So you were named to serve as an Executor … now what?
An Executor of an estate has many duties beginning at the moment the testator
dies and continuing until all beneficiaries have been paid and the estate
is closed. Depending on the size of the estate and challenges which may
be present, an executor’s role could continue for years.
Most Executors will hire an Estate Attorney to help guide them through
the often daunting process of settling a decedent’s estate, including
the probate process. In New York, the Executor is appointed by the Surrogate’s
Court in the county where the decedent resided in a proceeding called
“Probate”. The first step of the probate process is having
the will validated by the court, or accepted as authentic, and the appointment
of the executor named in the will. This process usually takes about a
month. New York will sometimes penalize an executor for not submitting
a will for probate within a reasonable amount of time if a creditor or
beneficiary suffers financial harm because of the delay. Once the Will
is admitted to probate, the Executor is appointed and may proceed to administer
the estate. Before the Will is probated, the person named as Executor
in the will has no authority to act.
Below is a basic checklist an Executor should follow:
- Make a list of the decedent's assets and protect them by notifying
the financial institutions of the death and your appointment.
- Obtain professional appraisals of real property and valuable personal property
(e.g. art, jewelry, furniture), if needed.
- Manage the testator’s business if necessary.
- Resolve disputes that may arise among beneficiaries.
- Contact the testator’s employer to find out about the testator’s
- Call the social Security Administration to notify them of the Testator’s death.
- Once you have collected some funds, open an estate checking account.
- Manage the estate assets, including the upkeep on any real estate prior
to a sale.
- Determine if there are creditors of the estate and whether their claims
are valid. (creditors have seven months from the date an Executor is appointed
to file a claim against the estate).
- Pay estate debts and expenses (e.g., funeral expenses, court fees, attorney
fees, appraisal costs, etc.).
- Keep careful and detailed records of financial transactions (i.e., make
a ledger and record all income and expenses).
- File an Inventory of Assets with the Surrogate’s Court
- Have the decedent’s final income tax return and estate income tax
returns prepared and filed, if needed.
- Federal and State estate tax returns should be prepared and filed on time,
- Pay the balance of estate funds to the beneficiaries of the will in accordance
with the terms of the Will.
Are you entitled to be paid for your services?
Most states do allow for commissions to the Executor for services rendered
to the estate. The amount of compensation is normally set by law and differs
from state to state. New York allows Executor Compensation by Statute
as set forth in SCPA 2307.
Keep in mind that commissions received by an Executor is taxable income
and must be reported on a personal income tax return. However, funds received
as a beneficiary are not considered taxable income. Before accepting your
commission, the tax implications should be discussed with your accountant.
Will an Estate Tax Return need to be filed?
If the estate is subject to federal and/or state estate taxes, an estate
tax return must be filed and the taxes paid within 9 months of the date
of death. Currently, only estates above $5,490,000.00 must file an Federal
Estate Tax Return and only estates above $5,250,000.00 must file a New
York State Estate Tax Return.
If it is filed late or incorrectly, there may be penalties assessed and
an unknowing Executor may be held personally liable for such penalties.
What is Fiduciary Duty?
The Executor has a fiduciary duty to the estate as well as its beneficiaries
and creditors. This means that he or she is held to a very high standard
of care. An Executor must be extremely faithful towards the estate, its
beneficiaries and creditors and must not put his or her own interests
ahead of that duty. If the executor breaches their fiduciary duty, the
executor could be held legally liable for any losses suffered by the estate
or the beneficiaries. An executor can be removed by the beneficiaries
for breach of fiduciary duty and could be subject to restitution of any
financial losses to the estate and the beneficiaries, as well as face
criminal charges if the executor committed any crimes such as embezzlement
of estate assets.
Serving as an Executor is a big responsibility, especially if the estate
is large and has substantial assets. That is why most Executors wisely
hire a competent estate attorney.