One of the most important decisions for a testator (person who signs a will) is the appointment of an executor. An executor is responsible for carrying out the testator’s directions concerning the dispositions set out in the will. An individual often appoints his or her spouse as executor unless the spouse is unable to handle the job, in which case a child or someone else knowledgeable about the testator’s estate is named. Alternatively, a co-executor may be appointed to act together with the spouse or another individual.
The executor is the individual who is ultimately in charge of having the will probated. Through that process, the executor gathers all the assets that will pass through the will (as opposed to those assets that will pass to joint owners or which have named beneficiaries) and pays the debts and expenses of the estate.
The Executor is also responsible for investing the assets in the estate and managing any property. The estate’s assets must be managed prudently, or the executor may be held accountable to the beneficiaries and to the court for any negligence, waste or mismanagement. It is strongly recommended that the executor seek professional advice for the management of the assets of the estate.
If an executor does not carry out the testator’s wishes, he or she may be held personally liable.
When considering whom to appoint, it is important to think about the family structure and the potential for tension among family members. Often, the surviving family members disagree in many areas, which creates unwanted friction.
It is important not to appoint co-executors that are likely to have a conflict of interest and disagree. One way to eliminate this problem is to appoint a professional executor, such as an attorney, financial advisor or accountant.
When deciding on an executor, another consideration is proximity to where the estate will be administered. It may be difficult for a family member who resides a distance away to handle certain aspects of an executor’s duties.
If the testator owns property in another state, “ancillary” probate (probating assets that are not within the testator’s residence) in the other state may be necessary, which adds to the executor’s requirements and duties. It may be necessary to appoint someone in that area. Avoiding ancillary probate through the use of a revocable trust would be a better overall option.
Executors are entitled to commissions. A professional, a bank or a trust company will usually not serve as an executor of an estate unless statutory commissions are paid. The commission rate in New York for each executor is five percent on the first $100,000 in the estate, four percent on the next $200,000, three percent on the next $700,000, 2½ percent on the next $4,000,000, and two percent on any amount above $5,000,000. Banks and trust companies may charge more for their services as executors and trustees, and particularly as money managers.
After all the assets have been collected and the debts and taxes have been paid, the executor is responsible for distributing the remainder of the estate assets in accordance with the terms of the will.
Given that there may be unforeseen circumstances such as outstanding debts, it is important that the beneficiaries agree in writing, before any assets are distributed, that they will return assets to the estate if the executor requests refunding. Otherwise, the executor may be held personally responsible for payment of the debts.
Given the concerns discussed herein, it is important to discuss these issues and look at one’s overall estate plan with a qualified attorney prior to executing a will.
Ronald A. Fatoullah, Esq. is the principal of Ronald Fatoullah & Associates, a law firm that exclusively concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts, wills, and real estate.
Stacey Meshnick, Esq. is a senior staff attorney at the firm who has chaired the firm’s Medicaid department for over 15 years. The law firm can be reached at 718-261-1700, 516-466-4422, or toll free at 1-877-ELDER-LAW or 1-877-ESTATES. Mr. Fatoullah is also the co-founder of JR Wealth Advisors, LLC. The wealth management firm can be reached at 516-466-3300 or 800-353-3775.