One of the important provisions of a will is naming anexecutor or personal representative of the estate.
The executor is a person or a bank selected for a position ofspecial faith, trust and reliance. When an individual is designatedexecutor, it is important that she and the testator both understand therequirements of the job.
During the administration of the estate, the executor willhave possession and control of all the assets of the estate, with theprimary duty of protecting and preserving them and investing theproperty in the estate in a prudent and cautious manner. Assetmanagement includes, to the extent that the estate has excess cash,investment of the assets, whether in bank accounts, government bonds orother prudent forms of investment.
A further and more important consideration is liquiditymanagement. If cash available to the estate is not sufficient, thepersonal representative is required to sell assets or borrow money onbehalf of the estate to meet cash requirements as they arise. Thesecash requirements include payment of creditors, expenses ofadministration and taxes.
If these duties are not properly or competently performed,the executor may have to answer to anyone who may have been harmed as aresult.
Probate or administration of the estate commences with filingthe will for probate and preparation and filing of a petition forprobate. After the proper documents have been filed, the judge willissue letters of administration, which are evidence of the legalauthority of the executor.
The first stage of administration, after the letters areissued, is giving notice to those involved or interested in the estate.Beneficiaries will receive this required notice by certified mail;creditors by publishing a legal notice in the newspaper. The next stage of administration is identifying, collecting,inventorying, valuing, securing and investing assets of the estate.Adequate insurance coverage of valuable property should be obtained. Aninventory of all assets and their value must be filed with the court,and if the estate is of a size sufficient to require filing an estatetax return, similar information must be provided for the local andstate governments and the Internal Revenue Service. The estate attorneywill assist in preparing the inventory list, obtaining the asset valuesand preparing the necessary documents that need to be filed. The executor must promptly arrange for and make payment ofall valid claims to avoid interest expense. Any claims not filed duringthe period, which the state statute delineates, will not be legalobligations of the estate, and, in most instances, cannot be legallypaid. Another stage in the estate proceedings is the determinationof various tax returns that the law requires be filed for the estate.The most common tax returns that will need to be filed are income taxreturns for the decedent that may not have been previously filed;income tax returns for the estate if necessary; and an estate taxreturn, required by law to be filed if the total taxable estate exceedsa certain valuation, or to clear the title to any real estate byestablishing the fact that there is actually no state or federal deathtax due.
After all expenses have been paid, the final steps in theProbate Court are distribution of the estate to the beneficiaries, andthe release of the executor by a final order of discharge from theProbate Court. To close the estate after distribution of the assets to thebeneficiaries, it is necessary to report to the court on all legallysignificant activities that have occurred in the estate, furnishevidence that creditors have been paid, certain taxes have been paid,and the remaining property has been distributed in proper shares to thepersons entitled to that property. When this evidence has beenpresented in proper form -- the lawyer's responsibility -- the judgewill sign an order discharging the executor from any obligationsregarding the probate. The final responsibility of the executor is filing any finalincome tax returns that the estate is obligated to file for the year inwhich final settlement occurs. When the estate is closed, the estatemay have had taxable income for that year or otherwise be responsiblefor the payment of taxes. Sufficient funds must be retained by theexecutor to pay any taxes due. In accepting the office and trust as an executor or personalrepresentative, an individual agrees to be personally responsible formany. W.C. Fields told a story about a poor man who was tarred,feathered and being ridden out of town on a rail who was heard to say,"Except for the honor, I'd just as soon walk." The executor of a will has important responsibilities, andmany times they are best handled by a friend, relative or otherindividual who has good sense and who will retain competentprofessional advice. However, in many other instances, a bank or trustcompany is best equipped to deal with the complex issues describedabove, and the individual should forego the honor. Attorney Alan S. Novick is a wills, trusts andestates lawyer. 2004 ScrippsHoward News Service. All Rights Reserve
Source: Money & Work
