And if so, do you know…
What it means to be an executor or trustee?
How to do the job right and what deadlines are important or vital (yes you can be sued as either an executor or trustee)?
The risks, dangers, and most common mistakes that you have to avoid?
How much you can be paid and the answers to many more questions?
To answer all these questions, you first have to know what we mean by “executor” or “trustee.” That sounds like it should be easy but in fact, it’s a pretty complicated question. However, we help between forty and sixty executors and trustees at any given time and we’re pretty good at clearing up the confusion and making the job simpler and more understandable.
So, if you want to have more clarity and understanding and you have a few minutes…let’s get started.
An executor is the person you appoint under your will whose job it is to conclude your state (it may also be that you’ve been appointed under the will of a parent or other person).
In some cases, less frequently in Pennsylvania than in “trust biased states” such as Delaware and California (just to name two), you or a relative or friend may have moved assets during your lifetime into one or more revocable and/or irrevocable trusts. In that case, the executor is typically appointed ONLY to move assets into one of those trusts and then the trustee takes over all of the duties of managing and/or distributing the assets.
Exactly how the job is split between executors and trustees is established in the documents and can, depending on the complexity of the estate or trusts’ assets, take anywhere from as little as six months to 15 months or longer. You’ll generally need some advice on this and other issues, so later we can review the best ways to make sure that you’re hiring the right person for the job. And, it’s a big job.
So, if you’ve either appointed an executor or trustee to handle your estate OR you have been appointed by your spouse, parent or other friend or family member, it’s best not to wait until you’re doing the job. For most of us its better to know what to expect and how to get help – the right kind of help.
Again, just to get an overview, here are just a few of the duties of the executor and or trustee following someone’s death:
- To identify the surviving heirs, the location of the wills, trusts, and estate planning documents, as well as the team of advisors such as the estate attorney who prepared the will/trust (and or who you want to help you with the following estate/trust duties), accountant and financial adviser(s),
- Secure the property of the deceased (both real and personal, as well as businesses, and wherever located),
- Verify or obtain insurance coverages sufficient to protect the assets of the estate from fire, loss and liability claims,
- Inventory all assets that are either owned by the estate or that must be reported on the death tax returns (such as life insurance and annuities, jointly owned assets, and retirement assets that are probably distributed by beneficiary designations) and to recover assets that have been landed to others or which have been held by the state as “escheated assets”,
- Establish the value of all of those assets as of the date of death and according to the requirements of both state and federal law (some assets may require an appraisal),
- Determine which debts of the decedent or obligations of the estate are legitimate and to pay them (in a particular order set out by law),
- File an inventory with the court and to file the decedent’s final lifetime income tax returns as well as the death tax returns required by the decedent’s state of residency as well as a federal estate tax return when either required or advisable for tax planning (just as a guideline, make sure to get advice on this issue anytime an estate exceeds a few million dollars as this changes frequently),
- Obtain either probate court approval or a family settlement agreement to protect the executor/trustee from future claims,
- Distribute assets of the estate either outright or IN TRUST, as described in the will,
- File a final status report with the probate court.
If that sounds like a lot, please understand that our typical estate (one where we are helping the trustee and/or executor to avoid problems, meet deadlines, and to do the job in the best possible way, has somewhere between 100 and 700 checklist items (these can vary significantly depending on whether the decedent had one or more businesses, real estate, stocks, bonds or other investments as well as how many beneficiaries are involved).
The bottom line is, that most people will reduce the cost to the estate by personally performing many of these tasks and checklist items. However, in a busy world where the demands of work and family life are already stressful and tiring, and because many of the tasks are highly technical (like preparing and filing the lifetime tax returns and the death tax returns and all of the elections within each return), many executors and trustees seek the advice of professionals.
Over the years (and during the administration of hundreds of trusts and estates ranging from small estates to estates over more than $200,000,000 million dollars) clients have told us that they appreciated both the way in which we communicated and completed such tasks AND how we have helped them to select professionals at the right price.
So, we thought that some discussion of who does what and the respective costs might also be helpful.
Hiring Lawyers, Accountants and Financial Advisers for Executors and Trustees
While this topic is a bit beyond the scope of this article, we have a few resources for you and a few quick rules to consider.
On hiring lawyers, many clients prefer to hire a law firm based on a flat fee rather than on an hourly basis (getting billed for each photocopy, email and letter is annoying…at least so we’re told). And, while the state of Pennsylvania has fee guidelines (which generally a lawyer or firm should not exceed), lawyers can offer fees below that guideline.
That’s especially true of law firms that:
- Have significant experience in trust and estate administration as this means that they probably stay current on legal changes, software, and training for their staff and lawyers,
- Employ a staff of lawyers, paralegals and other support personnel (who can perform tasks for you at a lower cost than lawyers who supervise them),
- Offer flat fee billing as an option or alternative to hourly rates (be sure to ask for the flat fee in writing and in that way, you know in advance what the total cost will be and whether or not it’s worth it,
- Have resources for executors and trustees such as manuals, training, detailed engagement letters that describe exactly who is doing what and by when (as well as the major and important deadlines),
- Allow you to use your own accountants or the deceased’s accountant for preparation of the lifetime returns and, when required, the estate or trust’s income tax returns (this can often be done by accountants at a much lower cost than by the law firm),
- Seek to maintain good communication and relationships so that the estate or trust can be ended by a written family agreement rather than by an expensive court accounting.