Duties of an executor or trustee

Losing someone you love and then almost immediately having to take care of legal and financial matters is a difficult situation.

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During the past 30 years, I've advised numerous people how to perform the duties of executor. They are normally overwhelmed and frustrated. However, I reassure them that it will be OK, and with some patience and determination, it will all get done. I always ask if they have spoken with an attorney, which is especially helpful if they can find the one who wrote the will and/or trust agreement.

L. Kaye DeSelms Dent of Dent Coulson Elder Law, with offices in Effingham and O'Fallon, Illinois, has 25 years of experience as an attorney and 10 years practicing in the area of elder law. Her first piece of advice for an executor is, "You need to make sure you know who your teammates are."

Executing a Will

Hence, one of the first things to do is to find and review the will. You can discover the heirs, specific bequests, some of the assets, and maybe even the names of professionals who have assisted the deceased. Sometimes there are multiple wills, and generally the newest one is going to govern the estate. However, it might not if all the legal requirements for a will in your state have not been met. In most states, the will has to be in writing and signed by the maker (testator) in front of two or more witnesses. The maker also needs to be of sound mind while signing the will.

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If you cannot find an original will or believe a newer one exists, then try to find the law firm that would have prepared it. According to DeSelms Dent, the law firm likely will have a copy in its files in case the client's original has been lost or stolen.

Also in place may be a trust, which is a separate legal entity that may be used for a variety of purposes. The operation of the trust will be governed by a trust agreement. You need to find that and read it. Sometimes a trust has not been handled correctly. For instance, the trust agreement may say it owns a farm, but title to the farm was never transferred into the name of the trust. It remained in Mrs. Johnson's name because she never got around to making the transfer. DeSelms Dent says she likes to help clients move assets into a new trust to make sure it gets done.

Normally, any asset not in the trust's name will be governed by the will, rather than the trust, except in the case of a "pour-over" will. In a will, this clause ensures that any assets a trust grantor accidentally neglects to add to a trust will transfer into the trust after execution of the will.

The trust will name one or more trustees, who are basically the managers of the trust. Their duty is to carry out the instructions in a trust agreement, and they may receive a fee for handling the affairs of the trust, which can be a lot of work for a farm owned inside a trust. The executor and the trustee do not have to be the same person. Separating them can help create checks and balances; however, I have also seen it result in legal battles between siblings. DeSelms Dent says she prefers to have the executor and the trustee be the same person for simplicity, but there are situations where they should be different.

Rules to Know

DeSelms Dent revealed several interesting estate rules:

1. If all the assets reside in a trust, then there may be little for the executor to do; everything is handled by the trustee.
2. Someone nominated as an executor in the will has no authority as executor until a judge appoints that person to perform that role in probate court.
3. In Illinois, estates with total assets of less than $100,000 do not have to go through probate. You can use something called a small estate affidavit to get assets transferred.
4. In Illinois, an original will is supposed to be filed with the county circuit clerk within 30 days, and it becomes a public document. However, this doesn't always happen.

One of your first projects as executor or trustee needs to be discovering assets. That process may be quick — one house, one car, one checking account. Or it may be extremely complicated — accounts at 18 banks, five brokerage firms, four life insurance policies, 10 fields in two states, stocks held directly with multiple corporations, or even assets still held in the name of a spouse who died 15 years ago. It can sometimes take years to find it all. (If you want to do yourself and your heirs a favor in your older years, simplify.)

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Besides the assets, the estate you are handling may have liabilities. You need to find out quickly what loan payments need to be made and perhaps what real estate and income taxes need to be paid. Once you have a comprehensive list of assets and liabilities, you can discuss the applicability of estate taxes with a CPA or attorney.

As the deceased's representative, you are responsible for filing the final tax return for the deceased, provided enough money was made to require a tax return. A trust will also need a tax return for one or more years if it makes enough income to necessitate filing.

One important move that we see missed often is getting an appraisal on inherited real estate. The heirs get a stepped-up basis to the fair value on date of death. To support that date of death value, the IRS will want to see you either sell the property in short order or get an appraisal from a licensed appraiser. We sometimes see the heirs retain the property for several years before liquidating it and then have no support for their stepped-up basis.

Differences in Deeds

Other items you should seek as the executor include a death certificate to show life insurance companies, banks, brokerages, or probate court. Be sure to communicate with every party who administers assets of the deceased.

You should also find and read any lease agreements with farm operators and deeds to the real estate, which will verify who owned the properties upon death. Some real estate transfers to heirs automatically upon death via a life estate deed or a transfer on death instrument.

In the life estate scenario, someone is the life tenant, which means that person owns the property as long as he or she lives, and someone is the remainderman (or woman) who gets the property after death.

There are differences between various types of deeds and what they mean to the estate, which you should discuss with an attorney.