For many people, probate avoidance in estate planning may impose unnecessary complications – and upfront costs – when a simple will would be adequate and preferable. When preparing an estate plan anchored to a will with the expectation of probate, appointing an executor (and a successor!) is crucial to ensuring the faithful administration of the estate. Executors are tasked with many duties and must make many difficult decisions, sometimes even before they qualify.
Perhaps the most paramount responsibility is an executor’s duty to comport themselves as the representative of the estate at all times. They must act in accordance with the will, weigh the interests of the beneficiaries, and address and pay the debts of the estate – and they cannot be influenced by their own desires or interests in doing any of the foregoing. It’s crucial to understand the role of executor to ensure that whomever you nominate will be a sound choice. Similarly, for those nominated, it is imperative to operate correctly, for otherwise they may be personally liable for the damage done to the estate.
Executor’s Duties and Responsibilities
Generally speaking, the executor is in charge of beginning the probate process, as may be necessary based on the assets of the estate and other considerations. Once qualified, they have obligations to the Court, the estate, and the beneficiaries. They marshall all assets of the estate and ensure that property and/or money is paid or distributed to the correct parties.
Legal Obligations of an Executor
A named executor does not have to serve, as a nomination is not a requirement. However, once an executor elects to qualify, and does so with the Clerk of the Circuit Court in the county in which the decedent passed, a series of legal obligations arise. While different factors or rules may preclude or alter these requirements (i.e. a Small Estate Affidavit for estates under $50,000), the following steps outline the traditional path for executors in the administration of an estate:
- After qualification, an executor must notify parties that they have so qualified. See form CC-1616. This must occur within one month of qualification.
- Upon providing the notice to heirs above, the executor must provide a sworn affidavit of doing so to the Clerk. See form CC-1617.
- Within four months, an initial inventory of the assets at the time of death of the decedent must be provided to the Commissioner of Accounts. See form CC-1670.
- The executor must identify creditors and work to address or pay outstanding debts owed.
- No earlier than six months and no later than 12 months, the executor must provide an accounting to the Commissioner of Accounts for review.
- An accounting must then be provided annually until all assets are distributed and the estate is ready to be closed. At such time, the executor must provide a proposed Final Accounting to the Commissioner for review and approval before closing the estate formally and legally.
Administering and Managing the Deceased Assets and Debts
Estate administration can be forthright and simple, but it can also be tedious, contentious, and exhausting. Navigating events and personalities that arise during estate administration may require legal representation. In all instances, an executor needs to do the following to insulate themselves and faithfully administer their estate:
- Get a new Tax ID number for the estate: The executor uses this number to establish a bank account that pays bills and/or receives incoming funds for said estate. This should be the only account receiving funds for the estate or making payments on its behalf.
- While in the process of collecting, selling, and/or distributing property and money, the executor must proactively protect and maintain that property.
- The executor investigates credit accounts, bills, and outstanding debts. It is often prudent to conduct a debts and demands hearing to uncover creditors and protect the executor. However, much of this process depends on the size of the estate and the outstanding amounts owed or recurring bills.
- At the appropriate time and in the appropriate form, an executor must make distributions to beneficiaries. Ideally, the parties reach a distribution agreement to formally acknowledge such act(s).
Limitations on Executor Powers
Executors operate within certain limitations and the laws and rules of estate administration are in place to prevent abuse, theft, or worse. An executor may never:
- Take formal action before the death of the testator
- Seek to influence the testator in their life as to their dispositions
- Sign the will on behalf of the deceased
- Change the provision of the will
- Stop beneficiaries from contesting the will
- Hide or secreting a will
- Make decisions outside the scope of the will or about property not in the estate
- Act with a conflict of interest or self-interest while distributing the assets
- Make significant changes to the estate distribution without court approval
- Sell assets for less than fair market value or without proper due diligence
- Gift estate assets away
- Receive unreasonable compensation for the execution of their duties
- Override provisions of the will due to family history
- Disregard or ignore the beneficiaries’ rights or requests
Consequences of Executor Misconduct
The consequences of mismanagement of estate assets for executors can be quite severe. Most notably, the executor of an estate can be found personally liable for not faithfully administering the estate. This means that the executors themselves, not the estate, might have to pay out of pocket for an incorrect action.
The role of executor is crucial to the formation and administration of an estate. It is important to know all of their options, duties, responsibilities, limitations, and ramifications. To make the best choice, both in the formation of the estate plan and in the administration of an estate, we recommend consulting with and retaining an attorney who specializes in estate planning and elder law. Contact us today to learn about how we can help you.
