It is critical to understand the executor and trustee obligations when it comes to estate planning. On our estate planning series, Amanda Gordon discussed
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What exactly is a trustee? What exactly is an executor?
You may be nominated Executor of the Estate or Trustee of a Trust in the Will. The Executor is in charge of the Estate’s affairs, including probate proceedings and the filing of the decedent’s final tax returns. (the decedent is the person who died). The Trustee is the legal owner of the Trust’s assets and is in charge of administering and distributing them in accordance with the rules of the Trust. Because both professions demand legal tasks that must be performed properly, you may consider hiring an expert to assist you in understanding your state legislation and carrying out your duties. If you do not believe you are capable of performing these duties, you should stand aside and let someone else take over. While this is definitely a sad time for you, it is critical that you understand the responsibilities of each job, Executor or Trustee, in order to make the process easier for everyone concerned.
You may have been designated Executor of the Will by a loved one. Understanding the responsibilities of an Executor can help you decide if you are ready to serve as one. As the Executor, your primary responsibility is to represent the Estate in legal proceedings. Following that, you must handle the Estate’s costs and affairs, which may involve paying any obligations, expenses, or taxes, arranging for any liquidity or financial requirements, and having all of the decedent’s assets evaluated. You may be required to file a probate inventory, which entails locating everything your loved one possessed and submitting a “inventory” list to the probate court. In addition to these duties, you must publish a public notice of probate, most likely in a newspaper, and send a statutory notice to beneficiaries informing them of their interest in the Estate. You must also submit a final income tax return for your loved one, as well as one for the Estate if it has assets, earned interest, or dividends.
Once the Estate is in order, you will distribute it to the Estate’s heirs or beneficiaries. After the time limit for creditors to file claims against the Estate has expired, you will distribute all of the Estate’s remaining assets in accordance with the Will and/or state law. Finally, you will submit a final account with the probate court, detailing every revenue received by the Estate since the date of your loved one’s death, as well as all costs and payouts. You will be able to disperse the remaining assets in the closing reserve and finish your job after the probate court approves the final account. If you are unable to perform these tasks, you may resign as Executor, and either the Will or the court will appoint someone in your place.
Duties of a Trustee
If you are appointed as the Trustee of a living trust for a loved one, your obligations differ from those of the Executor. If you are not both the Executor of the Estate and the Trustee, you should keep in regular contact with the Executor during the first several months. This is due to the Executor’s authority to transfer assets from the Estate that are not held in the Trust to the Trust, where they become your responsibility.
Your first duty will be to form the Trust. This may need gathering information about the Trust, such as sending letters and making phone calls, submitting tax reports, and transferring ownership of any real estate, among other things. If the Trust directs that you deliver Trust property to beneficiaries promptly, you may be able to perform your tasks quickly. However, if you are in charge of managing an ongoing Trust, which is often for small children, your obligations might last for years.
Specifically, establishing the Trust will need obtaining death certificates, locating and filing the Will with the proper probate court if the Executor has not done so, and notifying the Social Security Administration and the state’s Department of Health about the death of your loved one. You must inventory the Trust’s assets, safeguard its property, identify the Trust’s beneficiaries, and inform them of their status. To keep track of the Trust’s assets, appraise them if required, and pay any obligations, you must transfer the Trust property into your name as the Trustee, examine the Trust documents, and establish a record-keeping system.
Many of these responsibilities are simple, but they rely on your ability to organize and keep track of what you’re doing with Trust property, what the Trust owns, and what the Trust owes. You will need to monitor your loved one’s incoming mail and pay bills when they come up, which may include funeral and administrative expenditures, as your last duties. (including lawyers, employees, and tax preparers).
While mourning the death of a loved one, serving as the Executor of the Estate, Trustee of the Trust, or both may seem like a lot to manage.