As many of you know, when you have your attorney prepare your will, there are two main choices you must make. The first and primary choice is who will receive your possessions when you die. Second is who will be the executor of your estate?
But what is an executor and why is he or she so important? The answer to this question is key in helping you decide who to choose.
The executor is, in fact, the pivotal element in the courtroom drama known as “probate”. Probate is a process that your family goes through after you die that changes your will from an ordinary piece of paper with no authority into a document that rules how your estate will be distributed.
Here is an example to further illustrate this miraculous transformation: Our client comes into our office for us to prepare a will leaving his home to his oldest son and splitting all of his bank accounts equally among his son and daughter. We prepare the document and keep it in our locked, fireproof file cabinet for, hopefully, many years until it is needed. Sometime later, the son comes into our office and reports that his father has passed away. We retrieve the will which shows that the son is to inherit the residence, meaning that a deed must be prepared to transfer that home from the father’s estate to the son. But who is going to sign that deed now that the father is deceased? It can no longer be someone who holds the father’s Power of Attorney because a Power of Attorney dies with you. The only person that can transfer it to the son is the executor of the estate and this executor must be appointed by the court. This means petitioning the court and proving that the will which names the executor is valid. This is the probate process.
Since we need that executor to be appointed for anything to be distributed to the family, it should be clear how essential your choice of executor will be. The executor must be someone who can do the following:
Hire an attorney with the appropriate expertise to handle an estate;
Marshall your assets – collect all that you own at the time of your death for distribution to your family; and
Pay your bills and distribute your assets fairly and in accordance with your wishes.
While the overwhelming tendency is to name one’s oldest child as executor when the will is being prepared, it is important to look at these responsibilities and choose the one that can best carry them out. Do not choose one of your children who will benefit if distributions are dragged out for a long time, e.g. the son who is living in your house rent-free that your will says is to be sold and the proceeds divided equally among all your children. Do not choose the child who is feuding with another. Do not choose the one who you know has had his eye on the most valuable asset for himself. An estate that is distributed quickly and equally has the least chance of causing irreparable harm to your surviving family.
If you, yourself, are in the position of being an executor of the estate of a parent, spouse or other loved one, there are many things that you need to know. There are certain assets that will pass automatically without the need for probate, such as joint bank accounts, life insurance, deeds with life estates and any accounts with named beneficiaries. While these “non-probate assets” are not within your obligation to distribute, you still have some responsibilities. You must ascertain the value of all assets regardless of how they are to be distributed. This can be accomplished either through appraisals or contacting financial institutions and requesting date of death values. Why? If the estate is valued at over $1,000,000 there may be New York estate tax liability (the Federal level for estate tax is significantly higher). This includes probate assets and non-probate assets. Estate tax returns must be filed within 9 months of the date of death. This should be done even if the total is close to the taxable level in case the State disagrees with some of your deductions. The failure to file in a timely fashion can result in extensive penalties and interest charges. In addition, income tax returns must be filed for the decedent and fiduciary returns must be filed if there has been any income from estate assets after the date of death. Make sure you discuss all of these issues with your lawyer and accountant and seek extensions if returns cannot be prepared by the due date.
Finally, if you are an executor (or an administrator in cases where there is no will), remember that you are acting in a “fiduciary capacity” which means that you are required by law to act for the benefit of the estate as a whole – all the beneficiaries – and never for your own self interest. If you act in this manner with proper advice from those with the appropriate expertise, you should have little trouble fulfilling your responsibility of carrying out the wishes of the one who has passed away.
Sanford R. Altman, Retired, was a Senior Counsel member of J&G. For more information contact us by phone at 845-778-2121 toll free or 845-778-2121.