We’re speaking with attorney Mary Randolph, author of ‘The Executor’s Guide: Settling a Loved One’s Estate or Trust.’ Mary, perhaps you can start out by telling us some of the major tasks that an executor is required to do.
MARY RANDOLPH: Well, you’re going to have to take care of a lot of daily, everyday details. Things like having mail forwarded, things like notifying people about the death - the credit card companies, the post office, the IRS – there’s a lot of details to handle. But the major duties of an executor are to take care of the property, to find the will, and to pay debts. And eventually, to pass out what’s left, after the debts and taxes are paid, to the people who inherit it. So really for most people it’s fairly straightforward, because there are probably not too many people inheriting, and they’re going to be family members, and the assets won’t be particularly complicated to gather; you’ll know what’s there. So it’s not too complicated, but it can be tedious, and it can take awhile.
NOLO: The executor is compensated for the task performed for the estate, but in your book you say that there can be practical reasons for declining these fees. Can you explain that?
MARY RANDOLPH: It really depends on the family situation. A lot of people who are executors are close family members, and they’re going to inherit maybe all of the property anyway. If you inherit property, you don’t have to pay taxes on it (it’s like any other gift, you don’t pay taxes on it). If you are paid compensation, that’s taxable income. So if you’re going to inherit the money anyway, there’s no point in taking it as compensation.
NOLO: One thing I like about your guide that’s very helpful is that you divide the book up into things that the executor has to do during the first week, and things that the executor has to do during the first month. What was your thinking when you set it up this way?
MARY RANDOLPH: I guess I was trying to put myself in the position of someone who’s faced with this job, and you just need to know where to start. And as important as knowing what to do right away is knowing what you can put off. You don’t have to worry about taxes in the first week; there are other immediate details and emotional issues to deal with. You don’t have to worry about long-term finances then. So, just to reassure people that they don’t have to do everything at once. You can break it down and take it a step at a time.
NOLO: Executors usually know ahead of time that they’ve been chosen for this task. What are some of the things you can do to prepare for the inevitable?
MARY RANDOLPH: That’s a really good question, because there’s a lot you can do beforehand, and there’s very little you can do after a death to make it easier. But beforehand, they’re really fairly simple steps. You need to have the person either get organized, or at least give you enough information so that you know what’s going on. You just need an idea of what assets the person owns. For most people, that’s pretty straightforward – they might have some bank accounts, or investments, maybe real estate, or cars. But if they have something that’s unusual, they’ve got a collection that would have to be valued by an expert, and we’ll find out who would be a good person to value that later on. Or if they have large assets, artwork, say, maybe they’d want to sell it ahead of time; maybe they’d want to make arrangements to sell it - something that would require maybe expert help after the death. Things like insurance policies, find out about those… a lot of things get stuck in bottom drawers and file cabinets, and you don’t know where to look. At least know where to look for the important documents, like wills, trusts, insurance policies, title documents, real estate deeds…
NOLO: What about information that’s stored digitally? What if you find a digital will, for example?
MARY RANDOLPH: A digital will isn’t going to be valid. You still have to have a printed out will that’s signed. One of the key things to find out about is passwords. What happens if someone’s information is locked up, about a bank account, or a mortgage and you can’t get to it because you don’t have a password? And you’re right, many more people these days pay bills online, they manage their accounts online, their mortgages – you need to know what automatic withdrawals are going to be made that have been set up online, for example, that you’re not going to know about unless you find out ahead of time. So it’s just finding that crucial information, and again, for most people, it’s not that complicated.
NOLO: I know from personal experience that you need multiple copies of the death certificate. In my case, I was told to get at least ten. How many copies should you get, and why do you need them?
MARY RANDOLPH: You are going to need about ten. Usually people need ten or a dozen copies. They’re called a certified copy, so you can’t just make a Xerox of more of them later. So what you want to do is get them all at once, at the beginning. You’re going to need them because they’re official proof of the death. So, for example, if you want to claim life insurance policy proceeds, you need official proof of the death, and that’s what a certified death certificate does for you. If you have a joint bank account, same thing – you’re going to need it. Stocks, whatever it is… a lot of assets pass outside a will, so you’re not going through the court; you don’t have a court process to show that you’re the valid new owner. You have to prove it yourself. The way you do that usually is with a certified death certificate.
NOLO: What happens if you find more than one will for the deceased? Is the newest one the winner?
MARY RANDOLPH: Usually it is the winner. In most wills, it’s kind of a boiler-plate phrase at the beginning, it will say, “I hereby revoke all previous wills.” That’s sort of a standard part of most wills. Because most people do make more than one will; they revoke the earlier ones as their family situation changes, or the property they own changes. So it is usually the most recent one.
NOLO: Mary, what happens if you can’t find a will?
MARY RANDOLPH: Well, there may not be a will - a lot of people die without a will - or maybe you just can’t find it. You have to look, and, depending on the person, you may want to look in different places. Some people hide things, sometimes older people, when they get a little confused perhaps, sometimes they hide things in odd places. You might want to look around before you toss anything. Again, hopefully you will have found out before the death where the will would be kept.
NOLO: What happens if the deceased owned a business? Does the executor have to get involved in the day-to-day running of it, or does the executor automatically shut it down?
MARY RANDOLPH: That’s something, again, that you should have discussed beforehand, to make a plan for. That’s a really good example of something you don’t want to have to start wading into without any preparation. Usually, the executor’s role is to sell a business; usually the executor doesn’t have to manage a business. But if the person wanted the business to go on, then you should have had some kind of plan, or he or she should have had some kind of plan, to continue it, because obviously it can’t go on without a rudder. A lot of businesses are small, service businesses, that don’t survive the owner; it’s not practical. Other businesses, usually larger, might be incorporated, or they might be Limited Liability Companies, where there’s more of a mechanism in place to transfer ownership.
NOLO: How do you know when to bring in an attorney for advice?
MARY RANDOLPH: Well, I think it’s like when you might need an attorney, or a CPA, or a tax preparer in your own life. So you might either want to turn the whole job over to an expert, or you might want to go in and ask some specific questions, about a particular asset, or about a particular tax treatment or something.
NOLO: Are the people who are inheriting money going to be unhappy that you’re paying for an attorney or a CPA, since those payments come out of the estate?
MARY RANDOLPH: Well, sometimes beneficiaries are unhappy about all kinds of things, but it’s a perfectly reasonable expense. Most wills authorize it specifically; they’ll say that the executor has the right to pay experts. But even if the will doesn’t say it, you have that right, and really, it’s all for the beneficiaries’ good, because you want to close things up, and you want to make sure it’s done right. You’re not going to be able to distribute money until you’ve paid taxes, so the beneficiaries aren’t going to get their share either, until things have gotten paid.
NOLO: Your book also provides guidance for trustees who are handling simple living trusts, AB trusts, and children’s trusts. A lot of people have a preconception that managing a trust is a lot more complicated, or technical, than acting as an executor of an estate. Is that true?
MARY RANDOLPH: It really depends on the kind of trust. An AB trust is a great example of something where you’re definitely going to need expert help. It’s really got long-term tax ramifications, how you divide up the trust into the A and the B at someone’s death. Now a simple probate avoidance living trust is not such a big deal at all. It’s not an ongoing trust; you wrap it up when the person dies. It’s really very much like a will, and that shouldn’t require any expert help. So it really depends on the situation. If you’re a trustee of a children’s trust that’s supposed to last for years, again, you’ll probably certainly want some help. Now the book talks about your responsibilities, and that will help you decide when you need help with investment, or management, or distribution.
NOLO: Mary, could you distinguish between an executor, an administrator, and a successor trustee?
MARY RANDOLPH: An executor is a person named in a will. Most wills say, “I name my spouse, (for example) my grown child, as executor.” If you die without a will, and there is no executor named, the court will appoint someone, and in most states, that’s called an administrator, rather than an executor. Now a lot of states are switching terminology, and they call either person a “personal representative.” So you may run across any of those terms. A successor trustee is someone who takes over a trustee after the person who set up the trust dies. So if there’s a simple living trust, for example, that contains the person’s house, they’re the trustee while they’re alive, and then after their death the successor trustee comes in, so it’s analogous to an executor.
NOLO: Filing income taxes is already tough enough when you have to do your own, but it seems especially tricky when you’re handling an estate. Is there a practical workaround, or do you just have to dive right in and do the taxes?
MARY RANDOLPH: I’m afraid you’re stuck with diving in and doing the taxes. But this is an area where you may want to get help, and you can pay for that help, for expert help, out of estate assets. That’s perfectly reasonable to pay a tax preparer from estate funds; you don’t have to pay it out of your own pocket.
For more on this subject, check out ‘The Executor’s Guide: Settling a Loved One’s Estate or Trust.’