The Executor's Guide to Staying Out of Trouble
The role of an Executor, also referred to as a Personal Representative or Administrator depending on the state, is equivalent to the CEO of an estate. The ideal executor serves the estate and those who are legally interested in it. Is it an easy job? Rarely. Relaxing? Never. Important? Absolutely - but the keys to success are common sense.
How is the executor chosen?
In almost every case, he/she is nominated in the decedent's Will. If not specified in the Will, each state's law sets out a list of people with priority to ask a court for authority to handle the business of the estate.
Can anyone be an executor?
Yes, almost anyone. For example, New York law excludes those under 18, the mentally incompetent, non-citizens of New York (though the court may allow them to serve in its discretion), felons, and a catch-all for those "who do not possess the qualifications required of a fiduciary by reason of substance abuse, dishonesty, improvidence, want of understanding, or who is otherwise unfit for the execution of the office."
Do executors get paid?
It depends. Do a good job, be careful, avoid unnecessary risk, and distribute the right assets to the proper people, and you'll get the full amount. Act irresponsibly, lie, cheat, steal, or destroy (or allow an asset to be destroyed), and you'll be liable for the damage to the estate or the intended beneficiary. Each state's law calculates an executor's compensation (in New York, it's called a "commission") in its own way. The executor's compensation is paid at the end of the estate's administration except as may be ordered before that time by the court.
How about an expense account for an executor?
Executors are entitled to charge legal and other professional fees to the estate and "reasonable and necessary expenses" - not exactly a license to steal. Professional fees are subject to scrutiny by the court as well as the estate beneficiaries. Postage, office supplies, and sometimes meals, flights and accommodations (remember, stay reasonable and related to estate business) are commonly accepted expenses.
How long does the executor job last?
The average estate administration should take a year, but problems and complications can extend this time. No, the executor does not get paid overtime.
Fiduciary Duties - Care, Loyalty, and Accountability, in No Particular Order
An executor owes each of the people interested in the estate a duty of "utmost loyalty." Opportunities for the estate may not be taken by the executor for the executor's benefit. The executor may not sell estate property to himself or herself except under the clearest disclosure, the fairest terms, and the greatest openness. Think "Golden Rule": do not unto estate beneficiaries that which you would not have done unto you as an estate beneficiary.
An executor owes each of those people a duty of care, which includes the duty to protect and insure assets of the estate to the extent necessary, the duty not to waste the assets of the estate, the duty to seek and consider professional advice, the duty to arrange for the payment of estate taxes (not always applicable), and the duty to defend the estate from claims without a basis in law or fact.
And an executor owes each of those people an accounting of what he or she gathered, paid out, earned, spent, distributed - effectively, every transaction handled by that executor. The executor is not permitted to say "you don't need to know." The executor must keep records that show that the expenses paid out by him were genuine. If requested, those records must be available for each beneficiary's review.
Keep in mind that the Executor's job is to see that the assets pay off liabilities, that the net is distributed appropriately (according to the terms of the Will or the law in the absence of a Will), and that whatever hiccups erupt during an administration are resolved with the appropriate remedy. Estate tax returns can be audited, and those audits can be successfully defended or settled; an asset can be destroyed, but provided that it was insured and not intentionally wasted, the insurance money will serve the same purpose for the beneficiary's benefit; and the court can award appropriate compensation to the executor even over a beneficiary's objection where the evidence supports the executor's choices.
And, if in doubt, the smart executor should ask his/her lawyer's advice - chances are that the experienced practitioner has seen most variations of family strife and drama and will be able to counsel the executor to the other side of the administration.
About the Guest Author
Matthew B. Abrams is a partner in the firm of Russo & Burke in New York City. He is admitted to practice in the State of New York and in the U.S. District Courts for the Southern and Eastern Districts of New York. Mr. Abrams’ practice focuses on the areas of trusts and estates, real estate and labor and employment.
He is a member of the American Bar Association and the New York State Bar Association. He earned his B.A. from Columbia University in 2004 and his J.D. from New York Law School in 2007.
Mr. Abrams advises and has represented clients in the litigation and administration of estates, trusts, and fiduciary obligations in the five boroughs of New York City and in Suffolk, Nassau, Orange and Westchester Counties. He also regularly counsels elderly and estate planning clients in real estate purchases, sales and rentals.