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-- G.M. Trevelyan
And it can be a job. Serving as an executor can be time-consuming, complex, emotionally frustrating and an exhausting experience, even for a modest-size estate. It also carries legal responsibilities. As a "fiduciary," you must act with the utmost honesty, impartiality and scrupulousness on behalf of the deceased and the estate's beneficiaries. This all comes on top of the fact that you're going through the emotional loss of the loved one.
Fortunately, you can hire professionals -- a financial planner, an attorney, an accountant -- who can provide advice and do much of the actual work. It is still your responsibility to ensure that all work is accomplished and done properly. So keep the following in mind when deciding whether to accept this role.
The role of an executor -- called a personal representative in some states -- is to make sure that the deceased's estate is properly settled. To accomplish this task, you ideally should have the time and live near the deceased because you'll need to go through their records and work with local officials. You should be an organized person, with financial savvy and attention to detail. You should be fair minded (especially if you're one of the beneficiaries), yet strong enough to handle squabbles among heirs.
As executor, first thoroughly read the will and any letter of instructions from the deceased, and register the will with the court. Identify the estate's heirs and all property and financial assets. Determine which assets will pass via the will, versus those that go directly to an heir (such as life insurance or a retirement account). Take note of any existing trusts or trusts created by the will.
All property and financial assets, ranging from insurance policies to bank accounts and real estate, must be identified and valued, either by yourself or by outside professionals. This process may be relatively simple if you're the deceased's spouse and records are in good order. On the other hand, a poorly managed estate about which you have little or no knowledge can be a nightmare to inventory.
You'll need to manage the estate's assets until debts and estate settlement costs are paid and the remainder distributed to the heirs. This is one area where liability can arise. You're not legally responsible just because the value of some assets decline under management (for example, due to changes in the stock market). But you could be held responsible if you mismanage them. In one case, the three executors of the estate of a world-famous artist were assessed millions of dollars in damages because they sold the estate's paintings at well below their market value.
You'll need to determine valid creditor claims and be sure the estate pays off any debts. You are also responsible for filing the estate's taxes, which probably will consist of an income tax return on behalf of the deceased, plus estate tax returns for federal and/or state taxes.
After these obligations are fulfilled, you'll distribute the estate's remaining assets to the heirs. Beware of potential conflicts that can erupt between heirs over personal possessions or other assets. If you're also a beneficiary, you might be accused of partiality. Sadly, some such battles end up in court.
You can reduce the potential for problems by working with outside financial advisors and, if possible, by being sure the person who has named you as executor has a well-prepared estate plan.
To compensate you for your work, you may collect a fee as executor (two to five percent of the estate's value is common), though you may waive the fee if you wish. Or you can decline to serve as executor and request that a successor be appointed.
Dianne Webster is a CERTIFIED FINANCIAL PLANNER (TM) and President of Integrated Financial Strategies of Amesbury, MA. She offers securities through Commonwealth Financial Network, Member NASD, SIPC. For more information please visit http://www.www.ifslegacy.com.
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