An Executor, sometimes called a Personal Representative or Surrogate, is the individual responsible for managing the affairs of the deceased person’s probate estate. An Executor’s responsibilities include all of the following:
- Applying to Court for Letters Testamentary or Letters of Administration
- Collecting and preserving all the deceased person’s assets until distributed
- Opening a checking and/or savings account for the estate
- Notifying beneficiaries
- Paying all of the deceased person’s debts
- Preparing a formal or informal accounting, and distributing the estate assets to those entitled to receive them
- Filing the deceased person’s final income tax return
- Filing the deceased person’s estate tax return and paying any estate tax that may be due
Before you agree to serve as someone’s executor, you should make sure that you’re aware of and comfortable with these responsibilities.
Applying for Letters Testamentary or Letters of Administration
Prior to officially serving as Executor, you must secure the court’s approval. You do this by applying to the court for an approval called either “Letters Testamentary” or “Letters of Administration”, depending on the state.
As part of this process, you’ll deposit the original copy of the last will with the county clerk. You’ll also need to “prove” the last will’s validity. If the deceased person executed a self-proving affidavit at the time of the last will signing or thereafter, your job here is already done. If not, you may need to secure the testimony of the last will witnesses that they saw the deceased person acknowledge and sign the will, and the signing ceremony complied with all other statutory requirements.
Other documents submitted as part of the application for Letters Testamentary or Letters of Administration include a certified copy of the death certificate, oath and designation of the executor, and a proposed order or decree for the judge to sign admitting the will to probate and issuing the Letters Testamentary or Letters of Administration.
You may also be permitted to choose between independent and dependent administration.
- Dependent administration: the ‘default’ administration scenario in which the court supervises the entire administration of the estate. Except in limited circumstances, a court supervised personal representative can only act on behalf of the estate after acquiring a court order allowing the specific action
- Independent administration: an administration independent of court supervision can be secured if (1) the last will explicitly permits it or (2) all the heirs or beneficiaries consent in writing to an application for a court created independent administration
Whenever possible, estate planning attorneys working with executors aim to secure independent administration, because it significantly reduces the amount of statutory requirements, which makes probate simpler, faster and less costly compared to dependent administration. One exception to this rule of thumb is if the estate has significant creditor problems, beneficiaries likely to litigate the proceeding, or difficult assets, in which case an executor may prefer to choose a dependent administration since it offers more protection to the executor as a fiduciary.
Collecting and preserving all the deceased person’s assets
As soon as you take the oath and qualify as the executor, you become an estate fiduciary. Fiduciaries have special legal obligations to protect the interests of beneficiaries and creditors of the estate, including:
- The duty to take possession of all property belonging to the estate
- The duty to care for and maintain the estate property
- The duty to keep estate or trust funds separate from non-estate or trust funds
- The duty to share with the beneficiaries important facts about their rights
In fulfilling these duties and obligations, you may rely on your own best judgment but must uphold the standard of care of a “prudent person” acting in a similar capacity.
Opening a checking and/or savings account for the estate
An executor has a duty to keep estate or trust funds separate from non-estate or trust funds. The best way to do this is to open a new, separate checking and/or savings account for the estate. This allows you and anyone auditing the estate to more easily track the inflows and outflows of estate funds.
Notifying beneficiaries
As part of the executor’s duty to share with the beneficiaries important facts about their rights, you must send notice to each beneficiary entitled to receive property in the will that the will has been admitted to probate.
As an informal matter, you may also wish to provide the beneficiaries with a brief overview of a typical probate process and timeline. Many people are surprised to learn that probate takes so long and they may not receive any distributions until six months to a year (or more) after the deceased person’s death.
Paying all the deceased person’s debts
As part of your fiduciary duty to protect the interest of creditors in the estate, you must provide notice to creditors of the deceased person’s passing and settle all agreed-upon debts.
Just as you identified and collected the deceased person’s assets, you must also make reasonable effort to discern the deceased person’s debts. Check whether outstanding debt exists on assets that commonly carry some level of indebtedness such as real estate and motor vehicles, and review the deceased person’s prior bank statements looking for recurring outflows that may signal principal or interest payments on debt.
Depending on your state, you will also likely need to publish a Notice to Creditors in a newspaper of general circulation in the county in which the probate proceeding is taking place. Different states have different rules on how long unknown creditors have to come forward to establish a claim against the estate. In Florida, creditors have between 30 to 90 days, depending on when the Notice to Creditors is published. In New York, creditors have seven months from the issuance of letters.
After receiving a claim from a creditor against the estate, as the executor you will decide to either allow or disallow the claim. If you allow a claim, you will either pay the claim or provide notice to the creditor that the claim is allowed and pay the claim later. The court will review all disallowed claims as part of the accounting to make a final determination on whether the claim is payable by the estate.
Preparing a formal or informal accounting, and distributing assets
Depending on the type of probate proceeding and any waivers secured from beneficiaries, as executor you will need to prepare either a formal or informal accounting of the estate.
The accounting starts with an inventory of assets, which establishes the identity and value of all probate assets as of the deceased person’s date of death. Referencing the dedicated checking or savings account for the estate that you set up earlier, you’ll provide account of all the inflows and outflows of the estate, including all taxes, debts, and other expenses paid, as well as proposed distributions to beneficiaries.
Filing the deceased person’s final income tax return
Among the deceased person’s debts and liabilities that you will pay from the estate is the final year’s individual income tax.
The final individual tax return is filed on the same form that would have been used if the deceased person were still alive, but "deceased" is written after the person’s name. The deadline to file a final return is the tax filing deadline of the year following the taxpayer's death.
Only income earned from the beginning of the year through the date of death should be reported on the final tax return. Income earned from the date of death through the end of the year is included on the beneficiaries’ individual tax returns (if gifts are made inclusive of all interest and appreciation from time of death to distribution) or the estate income tax return.
Filing the deceased person’s estate tax return and paying any estate tax that may be due
If, after death of the deceased person, the estate generated more than $600 of income that is not directly allocable to individual beneficiaries, you will need to file an estate income tax return for the estate. You will use the same Form 1041 as the individual return.
Depending on where the deceased person lived and the value of the estate, a federal or state estate tax return may also be required. The federal estate tax threshold is $12.06 million in 2022, and therefore very few estates need to complete a federal estate tax return. Some states have lower state estate tax thresholds, however, which may result in additional tax owed at the state level even if the estate falls short of the federal one. Additionally, some states like Connecticut require all estates to complete a state estate tax return, even if there is no estate tax due.
Closing the estate
Depending on your state, you may need to make a filing with the court to officially close the estate.
Many states do not have such a formal process or requirement to close the estate. In these instances, as the executor you will nonetheless want to seek from beneficiaries and interested parties a signed approval ratifying and indemnifying (i.e., holding harmless) all actions that you’ve taken as an executor and fiduciary. To secure this approval, typically you will share with those parties the formal or informal accounting that you’ve prepared for the estate.
Summary
Agreeing to serve as an executor is a very important decision that should not be taken lightly. You will act as a fiduciary to protect the interest of multiple parties, and you will be engaged in the role throughout the duration of the probate process.
Trying to make sense of everything that you need to do as an executor in estate administration can be daunting. Just In Case Estates helps break down the process step-by-step to guide you along the way with easy-to-follow checklists and collaboration tools.
Engaging an attorney and/or accountant experienced in estate administration to assist you is also a great idea and very common tactic. Since the probate process varies from state to state and certain forms or requirements can even differ at the county level, partnering with an experienced professional can help you avoid pitfalls, speed up, and simplify the estate administration process.
