I am sorry to hear about your sister passing. No the terms Executor and Trustee are not the same. The Executor oversees the liquidation of all estate assets to the designated beneficiaries while the Trustee oversees the management of all the trust’s assets. Since you are both and are liquidation all the assets it might seem the same but each have a different legal duty.
An executor is a personal representative who acts for you after your death. You nominate or designate an executor
in your will to settle your estate. The person chosen will act in your
place to make decisions you would have made if you were still alive. The
probate court has final approval, but the court will generally confirm
your nomination unless there are compelling reasons not to. An executor’s
responsibilities typically last from nine months to three years
(although, an estate may remain open for several years because of will
contests or tax problems). The functions of an executor are varied, but generally your executor:
- Locates and probates your will
- Inventories, collects, and sells (if necessary) your assets
- Pays legitimate creditor claims
- Pays any taxes owed by your estate
- Distributes any remaining assets to your beneficiaries
Your executor is entitled to a
fee from your estate for services rendered. The fee can be waived
(usually, a close family member will waive the fee).
What are the duties of an executor?
Your executor acts in a
fiduciary capacity . This means that he or she must exercise a high
degree of care at all times. Additionally, your executor is under court supervision, subject to its control and approval.
Some states require executors to post a bond, which is later paid back to the executor from the estate (though you may be able to waive this requirement through a will provision). In addition, your executor
is personally responsible for ensuring that all the proper tax returns
are filed and that any estate taxes due are paid. Finally, your executor is accountable to the court and to your beneficiaries on completion of his or her duties.
How do you select an executor?
Your choice of executor is a
very important one. Ideally, you want someone you can trust, who has a
close relationship to your family, who has some understanding of tax
laws, and who has a keen sense of business (especially if you are a
Typically, spouses are named. Other choices include older
children, siblings, or parents. Friends, attorneys, and bank or trust
officers are also common. You can name multiple executors
to oversee different aspects of your affairs. However, coexecutors may
result in an increase in paperwork and a slowdown in the probate
process. Some of the attributes you should look for in a good executor are:
- Ability to serve
- Willingness to serve
- Appreciation of your family's needs
- Knowledge and experience
Individual versus professional
When choosing an executor, you can name an individual or a professional (e.g., an attorney or a bank trust department) to handle your affairs.
A family member or close friend has knowledge of your
affairs and would take a personal interest in the settlement of your
estate and the well-being of your beneficiaries. However, he or she may
not be the best choice. Serving as an executor is a time consuming and stressful task. Some of the executor's
duties are very demanding: preparing and filing tax returns, obtaining
appraisals, making an accurate accounting, and these are things best
left to professionals. By naming a professional to manage your affairs,
you gain some permanence. A professional executor is unlikely to refuse to serve or to resign. In addition, it may be easier to hold a professional executor
financially accountable for mismanagement than a nonprofessional. A
professional who makes money from managing estates will have the
investment expertise as well as the legal, tax, accounting, and computer
abilities to do the job well and efficiently. You also gain some
impartiality by having a professional manage your affairs. A
professional executor should be more impartial to your beneficiaries or heirs. You also reduce the risk that your executor
will make hardship loans to friends. However, by nominating a
professional, you lose that personal touch from a friend or a relative
who is not managing any other estates.
In general, state laws require that the person who manages your affairs be an adult U.S. citizen. Additionally, your executor cannot be a convicted felon. State laws may also give special powers to your executor, or spell out what your executor can or cannot do. You can also use your will to grant your executor any special powers needed to carry out the instructions in your will.
What if you don't leave a will?
If you leave no will, if you do not name an executor in your will, or if your executor
refuses or fails to serve, the probate court will appoint an
administrator (or curator). If this happens, you have no say about who
will manage your final affairs. An administrator performs many of the
same functions as an executor but has much less power and authority.
Advantages of Trusts
Why you might consider discussing trusts with your attorney
Trusts may be used to minimize estate taxes for married individuals with substantial
Trusts provide management assistance for
Contingent trusts for minors (which take
effect in the event that both parents die) may be used to
avoid the costs of having a court-appointed guardian to manage your children's assets.
Properly funded trusts avoid many of the
administrative costs of probate (e.g., attorney fees,
document filing fees).
Generally, revocable living trusts will keep the distribution of your estate private.
What is a trust?
A trust is a legal entity that is
created for the purpose of transferring property to a
trustee for the benefit of a third person (beneficiary).
The trustee manages the property for the beneficiary
according to the terms specified in the trust
Trusts can be used to dispense income to
intermediate beneficiaries (e.g., children, elderly parents)
before final property distribution.
Trusts can ensure that assets go to your
intended beneficiaries. For example, if you have children
from a prior marriage you can make sure that they, as well as
a current spouse, are provided for.
Trusts can minimize income taxes by
allowing the shifting of income among beneficiaries.
Properly structured irrevocable life
insurance trusts can provide liquidity for estate settlement
needs while removing the policy proceeds from estate taxation
at the death of the insured.
The Trustee is the fiduciary responsible for executing the trust document.
I know this is a lot of information but I hope it helps you. Please dont hesitate to m if you have any other concerns.
Rob Riedl, CPA, CFP, AWMA
Endowment Wealth Management