CHOOSING AN EXECUTOR
What does an executor do, and why do we need one? An executor is the person selected to settle the affairs of a person who has died and to carry out the terms of his or her will. If there is no will or the named executor does not accept this responsibility, the probate court will appoint an appropriate person to settle the estate.
In many estates, usually small in size, the executor will be a member of the family. In such cases the executor's principal job is to use good judgment in selecting a qualified attorney, and then to review, approve and sign various court and tax documents.
As a person's affairs become complicated by investments, business dealings and otherwise, the executor's job likewise becomes more complicated. Ultimately it can be one of the most difficult and time-consuming responsibilities of a lifetime. In such a case, an experienced professional should be considered for the position. Clearly it is important to know in advance whether a particular executor's duties will be simple or complex. How can you tell? The following guidelines may be helpful in answering this question.
Tax planning was generally considered necessary when an estate was required to file a federal estate tax return. However, since January 1, 2010, there has been no federal estate tax. The State of Connecticut does have an estate tax, and while the threshold for taxable estates is $3.5 million, a tax return must be filed for every estate. A bank, lawyer or other professional will know exactly how to prepare the necessary tax returns so as to minimize taxes.
While family quarrels are rare, they do occur. An independent and experienced executor can be helpful in resolving disputes between heirs and maintaining family harmony. It should be noted that an executor has a duty of loyalty to the creditors of the estate as well as to the beneficiaries. Often times a neutral or independent executor can better handle these potentially troublesome matters. It should also be noted that the executor can be personally liable for any errors made in administering the estate.
Some estates require only that the executor safeguard family assets. Other estates demand careful analysis of assets, the sale of some and the purchase of other assets. Is the estate cash poor or cash rich? Does the family have the knowledge and experience to make these decisions?
Three common approaches to the choice of an executor are as follows:
1. Single family executor. Most married people designate their spouse as executor. If the spouse is financially experienced or the estate is small and uncomplicated, this is an appropriate choice. While two or more family members can be used as co-executors, this can be cumbersome and generally should be avoided.
2. Family member and professional. Larger estates can often benefit substantially from professional management. In such a case a person often designates their spouse as a co-executor along with an experienced professional. The reasoning is that the professional will attend to the day-to-day responsibility of settling the estate while the spouse insures that various family interests are not overlooked.
3. Single professional executor. Sometimes the executor's job can be difficult and time consuming and the spouse (or other family member) may have no interest or time for the job. In such cases the appointment of a professional executor is recommended.
These and other considerations should be discussed carefully with your attorney when preparing your will, or before accepting appointment as an executor.
For more information, please contact Attorney David Baram.