Mat Sorensen


May 5, 2015

If you’ve been named as an executor in a will or as a trustee in a trust, you have some important responsibilities and obligations that arise upon the death of a loved one. Here’s a quick list of items to consider as you begin managing a deceased persons estate.

1. Understand the Estate Documents. The first item to understand is the estate documents. The estate documents will determine the rules, persons, and procedures that will apply to the distribution and management of the estate.

If you were appointed as an executor or personal representative in a will, you will need to understand the terms of the Will and who are the heirs pursuant to the Will. The executor, also known as personal representative, has the authority to administer and distribute the estate. In most situations where only a will is used, you will need to go to court to be appointed as the legal executor of the estate and will need court approval to transfer certain assets such as real property.

If you were appointed as a trustee in a Trust, you will need to understand what assets are owned by the Trust and what assets are owned outside the Trust. In general, a Trust is used by individuals to avoid probate and to provide better direction and control of their estate. If the Trust was established correctly and if it was properly funded (e.g., it owns the assets of the deceased person), then you will not need to go to court to get approval to administer the estate.

In addition to understanding the operative will or trust, you will need to identify other documents that may be included in the estate plan. These documents may include funeral and burial instructions where the deceased person has indicated whether they are to be buried or cremated and what services should accompany their funeral (e.g. church, military). There may also be a memorandum of personal property that outlines how specific items of personal property are to be distributed to heirs. Common items identified and handled on the memorandum of personal property are jewelry, pianos, guns, precious metals, and valuable personal effects.

2. Determine the Assets. You will need to determine what assets are included in the estate. In many instances, this can be difficult to determine, as the deceased person may not have provided complete information as to their bank accounts, investment accounts, real estate, retirement accounts, and life insurance policies. Many children who become executors and trustees have a difficult time locating the assets of their deceased family member despite having an otherwise close relationship.

3. Identify the Heirs. Most estate documents such as a will or a trust will list the heirs to the estate and these heirs (aka, beneficiaries) are whom you are serving for as executor or trustee of the estate. In most instances, the heirs are clearly identified. However, what happens if the will or trust listed one of your siblings as an heir and what if that sibling in longer living? Does that portion of the estate go to your sibling’s surviving spouse or children or to the other siblings? Ideally, the will or trust will state what shall occur in this instance but in many instances this item can be overlooked and not considered in the estate plan. As a result, as executor or trustee, you are left to determine who shall take the place of your deceased sibling and this decision is subject to the terms of the document and state laws. In general, you will need to seek the guidance of an attorney and those legal expenses shall be paid and/or reimbursed to you by the estate. Depending on the terms of the documents and the heirs involved, you may need to get a court order to identify and determine heirs.

4. Identify the Creditors. Almost every estate has creditors who need to be paid. From credit card companies and other consumer debt to mortgage lenders with liens on real estate owed by the deceased. As executor or trustee of the estate, you have an obligation and responsibility to ensure that all creditors claims are paid from the estate. Failure to do so may result in liability to you as the executor or trustee or to the heirs who receive distributions from the estate that should otherwise of been paid to creditors.

Whether you are working with a secured or unsecured creditor, you will need to provide evidence of your position as executor or trustee, which in the case of a Will would include a copy of the Will or in the case of, a Trust would include a copy of the certificate of trust.

In general, secured creditors such as mortgage lenders or car lenders will be paid upon the sale of the property or asset unless the estate otherwise ahs cash available and intends to hold these assets. Regardless of whether the asset will be held or sold, you should immediately notify secured creditors of the death of the deceased person. Where possible, you should ensure that payments are made to these creditors so that penalties and late fees do not accrue to the estate. If properties or assets subject to the secured creditor are paid, then the proceeds from the sale will resolve these debts.

As to unsecured creditors, you should notify them of the passing of your loved one. However, these creditors are not always paid in full. From personal experience in handling estates, I have found that unsecured creditors, such as credit card companies, will generally negotiate amounts owed to close the account. Maybe start with an offer of 1/3 of the amount owed and see if the unsecured creditor will accept that amount as a payoff. While they do have legal recourse against the estate, they do face significant legal fees in probate court to collect on the debt. If the estate must probated in court, as will typically occur if there is only a will, then as executor you are required to notify creditors of the probate court action and of the assets of the estate. Un-secured creditors then have a certain amount of time to assert their claim against the estate. I have been surprised at how many unsecured creditors actually follow up and make a claim against the estate despite being given notice of the assets of the estate. As a result, look to negotiate with these creditors and if you are in probate already, wait until they actually make a claim in the probate court (following notice of the case and deceased persons death you will be required to provide) before paying those creditors. You have a good chance that the creditor won’t even make a claim.

5. Conduct the Proper Process. The estate documents and the assets of the deceased will determine the process to administer the estate. Also, if the deceased person had assets in multiple states if they only left a will, you may need to conduct probate in multiple states.

There are a number of common situations where you will need to go to court to obtain court approval in administering the estate.

First, in the case of a will, you will typically need to go to probate court to be appointed as executor by the Court and to get court approval to transfer any real estate assets to heirs or in a sale from the estate.

Second, if the identity of heirs is in question, you may need to get approval from the court as to the proper heirs to receive proceeds from the estate.

And third, you may be required to go to Court if the estate documents leave contradictory, improper, or confusing provisions that cause disagreement amongst heirs. In this situation, obtaining approval from the court is advisable in order to avoid claims against yourself and the estate.

As executor or trustee, you must also ensure that appropriate individual income tax returns and estate tax returns are filed. There are important procedures to follow when filing a deceased persons final tax return. For example, you must write the word DECEASED across the top of the tax return. In addition to a final income tax return, or the deceased, you may be required to file an estate tax return using IRS form 1041. This is required if the estate receives $600 or more in gross income.

In short, the responsibilities of an executor and trustee to an estate are significant. As an executor or trustee, you should seek out licensed professionals to advise you in the process. Whether these are attorneys, CPAs, or investment professionals, their expertise can aid you in quickly understanding and completing the tasks that are part of your responsibility as an executor or trustee. Keep in mind, the estate can pay the expenses of professionals and if you incur out-of-pocket expenses as executor or trustee then the estate can typically reimburse those expenses. In most situations, you are not paid to serve as executor or trustee, unless the estate docs specify provide for such compensation.

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