Now Stop Blushing … Ask The Right Questions Before Saying, “Yes”

August 2018

Of course, it is most complimentary to be asked to serve as an estate executor or trustee. That invitation should not be made lightly by the person requesting your participation. Likewise your response, whether yes or no, should be based on a sound understanding of what the responsibility will include. Once armed with that research, you can best determine both your competency and willingness to play the part.

Being invited to serve as the executor of an estate initiates a weighty series of questions to be answered on the road to arrive at an informed decision. While it may be flattering to be asked, it may involve far more than you are willing or capable to undertake.

Here’s a roadmap to explore what you are being asked to do. Importantly, you’ll want to know details regarding three items:

• Motivation of the person to choose you as a candidate.
• Will you be acting alone or in concert with other co-executors/trustees?
• What access will you have to tax and legal professionals?

Why You?

This question is not posed with a cynical frame of mind. The answer is critical as the person requesting your participation may or may not have a comprehensive grasp on what you are being asked to do.

Executors and trustees shoulder significant responsibilities. So, you must be comfortable that the individual choosing you as an estate decision maker is not doing so because you are the oldest child, a family member or close friend. Said another way, selecting you should be based on an evaluation of your capabilities and certainly never on the basis of not hurting your feelings.

To help you in a self-evaluation of your competencies to perform in the invited role, here’s a brief overview of guidelines for executors and trustees.

Executors: The executor is responsible for managing the affairs of the estate including settlement functions such as filing the deceased’s tax returns … both final individual and estate. Additionally, initiating legal and court proceedings as necessary is part of the executor’s duties. Another key function is to communicate regularly with beneficiaries of the estate.

Trustees: The trustee performs as the legal owner of trust assets. As such, responsibilities include safeguarding trust assets, distributing assets pursuant to trust terms and tax filings. As is the case with executors, trustees will be responsible for regular communications with beneficiaries of the trust.

Note: Both roles involve legally required duties. Certainly, you are urged to seek counsel and direction from competent accounting and legal professionals for conclusive guidance. This article is meant as a general discussion document and not to be construed as providing legal, accounting or tax advice.

Flying Solo or With Co-Pilot(s)

As part of your discovery of how the estate and/or trust will be administered, you may find that the intent (perhaps prudently inspired) is to appoint one or more adults who will join you as joint executor/trustee. That raises a couple of issues relating to harmony, or lack thereof. For example:

• Appointing two siblings with an adversarial relationship creates the potential for an explosive and protracted delay in settling the estate. If you are not one of the siblings, how will that affect you?
• Likewise, choosing two or more executors who have no history of successfully working together may harbor the fixings for a confrontational atmosphere that may lead to less than efficient management of the estate/trust.

Another scenario may be the choice of a bank, trust company or a law firm that offers such services to be a co-decision maker. That may foster an additional bureaucratic, time-consuming burden to your participating role.

Well … Will You or Won’t You?

After reviewing all that you have discovered based on the above and guidance from estate and trust professionals, your decision may come down to willingness to accept the responsibilities. That presupposes your confidence that you’re equipped to step up to the challenges and required duties.

Here are a couple of additional considerations for you to ponder before accepting the invitation. There are potential legal liabilities for negligence in performing as executor or trustee. Additionally, depending on the complexity of the estate, it may be a far more overwhelming task than expected. On that note, get answers to the following four questions.

• How complex is the estate, both in value and the composition of assets?
• Does the estate include property in more than one state; a significant investment portfolio and controlling business interests?
• Are there any interpersonal conflicts known to be present among beneficiaries?
• Are there outstanding liens, lawsuits or other legal actions affecting the estate?

These and other questions that your competent advisors may recommend will offer a profile of what the challenges may look like.

As part of your due diligence, it’s valuable to review some of the duties that an executor and/or trustee are called upon to perform.

• In the state of Virginia, you will be considered to be a fiduciary. How well do you deal with people-skills and finances?
• Identifies estate assets and location.
• Directs valuation of all assets to provide beneficiaries with information to determine tax basis for distributions and for estate tax purposes.
• Sets up checking account and pays estate bills.
• Maintains thorough record keeping.
• Oversees tax return preparation and tax planning issues
• Manages the distribution of assets to beneficiaries as dictated by the decedent’s will/trust.

Now consider all of the above in the context of complexity of the estate, warring beneficiaries and outstanding legal issues. It may be a simple undertaking with a modest estate. It may prove daunting in an estate with multi-faceted intricacies. Many executors/trustees anticipate their role as a part-time job … only to be surprised that it requires a broad range of skills plus a major commitment of time.

Again, if you choose to accept the position of executor, enlist the aid of accounting, legal and investment professionals. From the accounting side, we at Blair + Assoc stand ready to serve executors and trustees with both consultation as well as filing the following documents:

• Inventories
• Court accountings
• Final income tax returns for the deceased
• Estate tax returns
• Trust income tax returns.

One last thought: we work with a number of skilled estate professionals. If we can help with a referral … just ask.