Agreeing to be the executor of an estate is a bigger decision than most people realize. It is important to consider the responsibility of the position before agreeing to take on the role.
Below are five things you should know before signing on.
- While it is an honor to be selected as an executor, executing a will takes a lot of time and work.
- Make sure you can handle all that is involved before accepting the responsibility.
- When deciding whether or not to accept, consider the complexity of the estate, whether you have the time to devote to the immediate responsibilities required, as well as the multitude of duties that come into play when the testator passes away.
1. The Complexity of the Estate
Taking on the role of executor (also known as a personal representative) is not simply a matter of reading the will and using it as a set of instructions for distributing someone's assets. An executor essentially steps in for the testator (the person who wrote the will) and sees to all of that person's final arrangements—financial and otherwise.
Generally speaking, the larger the estate—whether in terms of property, possessions, assets, or the number of beneficiaries—the more difficult and time-consuming it will be to disperse. For example, a house, several bank accounts, a stock portfolio, and possessions will all have different steps to dispersal and hurdles to clear, like completing tax documents. This is why high-net-worth individuals usually use professionals to both set up an estate plan and then help execute it when they pass on.
That said, even small estates with only a few beneficiaries can become problematic if just one person contests the will or is otherwise inclined to throw a wrench into the process. The best way to assess how difficult the job will be is to ask to see a copy of the current will (or a draft of the will if one is in the works).
If there are obvious red flags—unequal distributions to children, trusts, or annuities to untangle, or anything else you feel uncomfortable handling—you might consider passing on the responsibility.
2. The Time Commitment
Being an executor takes time and energy, and requires a lot of attention to detail—in fact, it is almost solely concerned with details.
Before you agree to be executor, you should be certain that you have the time to do the job. If you have a busy professional life or a lot of family commitments, it may be difficult to set aside the needed time.
It is important to make a decision based on your current situation. As long as the testator is alive, you can be added or removed as the executor of the estate. You can also request a co-executor or professional help. However, you will not be able to appoint someone else if you find out you don't have the time after the testator has passed away.
If you don't live near the testator or move out of state, that's something to consider as well, as you may need to travel to the testator's home state to handle paperwork and other matters.
It is important to review your decision to serve as an executor every time your situation changes significantly (you get married, have kids, get older, etc). It is natural for a testator to change executors throughout a lifetime.
It is far better to decline the honor of becoming an executor of an estate for the right reasons (the inability to do the job properly) than to take it on for the wrong ones (a sense of obligation).
3. Immediate Responsibilities
Some people agree to be an executor thinking that it will be years before they have to do any work. However, doing the job properly means going to work immediately. You'll need to be ready, since your legal responsibility could be called upon at any time.
To prepare for the task, you should do the following before the testator dies:
- Make sure the testator keeps an updated list of assets and debts, including bank and investment accounts, insurance policies, real estate, etc.
- Know where the original will and the asset list is being held and how to access them.
- Know the names and contact details of attorneys or agents named by the testator, and what their functions are.
- Discuss the testator's wishes as far as a funeral or memorial service, including instructions for burial or cremation.
- Discuss the will with the testator and, if possible, with the beneficiaries in order to minimize problems in the future.
- Have a copy of important documents such as the will, letter of intent, and any powers of attorney. It may be helpful to consult an estate planning checklist to make sure you have everything you need.
4. Duties After the Testator Dies
Of course, the real work starts when the testator passes away. It is then that the executor is called on for funeral arrangements, locating and filing the will, clearing probate, managing assets, clearing debts, submitting tax returns, establishing and managing any trusts, responding to legal challenges, and more. Being an executor requires you to carry out the details of the will and comply with legal requirements.
It's important to be organized and detail-oriented. Even if you aren't naturally inclined to be so, the estate will pay reasonable costs for professional help. That said, you will still need to be involved at every stage.
5. How You Will Be Paid
Each state has laws determining how an executor is paid. It can be by the hour, as a flat fee, or as a percentage of the estate. Sometimes the fee is determined by the probate court judge.
In addition to the regular fee, there may be an "extraordinary fee" if an unusual amount of work is involved, for example, selling off personal property or managing litigation on behalf of the estate. The testator is permitted to state in the will how they want the executor to be paid, and that may override applicable state law. Executors are also entitled to compensation for expenses incurred as they carry out their responsibilities.
Payment is made from the estate after all the bills are paid, but before any money goes to the beneficiaries. If being an executor is likely to take a major portion of your time and cut into your ability to do your regular work, it's especially important to get some sense of how you will be compensated. And remember, this payment counts as income and must be reported on your tax return.
Executors are also permitted to refuse compensation—for example, if you are doing this task for a member of your family and want the whole balance of the estate to go to the beneficiaries.
The Bottom Line
It is an honor to be selected as an executor. It signifies that the testator trusts you to carry out their final wishes and to see to their legacy. However, only you know if you are up to the challenge of a particular estate, so it is important that you accurately size up the task as well as your personal situation before committing to do it.
Remember, there are always other options. The testator can always find another person, or assign multiple executors or agents who each specialize in a particular area.