WHAT IS AN EXECUTOR?

• What is an Executor?
• What Does an Executor Do?
• Who Should Be Named Executor?
• Do Executors Get Paid?
• What is the Surrogate’s Court?
• How is a Will Probated?
• How Does the Executor Find the Estate’s Assets?
• How Does the Executor Determine a Decedent’s Liabilities?
• How Should an Executor Invest the Estate?
• What Taxes Must Be Paid?
• When Does the Estate Get Distributed?
• The Spouse as Sole Executor and Sole Beneficiary.
• Surrogate’s Court Clerks.

What is an Executor?
The Executor is the man, woman (a woman is sometimes referred to as an Executrix) or bank or trust company named in a decedent’s Will to carry out the provisions of the Will and administer the decedent’s estate. A decedent is someone who has died, and the decedent’s “estate” is all of the property owned by that individual at the time of his or her death.

A Will can appoint more than one Executor. In some states, such as Florida, an Executor is called a Personal Representative. If a person dies without a Will (or if there is a Will but no Executor is named or is willing to act), the individual appointed by the court to wind up the decedent’s affairs is called an Administrator. The law provides that Executors are entitled to commissions for their services, which are paid from the estate unless waived by the Executor. It is not unusual for individual family members or friends who serve as Executors to waive commissions. Banks or trust companies, however, will seek compensation, and will usually serve only if the estate is substantial enough in size to meet the minimum fee requirements set by that particular bank or trust company.

What Does an Executor Do?
The Executor is responsible for having the Will probated, collecting those assets of the decedent that pass under the Will (i.e., not joint property, insurance and pension benefits payable to named beneficiaries, and the like), paying the decedent’s debts (including funeral expenses), paying administration expenses, and paying any taxes that are due from the estate. Such taxes can include the decedent’s final income taxes, gift taxes, the federal or state estate taxes due, if any, and income taxes on income earned by the estate during the period of administration.

During the administration of the estate, which can take anywhere from a few months to several years depending on the size and complexity of the estate, the Executor is generally responsible for investing and managing the estate’s assets and providing for the management of any real estate or cooperative apartment. Once all of the bills and taxes have been paid, the Executor is responsible for distributing the remaining assets in accordance with the terms of the decedent’s Will. If the decedent has made any pledges or agreements during his or her life, the Executor must also determine if the obligations are binding, and if so, must ensure that the estate complies. If the Executor has any question as to either the enforceability of such agreements or the terms of the Will, it is his or her responsibility to take the matter before a judge and let the judge decide. Finally, the Executor will be required to account to the beneficiaries (and sometimes to the Court) for every asset collected, all gains and losses, all income and other receipts during administration, and all of the property paid out or distributed to the decedent’s creditors and beneficiaries.

Who Should Be Named Executor?
Being the Executor of a Will is a major responsibility, although the Executor’s attorney can be of substantial assistance with a good portion of the task. The Executor is required by law to wind up the decedent’s affairs, and to carry out the terms of the decedent’s Will. The Executor is personally responsible for the payment of all of the decedent’s bills and taxes to the extent of the estate’s assets. Therefore, if the estate’s assets are distributed to anyone other than (1) the decedent’s creditors and (2) the decedent’s beneficiaries, the Executor can be held personally liable. Being an Executor entails a significant amount of work and the person chosen should be trustworthy, responsible, organized and diligent.

It is also important to consider the family situation and the personalities of the individuals who will be benefiting from the estate or likely to object to the terms of the will. A person making a Will (a “testator”) should give a lot of thought to his or her specific family dynamics and to the financial astuteness of the people being considered for the job. Often, the surviving spouse is an appropriate choice, unless he or she is not experienced in making personal financial decisions or is likely to be overwhelmed by the responsibility.

If it does not appear that the surviving spouse could or should handle the job alone, the spouse is often appointed in conjunction with a business partner, adult child or sibling, or with an estate professional such as a bank or an attorney who is knowledgeable about the testator’s affairs. The testator should be aware, however, before appointing any Executor, that there may be decisions to be made during the course of the estate administration in which the financial interests of the surviving spouse and the business partner or other persons interested in the estate will conflict. It is important to evaluate carefully the possibility that there may be a conflict of interest among the beneficiaries or between the Executors before making a final choice of Executor. In all instances a person or persons should be chosen who will be able to take into account the interest of the estate as a whole.

Do Executors Get Paid?
Executors get paid commissions which are calculated as a percentage of the value of the “probate estate,” less any specific bequests, legacies or devises (i.e., items of real or personal property left by the testator to a specific individual). The probate estate is defined as all property held in the decedent’s name. It does not include jointly held real property (such as a house which passes to a spouse), or any bank account or other property held jointly with another individual such as a spouse or child. Such amounts do not pass under the Will. Bank accounts which are held in trust for another individual, pension plans, life insurance, IRAs and any other accounts or policies which are paid directly to a beneficiary and not to the estate itself also do not pass under the Will.

Generally, everything that the decedent owned individually at the time of his or her death is included in the probate estate. This includes any business interests or real property owned by the decedent individually, any stocks, bonds, bank accounts or brokerage accounts held individually, automobiles, tangible personal property, works of art, furniture, jewelry and collectibles.

Depending on the size of the estate, if there is more than one Executor, the Executors may be required to share commissions. If the value of the probate estate (less any specific bequests of personal property or cash amounts to named individuals or institutions) is more than $300,000, each Executor (up to a total of two) is entitled to be paid a full commission. If more than two Executors are named, they must split two full commissions, unless the decedent has specifically provided otherwise in writing.

While a testator can specify in his or her Will that the named Executors (or any successors) must waive commissions in order to be eligible to serve, this is only recommended if the person named is a beneficiary of the estate or a very close personal friend, since being an Executor is time consuming. A bank or trust company will not serve as an Executor of an estate unless it is entitled to commissions, although an attorney may agree to serve without commissions (or for reduced commissions) if his or her firm will receive legal fees for work done during the estate administration. The commission rate in New York for each Executor is 5% on the first $100,000 in the estate, 4% on the next $200,000, 3% on the next $700,000, 2-1/2 % on the next $4,000,000 and 2% on any amount above $5,000,000. Banks and Trust Companies may charge more for their services as Executors and Trustees, and particularly as money managers.

What is the Surrogate’s Court?
The Surrogate’s Court is the court in New York where all matters relating to Wills and Trusts are determined. The Surrogate is the title of the judge in this particular court, and each county in New York has at least one Surrogate (New York County, covering Manhattan, has two Surrogates). The Surrogate’s Court handles, among other matters, the probate of Wills and appointment of Executors, the appointment of Administrators who serve in the role of Executors for the estates of people who die without a valid Will, and any disputes over the validity of a Will or the administration of a trust or a decedent’s estate. The Surrogate’s Court Clerk can provide an Executor with many forms necessary for an estate administration and can be a valuable source of information for a first time Executor. For information on Surrogate’s Court procedures an Executor may contact the Surrogate’s Court in the borough or county in which the deceased person last resided (see list of addresses for Surrogate’s Court Clerks).

How is a Will Probated?
Probating a Will is the first step in any estate administration. Original Wills are often left with attorneys rather than kept at home or in a safe deposit box. The Executor must locate the original Will to file with the Surrogate’s Court for probate. If the Will is in a safe deposit box, often the Executor will have to hire an attorney to obtain an order from the Court to open the box and retrieve the Will. It is best never to keep the original Will in a safe deposit box, since such arrangements tend to cause delay.

Once the Will has been located, the Executor must make sure that the probate is handled quickly and efficiently, and the best way to do this is to hire a lawyer familiar with probate and Surrogate’s Court procedures. Although an Executor is not legally required to obtain the assistance of an attorney to probate the Will, he or she would be well advised to do so. The Executor is responsible for probating the Will, and frequently hires the attorney who prepared the Will or who knew the decedent well to prepare and file the necessary papers. The attorney-draftsperson may be more familiar with the nature of the estate than an outsider, and can explain any terms or provisions in the Will which are initially unclear to the Executor. If an Executor does not have a particular attorney in mind, the local bar association is often an excellent source for referrals.

New York requires that all beneficiaries and fiduciaries named in a Will as well as all of the decedent’s distributees (those who would benefit if there were no Will) be notified that the Will is being submitted to probate. Any person who would be adversely affected by the probate of the Will is given an opportunity to appear in Court and object. Such a person may sign a waiver (obtained from the Surrogate’s Court) indicating he or she consents to probate. In most cases, no one has any objection to the Will, and as long as the Surrogate believes that the testator’s last Will is valid, the Will will be admitted to probate and the person or persons named therein appointed Executors. In some instances the witnesses to the Will may be required to testify that the Will is valid.

Generally, an Executor is no longer required to file a bond with the Court unless the Will requires it. If required, a bond is generally purchased by the Executor from a bond company. The Executor pays for the bond with assets from the estate. The bond secures the amount of the value of the estate, thereby protecting the beneficiaries from any chance that the Executor will try to steal the estate’s assets. Unless the Will specifically provides otherwise, an Executor will be required to file a bond if he or she is not a resident of New York State, is not sufficiently responsible, or is required to hold, manage or invest real or personal property for the benefit of another person.

How Does the Executor Find the Estate’s Assets?
The Executor must undertake a thorough search for all of the decedent’s assets. It is the Executor’s sole responsibility to locate all of these assets, pay the taxes on them, if any, and distribute them to the people named as beneficiaries in the Will. These assets can include social security payments, Blue Cross reimbursements, CDs, bank accounts, furniture, jewelry, artwork, pension plans, IRAs, stock certificates, brokerage accounts, real property, partnership interests, automobiles and life insurance. The location of the assets may be readily available from the decedent’s files or the assets may be hidden away in the decedent’s home, or at banks and in safe deposit boxes. The Executor must locate all assets, even those which are not “probate assets” such as jointly held property or accounts or life insurance policies payable directly to beneficiaries, since the Executor is responsible for including information about such property on the estate tax returns.

The Executor should go through the decedent’s papers very carefully to locate all of the decedent’s assets. Thereafter, the Executor must transfer all of the probate assets into the name of the estate. In order to do so all of the banks or brokerage houses and life insurance companies involved will need to be notified. The Executor will also have to obtain releases (“tax waivers”) from the New York State Tax Commission to transfer any money or property valued over $30,000 from the bank to the estate. The attorney for the estate can be helpful in aiding the Executor by obtaining the tax waivers, although an attorney’s assistance is not required.

The attorney for the estate can also be helpful in helping prepare an estate inventory. The inventory is required to be filed by the Executor in the Surrogate’s Court on the later of (a) six months from the date the Executor is appointed, or (b) the date that the federal or state estate tax return is due (or would have been due had a return been required), including the time granted for any extension(s). The inventory must contain the value of all of the decedent’s property as of the date of death, and special inventory forms exist in each county’s Surrogate’s Court to aid in its preparation. Alternatively, the federal or state estate tax return can be filed instead of a separate inventory. However, if the tax return is filed, a special cover sheet is still required in each county, and following its filing as an inventory, the tax return will become a public document. If the estate contains complex assets (other than cash and marketable securities) such as limited partnership interests, rental properties or oil and gas interests, the Executor must hire competent appraisers to prepare valuation statements for inclusion with both the inventory and the estate tax returns.

How Does the Executor Determine a Decedent’s Liabilities?
The Executor must pay all of the decedent’s debts, including unpaid bills, medical expenses, funeral costs, loans and income taxes. Before paying any debts, the Executor must determine what the total debts are, in order to insure that the estate has sufficient money to pay them all. The Executor has no responsibility to seek out possible creditors. It is usually fairly easy to determine the decedent’s debts by monitoring his or her mail, but the Executor must make sure that all claims are genuine before agreeing to pay. Generally, in New York, the Executor is required to consider all claims received from creditors within the first seven months of his or her appointment, although there is a special obligation to insure that all of the decedent’s taxes have been paid.

How Should an Executor Invest the Estate?
During the period of estate administration, the Executor decides which of the estate’s assets to hold and which to sell in order to meet cash needs and to help the estate earn income. The estate’s assets must be managed prudently and conservatively, and the Executor may be held accountable to the beneficiaries and the Court for any gross negligence, waste or mismanagement. The Executor must be vigilant and diligent, and may hire professional help, if the estate is large enough, to provide advice on the day-to-day management of the assets.

What Taxes Must Be Paid?
Income Taxes. The Executor is responsible for paying all of the decedent’s outstanding income taxes and arranging for the preparation of his or her final income tax and gift tax return(s). The Executor is also responsible for paying income tax and filing income tax returns for any income earned by the estate during the course of administration. It is often best to hire the decedent’s accountant to prepare the decedent’s final income tax and gift tax returns since he or she is most familiar with the decedent’s tax history and asset structure. However, since many accountants are unfamiliar with fiduciary returns, it may be necessary to hire a special fiduciary accountant to prepare the estate’s income tax return(s).

Estate Taxes. The Executor is also responsible for paying any and all federal and state estate taxes due on the estate and filing any estate tax returns required even if no tax is due. Estate tax returns are usually prepared by the estate’s attorney, although estate income tax returns and complex accountings may require the services of a fiduciary accountant. The estate attorney may have a fiduciary accountant in his or her office or recommend one who is trustworthy. Similarly, banks and trust companies usually have such accountants on staff. Since in sizeable estates there are often complex tax elections to be made on an estate’s tax returns, it is very important that the Executor hire competent professional help.

When Does the Estate Get Distributed?
After all of the assets have been collected and the debts and taxes have been paid, the Executor is responsible for distributing the balance of the estate assets in accordance with the terms of the Will. Often, the Executor will distribute certain assets such as furniture and jewelry long before the estate administration has been completed. However, if the estate encounters unforeseen debts and assets have already been distributed that cannot be recovered, the Executor may be personally responsible for the payment of those debts. Therefore, before any assets are distributed, it is important that the beneficiaries agree in writing to return them to the estate if the Executor requests refunding.

Thereafter, the Executor will generally pay cash legacies and again obtain appropriate receipts and releases from the beneficiaries. It is also customary for the Executor to require the beneficiaries of such legacies to sign agreements stating that such legacies will be repaid if the estate is ultimately unable to pay all of its debts.

After the estate is distributed, the Executor is responsible for preparing an accounting which lists all of the estate assets and indicates every dollar that has been earned and every dollar that has been spent or distributed to beneficiaries during the course of the estate administration. The accounting can be informal if all of the interested parties are competent adults who agree that an accounting before the Court is unnecessary. However, it can be to the Executor’s advantage to have a judicial accounting in order to obtain a discharge from all duties with the blessing of the Court. The accounting will usually contain a calculation of commissions unless the Executor has waived compensation. The accounting is the final duty of the Executor and is often prepared with the help of the estate’s attorney and the same fiduciary accountant who prepared the estate income tax return (s).

The Spouse as Sole Executor and Sole Beneficiary.
The above paragraphs regarding the probate of the Will, the collection of assets, the payment of creditors, and the payment of taxes apply in the case where the spouse is named as the sole Executor and is also the sole beneficiary. However, distribution of the estate to the surviving spouse can in this instance be made at any time since the spouse will continue to be personally liable to the estate’s creditors. In addition, in this instance no accounting need be prepared.

Surrogate’s Court Clerks.