Trustee Vs. Executor: Who do you Need?

Unless you are the villain in a in a horror movie, you probably don’t feel the need to save any surprises for the reading of your will. While the unexpected announcement of an executor or trustee can make for wonderful drama in a film, drama surrounding your finances after your death isn’t as funny or mysterious in real life. They’re just painful. So in addition to clarifying the terms of your will, make sure you actually inform your executor or trustee that they have the job and what their responsibilities will be.

An executor is the personal representative of the deceased. They have the authority to administer and distribute the estate. An executor needs to understand the terms of the will and who the heirs are.

A Trustee is appointed to overlook a trust. So the first step is to make it clear which assets are in the trust and which assets are not. In general, trusts are used to avoid probate and to provide more direction and control over certain aspects of the estate. If the trust is properly funded, it owns the assets specified by the person who established it. The trustee is the person, or group of people, who decide how the funds in the trust will be used.

Executors liquidate estates. Trustees manage them. The former is usually temporary, while a trustee might serve in that capacity for years. There is rarely compensation for either. If there were money to be made, people would be making money at it. Nonetheless, if you get asked to do this, it is important that you do it right. Here is a quick survival guide.

Before you do anything, you need to read the estate documents. This will take care of all the big questions. The management and distribution of the estate as well as funeral and burial instructions will be found here.

Hopefully there will be a memorandum of personal property for valuable items like jewelry or firearms.

Next you need to Determine the Assets, which can be a big chore if the deceased hasn’t left a complete list.

When you’ve pulled together all of the bank accounts, investments, real estate, retirement plans, insurance policies and secret treasures from ancient antiquity, you need to identify the heirs. This part is usually easy as the heirs are most often related to the deceased, or at the very least, present at the funeral.

In any case, estate documents will list the heirs, but it can get sticky. What if one of the heirs is not longer living, for example? This is the sort of detail that might get overlooked. This is where you will have to make a judgment that will definitely incur the wrath of the family and ruin Thanksgiving for years to come.

There are almost certainly going to be creditors that need to be paid. You need to guarantee that all creditor clams are paid from the estate. Failure to do so could lead to liability.

Yeah, this is a thankless job.

In general, secured creditors such as mortgage lenders will be paid upon the sale of the property, unless there is cash available and the estate intends to hold the assets.

Inform the secured creditors of the death right away. Make payments immediately where possible to avoid penalties.

When you speak with unsecured creditors, don’t hesitate to negotiate. Credit Card companies don’t expect to be paid in full. You should be able to bring those prices down. Keep in mind that they do have legal recourse against the estate, but they face significant legal fees in probate court to collect on the debt and can usually be bought off for about a third of what is owed.

If the estate must be probated, which is often the case where there is only a will, then as executor you will need to go through your list of creditors and inform them of the action and of the estate assets.

At this point, you will be cursing whoever named you executor.

Unsecured creditors have to make a claim against the estate within a specified time frame. Most unsecured creditors won’t follow up with a claim even after they are given notice of the estate assets.

So hold off on unsecure creditors until claims are made. There’s a good chance this one is going to take care of itself by dissolving into the ether of banking bureaucracy.

The estate documents should outline the process for estate administration. You may need court approval for parts of this, such as the transfer of real estate assets.

If the identity of any of the heirs is in question, you may need approval from the court before you distribute proceeds from the estate.

Anything confusing or contradictory isn’t for you to interpret. Get court approval before “interpreting” a will if you want to avoid claims against yourself or the estate.

As your final Honor as executor or trustee you will need to handle the individual and estate income tax returns. Make sure that the tax returns are marked DECEASED, or they may come back to haunt you. You must file an estate return if the estate receives more the $600.00 in gross income.

Being an executor or trustee is a big job. Get help if you need it. Lawyers and accountants can ease the stress and the estate can pay their fees. Your out of pocket expenses should also be reimbursed.

Keep in mind this is a sensitive time for the family. If you are acting as executor or trustee, you are probably close to the family and lending your emotional support as well as your financial acumen. Just be certain than when you execute your legal duties, you are doing so with your head and not with your heart.

This has been another installment of Money Matters.

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