The person who died, also known as a decedent, will typically name their executors in their wills, and the judge will almost always appoint these individuals unless beneficiaries object. For example, someone may designate a sibling to oversee their will in case they die—in that case, the sibling becomes the executor. If no executor was named, a judge will usually appoint a close family member to oversee the estate. Many states have statutes citing which relatives qualify and in what order of preference. In California, for instance, surviving spouses or domestic partners are the first preference for becoming the executor, followed by children and grandchildren. The judge will grant the executor authorization to act on behalf of the estate through “letters testamentary” or “letters of administration.” Executors provide these documents to entities such as insurance companies or financial institutions to confirm that they have the legal authority to act on behalf of the estate.
How Being an Executor of a Will Works
An executor’s work takes place during probate, the legal process of making sure the decedent’s debts and liabilities are paid from the cash and assets left behind then transferring the remaining assets to beneficiaries. Probate can last for months or even years in some cases if an estate is extremely complicated. The executor is responsible for managing the estate throughout the entire process. This typically involves seeking approval from the probate court before taking some actions, and it can involve numerous court filings and some court appearances. An executor’s duties typically occur in mostly chronological order. Here’s a rough outline of what an executor will do during probate.
Submitting the Will
The executor’s first order of business is to submit the decedent’s last will and testament to the probate court for review and acceptance. This officially begins the process of opening the probate estate. The executor must then attend a hearing where a judge will determine if the will is valid and meets the letter of the law in that state. It can contain no procedural errors. This hearing also provides an opening in most states for individuals who have an interest in the estate to contest the will. They can then open a separate lawsuit to convince the court that the will is invalid and that its terms should not be honored.
Gathering Assets
The executor must first identify all the decedent’s assets and gather them for safekeeping if necessary. Safekeeping can be required if the decedent left a valuable piece of jewelry or another asset that could be targeted by thieves. Part of this process can be a literal hunt for assets, such as tracking down financial accounts, insurance policies, or safe deposit boxes. The executor will typically go through the deceased’s personal papers and interview family members to track down all accounts that might exist. Some or all of these assets might be mentioned in the decedent’s will, but the executor can’t simply assume that there are no other assets just because they’re not bequeathed to anyone. The decedent might have acquired them after making the will, or they might have overlooked them while writing the will. The executor must then maintain the assets that need upkeep. This can involve making sure that insurance policies don’t lapse and keeping up with mortgages, car loans, and any other installment loans. The estate’s money is used for this purpose. Survivors don’t have to pay out-of-pocket. The executor will set up an estate bank account. The decedent’s personal bank accounts, along with any other cash assets, are then transferred into this account so the estate can operate.
Making Notifications of the Death
The executor will make all necessary notifications of the death, including to beneficiaries named in the will if they’re not already aware. This might or might not be a formal process. Services, subscriptions, and benefits the decedent was receiving must be contacted and cut off as well. Credit cards should be officially canceled, and the Social Security Administration must be notified if the decedent was receiving benefits. The decedent’s creditors must be notified because the estate is responsible for paying all final bills and debts. The executor must first identify the deceased’s creditors, often through the same methods used to pinpoint the assets. Once identified, the executor sends creditors a notice that the decedent has died, and most states also require running a newspaper notice to ensure that unknown creditors are also alerted. Creditors can then make claims to the estate for payment. The executor decides if the claims are valid and if so, those debts are paid from estate funds. The executor can also decline to pay certain debts if they don’t appear to be legitimate. The rejected creditor can then typically petition the court to override the executor’s decision. This usually requires that the executor appears in court to defend the estate’s position, often with the assistance of an attorney who’s paid for by the estate.
Settling Taxes
The executor is also responsible for having all assets valued for tax purposes. This determines whether any estate taxes are due. An executor can typically choose between valuing these assets as they were on the date of death, or they can use an alternate valuation that occurs within the appropriate timeframe set by local law. If assets are sold or passed on to heirs before they have been valued, they must be valued on the date of distribution. At the state level, an estate tax, inheritance tax, or both may further complicate these tax issues. States typically have a much lower threshold for capturing estate taxes—as low as $1 million in Oregon and Massachusetts. Once they understand the taxes due, the executor must prepare and file a federal or state estate tax return (or possibly both). The executor might also have to prepare and file an estate income tax return if any assets earn income during the probate period. Finally, they must prepare and file a personal income tax return for the decedent’s final year of life.
Closing the Estate
As the last step, the executor will submit an accounting to the court detailing all actions and transactions made on behalf of the estate. The judge will then grant the executor authority to distribute the estate’s remaining funds and property to the beneficiaries named in the decedent’s will, assuming the accounting is approved.
Executor Pay
An executor is usually entitled to payment, but the amount depends on the state in which the decedent has died and where the will is being probated. Many people include instructions for their executor’s compensation in their wills. Courts typically honor these provisions if they don’t fly in the face of state law, and state law takes over if the will doesn’t specify a payment. The executor’s payment comes out of the estate, decreasing the amount that’s left to be transferred to beneficiaries. Payments for services rendered by the executor represent taxable income to that individual, whereas cash inheritances generally aren’t taxable at the federal level, so a tax-savvy executor may prefer an inheritance over executor pay.
