One of the most famous axioms that individuals hear when discussing wealth is that “you can’t take it with you when you go.” This adage could be considered the primary ethos behind the process of estate planning. Estate planning is the preparation for the distribution of an individual’s assets and real and personal property upon their death. At the heart of estate planning lies the formal creation of a will, which includes naming an executor. An executor of an estate is an individual tasked with locating and assembling the assets of an individual’s estate. In this article, we’ll further explore the executor of an estate, including executor responsibilities and duties.
Who Can Be an Executor of an Estate?
Individuals creating their estate plan will create a legal document called the last will and testament, which outlines how they wish their assets and property be distributed. While creating a last will and testament includes many difficult decisions, perhaps one of the most difficult is deciding on who the executor of your estate will be.
An executor’s responsibilities, as well as who can act in the capacity of an executor of an estate, are governed by the laws of your state of residence. Even though it’s highly recommended that you choose an executor who lives within your state, this isn’t always possible. If you do decide to name an executor who is a nonresident of the state in which you live, the rules of your state will govern who can be an executor of an estate. You’ll want to address the specific laws in your state to ensure your executor is eligible to do so.
In Tennessee, an executor cannot be an individual who has been convicted of a crime who has served a prison sentence as a result or a judge, unless they are family and the act of being an executor doesn’t affect their judicial duties. Tennessee law also allows for corporations such as banks or trust companies to act as executors under certain situations and for out-of-state residents to act as executors as well.
Wyoming, on the other hand, imposes no restrictions on who can be an executor so long as they live in the state. In Georgia, an individual must be at least 18 years old and of sound mind to serve as an executor in that state, however, they are not required to live in the state.
Moreover, it’s important to point out that in some states, an executor must petition the probate court to be officially appointed as a decedent’s executor or personal representative. Lastly, some states require that an executor post a bond or be already bonded, even though this obligation can be waived.
Duties of the Estate Executor
So, once you have an executor in mind to serve out your last wishes, what exactly does an executor do? What are their responsibilities and duties? Initially, the primary responsibility of an estate executor is to gather relevant documents and records as quickly as possible. This information helps the executor determine precisely what personal and real property the decedent owned at the time of their demise. Afterward, an executor is tasked with listing and valuing all assets. These assets include the probate estate, joint tenancy with right of survivorship, properties with designated beneficiaries, and properties that reside in a living trust. Simultaneously, it is often necessary for executors to meet with the attorney of the decedent, as they will often have custody of the will.
Executors are also charged with preserving the estate’s assets, which includes keeping up on insurance and mortgage payments, filing insurance claims, and canceling credit cards. An estate executor will open a checking account for the estate so that they can pay applicable income taxes, estate tax returns, and other expenses of the estate. Executors are often best known for making distributions of assets to beneficiaries named in the last will and testament.
Other executors of estate duties include notifying friends and family of the death of the decedent, making funeral arrangements, supplying information necessary to obtain any veteran’s benefits, and contacting other individuals and institutions such as lessors, the local organ bank or hospital (if decedent is an organ donor), and the decedent’s power of attorney (if applicable).
Information an Estate Executor Gathers
As aforementioned, an estate executor’s number one job is to gather all the necessary information needed to satisfy all obligations of the last will and testament. There are numerous documents that an executor must acquire from the decedent’s records, which include:
- All records of bank accounts including checkbooks and checks
- Most recent credit card statement
- Mortgage and deeds for real property
- Partnership, operating, and shareholder agreements
- Lease agreements signed by the decedent
- Most recent brokerage statements
- Stock or bond certificates
- Retirement or IRA statements
- Insurance policy information
- Loan documents
- Income tax returns and gift tax returns (last 2-3 years)
- Personal property tax records (last 2-3 years)
- Valuations of personal property, such as art or jewelry
- All titles (including burial plot, automobiles, and other personal property)
Estate Executor Fees
Many individuals inquire about fees associated with an estate executor. How are they paid? What is an appropriate price for an executor to charge? And so on and so forth. With this topic coming up in estate planning sessions so often, it makes sense to address the subject. In most states, the law provides for the payment of an executor for their hard work and diligence in their duties. Even though the work necessary to be an executor for most estates is substantial, some executors decide to waive their fee.
As in most estate planning rules and regulations, executor fees are governed by the state, so you should consult your state’s statutory provisions for how much an executor can claim. There is often a formula based on either the percentage of the total value of the estate or a portion of the number of transactions completed. In some instances, the estate executor fees can be based on an hourly rate. In other states, an executor fee must be reasonable and commensurate with the work performed. In Tennessee, an executor is required to petition the probate court in order to be paid, and the court, in turn, rules on the reasonableness of the fees based on the total value of the estate.
Estate planning is not just for wealthy individuals but should be an essential financial tenet of anyone who wishes to leave a legacy in the form of personal wealth or property. At Lawhorn CPA Group, we understand that estate planning is a critical financial and tax strategy with many moving parts. Our business and tax experts can help you review your estate and financial strategies and help you adjust them to meet future tax changes or changes to your estate that offer the most significant benefit to your beneficiaries.
* It’s difficult to discuss estate planning and executor of estate without mentioning laws and legal aspects. The information provided on this site is not legal advice. If you have questions regarding the legalities of estate planning, you should consult an attorney before acting.