05 Dec 13 Common Mistakes Of Executors
The executor named in a will is the fiduciary who is responsible for (1) collecting the assets that pass by probate; (2) paying the debts, taxes, expenses and fees of the estate; and (3) distributing the assets in accordance with the terms of the will. The following are some of the most common mistakes that executors make:
- Assuming you can act as executor without court approval
Although you may be named as the executor under the will of the deceased, you have no authority to act as executor until the court approves your appointment and either Letters Testamentary or Letters of Administration are issued. Sometimes executors are not qualified to serve (i.e., convicted of a felony or of a crime of moral turpitude or if disabled or failing to appoint a resident agent if the executor is not a Texas resident).
- Assuming all wills must be probated
Some assets have a beneficiary designation (i.e., life insurance, retirement accounts, annuities, etc.). Some bank accounts are opened as joint with right of survivorship or are paid on death. Even real estate can pass outside the terms of the will (i.e., life estate deed, transfer on death deed, pursuant to trust, etc.). Also, cars can pass outside of probate if the certificate of title has a beneficiary designation or is titled as joint owner with right of survivorship. As a result, there may not be a need to probate a will. However, just because you have assets that do not pass by probate, this does not mean that you should fail to have a will as the beneficiary may need protection from various situations (creditors, disability, marital problems, etc.) or the beneficiary could have predeceased you. It should be also noted that if you own a life insurance policy that has a cash value and someone else is the insured, probate may be needed to transfer ownership of the policy.
- Waiting too long
Usually it is best to probate (getting court approval) the will as soon as possible. A delay usually frustrates all potential beneficiaries. You have 4 years to probate the will under Texas law.
- Failure to timely communicate with beneficiaries and failure to provide a copy of the will
Lack of communication often leads to mistrust. Furthermore, an executor has a duty to provide a copy of the will to beneficiaries.
- Not collecting funds due to the estate
If there are funds that were due to the deceased, the executor has a duty to collect such funds. For example, if the deceased was going to pursue a lawsuit, then the executor may have a duty to pursue or continue the suit (or potential liability is risked for the executor).
- Ignoring claims against the estate
If there is a bill owed to creditors of the estate, the executor could have personal liability if all assets are distributed and the creditor gets a judgment against the estate.
- Failing to provide notice to creditors
Under Texas law, the executor must at least file a notice in a local paper of general circulation of where to send any claims owed by the estate.
- Distributing too early
If one beneficiary asks for a partial distribution in advance and then the executor finds out there are more bills, taxes, fees, etc. due than expected and there are insufficient funds to pay the debts, then the executor may have personal liability. The beneficiary who got the “advance” often will have spent the money distributed.
- Distributions that do not follow terms of will
If the deceased told the executor verbally how she or he wants assets to be distributed and the executor makes the distribution which is inconsistent with the will, then the executor can be personally liable.
- Portability election
If the deceased is married and the surviving spouse could potentially have an estate that may grow beyond the estate tax limit, then an estate tax return should be filed within 9 months of death (even if it is not a taxable estate upon the death of the first spouse to die) to potentially eliminate estate tax on the surviving spouse’s estate after his or her death.
- Failing to open an estate account
If an asset of the estate is sold or funds owed to the estate are collected, then the proceeds should be deposited in an estate account. A tax identification number would be required.
If the executor gives himself or herself priority of a personal property item or anything else, personal liability is risked.
- Taking compensation for acting as executor
When a beneficiary inherits from the estate, then generally there is no income tax on the inheritance. However, an executor who is paid for serving as executor is taxed on the compensation as income. Thus, if the executor is also a beneficiary, then sometimes it is best to not take an executor’s fee.
If interested in learning more about this article or other estate planning, Medicaid and public benefits planning, probate, etc., attend one of our free upcoming Estate Planning Essentials workshops by clicking here or calling 214-720-0102. We make it simple to attend and it is without obligation.