Seven Tips if You Are the Executor of an Estate

You've Been Named Executor: Now What?

Acting as executor of an estate (also called "personal representative" in some states) doesn't have to be an overwhelming task if you're organized.

As the chief administrator, so to speak, the executor is legally responsible for protecting the assets of the decedent, or deceased, until the probate process is completed and the assets are disbursed. Acting in good faith won't get you in trouble if the assets in the estate drop in value (with investments, for example), but you could be found liable if you allow assets to be tampered with before the probate process is complete or you sell off assets at fire-sale prices to raise cash. So it's important to know that if you are unable or unwilling to serve as executor, you can refuse, and the contingent executor will step in, or the court will name a new one.

State probate and tax laws vary, but if you set up a checklist and seek appropriate tax and legal advice, settling an estate can be orderly. Read on for seven tips to keep you on track.

Obtain the Death Certificate

The executor of an estate is responsible for funeral and burial arrangements and will pay for the costs out of the estate.

The first question a funeral home will ask is how many copies of the death certificate you require, says attorney Marshall Jones, principal at Jones Lowry and an accredited estate planner and life insurance consultant. If you need one that states cause of death for the insurance company, for example, the doctor can provide that, he adds. Otherwise, you'll need copies of the death certificate when notifying financial accounts, life insurance, Veterans Administration or Social Security Administration, if applicable, and for filing the final tax return, among other reasons. Many experts suggest ordering twice as many as you think you'll need. Renno Peterson, estate planning attorney and co-author of "Protect and Enhance Your Estate," says if the deceased was receiving Social Security benefits, especially by automatic deposit into a bank account, it's critical to notify them immediately. "Otherwise, it's a mess to try to pay it back and a real hassle."

Find the Will or Trust

Whoever informed you that you are executor will likely know the location of the will or trust documents. You'll need a copy of the will for the probate court, which usually has to be filed within a few days to a month of the death. If the decedent had a living trust, you may be able to avoid probate if it was set up properly.

Trust assets can be disbursed from day one without court approval, Jones says, while those in a will have to wait for a probate judge. The probate process varies by state and ranges from six months to two years on average. "I've seen probate go on for 20 years," says Peterson. "As long as there are outstanding lawsuits, it could go on for years, but the average is probably 10 months to a year." The living trust will avoid probate because the trust owns all the property, not the decedent, so in effect, the trust never dies even though the person does, and life continues fairly uninterrupted. "It's like running a relay race," Peterson says. "With a living trust, one runner is handing the baton to the next, but in the probate process, when someone dies, it's like dropping the baton."

Seek Professional Advice

Once you have the will and/or trust documents, you'll have an idea how complicated the process of administering the estate will be. At that point, avoid mistakes by consulting with an estate attorney, tax accountant, appraiser or any other professionals who can provide expertise. An attorney can advise you on the legal steps to take and help handle questions that come up from beneficiaries who might push for a quick distribution of assets. The tax professional will help with the final tax return and any issues involving particular inherited assets such as a home, certain investments, retirement accounts or a family business. An appraiser will put a fair market value on antiques and other valuables.

If the estate has to go through probate, the courts look more favorably on an attorney, who will know the right forms to use to make the process smoother. "Generally speaking, if you try to do it yourself, it will take longer," says Peterson. "In the meantime, all of the assets and money are tied up because you can't do anything."

File Letters Testamentary

This is the third of the top three steps an executor of an estate should take to begin settling an estate, after obtaining the death certificate and filing the will with the probate court. Consult your state laws to see if the estate must go through probate. If it does, the probate court will legally confirm your appointment as executor with what are called letters testamentary (sometimes called surrogate certificates). These are certified documents that prove you have the legal authority to act on behalf of the estate to begin the process of paying bills, filing tax returns, managing and distributing assets, dealing with beneficiaries, and opening or closing bank accounts.

Locate and Protect the Assets

The best gift an executor can have from the decedent is a detailed list of assets and where to find them. This includes copies of wills and trusts, documentation on insurance, investment accounts, prearranged funeral plans, bank accounts, real property such as vacation homes or artwork, business interests, and partnerships. Documents that verify the value of antiques or collectibles will also be helpful. Ideally, all of this would be in a safe deposit box, ready for the executor. But even if the decedent didn't prepare a listing, "in almost all cases, the attorney who prepared the will does the listing of the assets and the filing," according to Jones. The attorney will also take care of the legal requirement of public notification to creditors.

When it comes time to disburse assets, it will happen in three possible ways, says Jones: by trust, by will or by contract (named beneficiaries on individual retirement accounts and insurance policies, for example). But it's important to remember not to let Aunt Edna take her favorite painting, chair or even a single teaspoon from the estate until the probate process is complete, and creditors have been paid.

Pay Bills and Taxes

The estate is responsible for paying the decedent's debts. If the debts exceed the assets, potential inheritors are not liable for paying them. But before paying any debts, the executor is responsible for ensuring the estate's assets can cover them all. If not, creditors will be prioritized by the state.

If the decedent didn't keep a detailed accounting of monthly bills, debts and money coming in, you'll need to figure it out. A great place to start is with the checkbook, which will provide a record of many of the bills and deposits. For example, a premium payment will tell you there's an insurance contract. Go through regular mail and email, if possible, for more clues. When combing through the decedent's property, look for contracts, deeds, financial statements and bills. Peterson recommends going through tax returns as well.

The bank will assist in opening an account in the name of the estate or trust, so you can pay bills and accept deposits.

It's the responsibility of the executor to make sure estate taxes are paid, if applicable. The executor also files the final income tax return.

Don't Rush the Process

The executor's natural inclination is to "make everyone happy and distribute the assets," says Jones. But if the executor rushes and misses some crucial legal steps, he or she could be found personally liable. This is where having an attorney who knows the rules will help.

An attorney can also step in and help mediate beneficiary disputes, which could get nasty. "There's a saying that you never know anybody until you've shared an inheritance with them," Peterson says, adding that "if someone feels slighted, it can get very bitter."

An attorney will also help the executor of an estate avoid acting hastily and making mistakes. For instance, Peterson says, many people think they should immediately pay bills as they come in, but they shouldn't. Instead, creditors are notified of the death and can't do anything until the probate court prioritizes the list of creditor claims.

To stay on track with what you've done and what still needs to be accomplished, set up a separate filing system, and keep copies of everything you've sent and received from creditors, beneficiaries, financial institutions, etc. With a little organization and careful record-keeping, the duties of an executor don't have to be overwhelming.