Episode 31: The Roles and Responsibilities of an Executor

Isaac Wright: Hey, welcome back to Wright Money Tips. I know we had a great conversation last month about inflation, and of course we’ve all been feeling the effects of rising costs of goods and services. But we wanted to change gears for this month and really discuss something that a lot of us have had to deal with.
And all of us here at some point in our life, will deal with losing a loved one. The executor of that loved one’s estate and there’s a lot of uncertainty and sometimes blurriness around what exactly are you required to do if you become the executor, or you are deemed the executor of an estate.
So, we’re going to have a conversation around that today and with me here is Aaron Reed. Aaron Reed is one of our lead advisors here at Financial Dynamics. We get this question quite often, frankly, because people are in a position where they don’t sometimes realize the amount of work that could be involved in being an executor.
But, you know, Aaron, maybe the first thing we should ask or talk about a little bit today is what exactly is an executor, if you’re an executor to the person’s estate, or to their will.
Aaron Reed: Right and thanks for having me, Isaac. So, an executor of the estate is going to be responsible for distributing any assets, paying any taxes that may be due, filing all this with the court. And what some people may not know if they haven’t been in that situation is that an executor is actually held to a fiduciary standard. They have to act as a fiduciary when they’re handling these things.
Isaac Wright: So, as I’m sitting here, when you say that, and I want to make this clear to all of us today, that if you are set up as an executor, you’re going to be held to a standard of the highest and best, let’s call it decision making when it comes to managing the estate.
And if you don’t feel that you have that kind of qualification, if you feel like you can’t manage somebody’s estate correctly, we strongly advise you to hire a professional or somebody that will assist you. Whether it’s an accountant, a financial professional, or a combination of the two, and sometimes even an attorney, you may wind up needing someone depending upon how complex the estate is.
So, number one is this, again when you hear the word executor, don’t freeze up. If you are named an executor in a Will, most people are aware of the fact that they’re an executor in a Will, not everyone. I want say that not everybody knows and sometimes they’re thrown off a little bit, offhandedly. But you know, with the fact that they have to act in the best interest of the deceased, the family, and the beneficiaries, if you will, let’s break down some things that come with being an executor.
So, I wrote down a few things here because this could be a laundry list, we could talk about this topic for two hours. We’ve talked about being a fiduciary and working with a professional to make sure you don’t make any mistakes. The last thing is you don’t want to be sued or you don’t want to have somebody come back after you because you’ve made a mistake with settling the estate.
But number two is, now that that person is deceased, let’s talk a little bit about some of the steps that they have to take as being an executor. Sure.
Aaron Reed: One of the first steps is going be filing the Will with the court. You’re going to want to create an asset list, an inventory, so you know of all assets that there are and that you’re responsible for. You’ll have to pay any debts or creditors that that may be owed. Of course, you’re going to need death certificates. And, and this may kind of sound like a no brainer, but you actually have to notify every financial institution that the deceased had an account with. If they had six, seven different accounts with banks, any financial institutions, you have to notify all of them within a reasonable time frame.
Isaac Wright: So, I mean, right out of the gate, you have a lot of steps that need to be checked off just to be able to let’s say start the process correctly. And one thing that Aaron and I run across here at the office is that some assets go through probate and some assets don’t go through probate. In other words, if they are designated with the proper beneficiary titles, money may go directly to the beneficiaries that are attached to each account. And sometimes, and I think this is important to say as an executor, sometimes they don’t know that rule. So, they’re thinking everything is following through, into the Will, where a lot of times some of the accounts don’t, and again, you just want to make sure that administratively, you’re checking your boxes and knowing that type of information is really important.
This gets back to the why. We have a lot of people and of course, over 20 plus years, I hate to admit this, but we’ve had some deaths, but we’ve helped families make sure that in conjunction with their financial affairs, that they’re making some of these decisions appropriately and their understanding about how to be able to mark some of this stuff off.
Aaron Reed: You know, it’s really unfortunate when I see, after someone is deceased and I’m helping someone put everything together, and then you see these assets that are going to have to go through probate now, where it would’ve been very simple to avoid probate with those particular assets: non-qualified accounts, property, and things like that. If you have them, you know, like you said, in with the right beneficiaries, the right designations, then you can avoid a lot of that probate on the front end, pretty easily.
Isaac Wright: Well, I think for all of you listening, again, this is also something where if you are trying to establish your own affairs for the person that’s going to take care of things when you do pass away, titling assets correctly and beneficiary designations is equally as important.
But again, just focusing on the fact that if you’re an executor to somebody’s estate, that these are going to be things that you’re going to have to pay attention to as well. I want to say this, and sometimes I would almost say some of this may come to the point where you want to have a conversation with an attorney, but the executor absolutely deserves to be paid. Now, whether or not they take payment for being the executor. For example, if the executor’s already a large beneficiary, they may not want to get paid because that may be taxable income versus if they just outright take it through the process of closing the estate, it could be taxed differently. I don’t want to say better or worse. I just want to say differently, that could make a big difference. But, you know, I think that’s also a big deal and some of the things that we’ve seen.
Aaron Reed: It’s a lot of work being the executor and it’s going to eat up a lot of somebody’s time.
Isaac Wright: It doesn’t go away in a couple of weeks.
Aaron Reed: A lot of times, we see two, three, four siblings, and one of them is the executor. And that executor may think that maybe I shouldn’t get paid or maybe one of the siblings think that, but you know, it’s a lot to go through.
And you mentioned the attorney. I think it’s a really great idea for someone to, and this may also sound like a no brainer, but to have their advisor and their attorney know who each other are, talk to each other before it’s too late. Make sure everybody’s on the same page and make sure all this stuff is just, you know, the I’s are dotted and the T’s are crossed, so to speak.
Isaac Wright: Yeah, because it’s easy for somebody to miscommunicate and sometimes even the executor, and I will say this based on what Aaron just said, when you have multiple children involved and one of the children is an executor, of course you understand family dynamics, maybe not always the most positive.
You know, listen, we try to keep it a little lighter because I think reality is this, all of us want to make sure that if we are deemed the responsible party to somebody’s estate, that we do the right thing. Some of the tidbits and some of the points we’ve covered, again, is not designed to give you an end all be all, but we wanted to lead into what an executor’s role is. And if you are somebody that’s deemed, and you go into the court and become the executor of somebody’s estate through the will, or what have you, that you just have at least a beginning point. If you have any questions around something like this, that we’ve covered today, please reach out to us here at Financial Dynamics.
We will most likely be able to not only help you directly, but also can involve other professionals if needed, to make sure that you’re accomplishing the goals. And the goal is to obviously, be the executor to the point where you can close out the estate effectively and do that without causing yourself any concerns.
Aaron Reed: And you want to do it in the most tax efficient way possible.
Isaac Wright: Yeah. So, we want to thank you for tuning in and we’ll be right back with you here very soon here at Wright Money Tips. Take care.
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Advisory services offered through J.W. Cole Advisors, Inc. (“JWCA”). Financial Dynamics & Associates, Inc. and JWCA are unaffiliated entities.