place within it. The person who creates the trust provides for its funding. The trustee, who may be an individual or even several people, is tasked with determining how money and other assets flow in and out of the trust.

Trust executor duties include liquidating estates. Trustee duties include managing estates.

The former is usually temporary, while a trustee might serve in that capacity for years. There is rarely compensation for either. Many have tried to monetize this position, and few have succeeded. So if someone asks you to serve in either capacity, there are some things you'll want to be aware of. After all, you want to honor your deceased loved one's wishes, don't you?

If this happens to you, don't be afraid. We've got some tips on how to execute and cope with your new responsibilities.

Get Your Estate Planning Paperwork in Order

Before you do anything, you need to review any and all paperwork relating to the estate. These should cover the basics: funeral arrangements, how the deceased wants the estate managed, and preferences about matters like burial. Assuming the deceased planned ahead, there will also be a specific document cataloging valuables like heirloom necklaces or firearms. In legalese, we call this a "memorandum of personal property."

Next you need to determine the assets, which is usually only a hassle if the document above is incomplete or totally absent. If you're in such an unfortunate situation, you may need to get some help. Death leaves quite the paper trail. You're going to need to hunt down everything from the glaringly obvious like bank accounts and real estate, to the not-so-obvious assets like IRAs/401ks, and perhaps a secret vault or two if you get lucky.

Identify the Heirs

Most of the time, heirs are direct relatives. You can usually expect to see them at the funeral. Even if you don't, your paperwork from above should list any heirs. But you should know ahead of time these matters often get sticky. What if one of the heirs has died themselves? Details like this can easily go unnoticed if the most recent will is, say, ten years old. This is when it becomes your job to make a decision--one that can breed contempt under the best of circumstances. Hey, there's a reason people have tried to figure out how to get paid for theses services.,

Speaking of money, there are almost certainly going to be creditors that need to be paid. You need to guarantee that all creditor claims are taken care of from the estate. If you don't pay up, you may suffer liability. "Liability" is legalese for "an all-around bad time."

Yeah, this is a thankless job.

Deal With the Creditors

It doesn't take long for the vultures to circle. You'll have two kinds of creditors to tango with: secured and unsecured. Worry about secured creditors first. These are folks like conventional lenders. You'll want to make sure these types of creditors are notified of the deceased's passing right away. Make payments immediately, as soon as reasonably possible. This is to avoid that all-around-bad-time mentioned above.

Unsecured creditors, on the other hand, are a totally different ballgame. They have to actually come after you in the form of a claim. Unsecured creditors can include everyone from the neighborhood bookie to the (much more likely) credit card companies. Fortunately, credit card companies are fairly realistic about the fact that they're unlikely to be paid off in full. So bust out your haggling skills. There is some wiggle room about the total bill, but don't expect the company to tell you that.
While credit card companies won't break your kneecaps, they can make probate court an even bigger pain in the ass than it already is. Both types of creditors can demand and collect legal fees in a court setting. If the estate ends up in probate court, you will be obligated to alert all creditors of this fact.

Still with me? At this point, nobody will blame you for cursing whoever named you executor.

To recap: Don't mess around with secured creditors. It's a good idea to delay making unsecured creditor payments, because if a claim is never made you won't be on the hook. There's also a clock on how long these types of creditors have to make a claim at all.There’s a good chance this one is going to take care of itself by dissolving into the ether of banking bureaucracy. Now it's time for the fun part: probate court.

Probate Court For Estate Planning

The estate documents should outline exactly how the estate will be administered. Sometimes, the court has to approve certain aspects of this, such as when the family home is transferred to an heir. This is particularly common if the estate is based solely on a will (all the more reason we should all be thorough in our estate planning.)

If the estate you're dealing with is more "Jerry Springer" than "cinematic drama," you may find issues with the identities of the heirs. We're kidding. This is actually more common than most of us would think. Fortunately, it's on the court to figure this out. You've got enough on your plate. Let the judge interpret the law, or anything ambiguous for that matter. Even if you have legal chops of your own, you'll likely need a greenlight from the court to interpret much of anything.

We're approaching home base: stay with me, folks.

Income Tax Returns

That's right, you get to deal with both of life's inevitabilities in one experience: death and taxes. You'll have to file the deceased's final tax return. You'll want to be certain that you label the returns with the word "DECEASED.

As your last task, you may have to also file an estate return. This is legally required if the estate earns over $600.00 in gross income.

Final Legal Estate Planning Tips

Don't go it alone if you don't have to. We're sure you're smart, but it's unlikely that you are both an attorney and a CPA. Enlist help from the pros. The estate will assume their costs, particularly if it is a large or complex one. If you spend any of your own money in the course of your duties, the estate should reimburse you.

Be aware that this is a sensitive time for the relatives and other loved ones.The role can be as emotionally draining as it is time-consuming. But don't forget that you have a job to do, and you must do with your head and not with your heart.

If you've been tapped to act as a trustee or executor, or if you need estate planning services yourself (if only to spare your loved ones from some of this rigmarole), get help from experts who know all types of estate planning and administration issues, and who can help in a compassionate manner. Don't let your death become a big traumatic affair played out on the probate court stage.