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Named as executor? Get organized and seek help

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Being named an executor of an estate is a significant responsibility, but you don’t need to be a legal or financial expert to do a good job. Getting your details organized and then seeking professional advice can take you a long way.

It’s natural to feel honored if you’re asked to be an executor of an estate (also known as a “personal representative” in some states), but it’s wise to know what the role entails. Winding up someone’s financial affairs once he or she has passed away is a big responsibility and requires patience, time, and organizational skills. Depending on the circumstances, you may require assistance from someone with more experience, like an attorney, accountant, or financial advisor. Even a seemingly simple estate can be a complicated undertaking based upon factors like asset composition, family relationships, and applicable state and federal laws. Serving as executor can be one of the most complex roles an individual can undertake. The responsibilities are extensive and often highly technical, and the commitment of time and emotional energy can be daunting.

What is an executor?

An executor is a person responsible for doing everything necessary to administer the estate of the deceased individual (generally referred to as the “decedent”). This may include tasks like settling the decedents’ debts, filing the necessary tax returns, and distributing property to beneficiaries in accordance with the terms of the will. Probate is the court-supervised process of settling a decedent’s financial affairs.

If you are named as executor under a will, you must qualify and be appointed by the probate court in order to act. Once you’ve been appointed, the court will issue you a set of papers that signify you as the person authorized to act on behalf of the estate.

What is expected of an executor?

The executor is a fiduciary, meaning he or she has an obligation to act in the best interest of the estate and exercise all due care in carrying out his responsibilities. As such, the law requires that the executor be:

Diligent – meaning that he or she must exercise care in the performance of his duties.

Loyal – meaning that he or she cannot unfairly benefit themselves at the expense of the estate.

Impartial – meaning that he or she cannot arbitrarily favor one beneficiary over another.

Serving as executor doesn’t necessarily require any particular legal or financial expertise, but it does require you to be honest and conscientious. Even if you decide to proceed without formal legal guidance, you’re responsible for strictly following the law. The personal financial liability for errors overlooked or inappropriate tax elections and decisions while serving in this capacity can be substantial. Therefore, it’s generally a good idea to consult with an experienced professional in order to protect yourself and the beneficiaries of the estate.

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The Digital Era

Just a few years ago, an executor on the hunt for important documents might find them in a filing cabinet or a safety deposit box. Today, there are many digital assets to consider, plus the usernames and passwords to access them. The best gift an executor can receive is a detailed list of assets and how to find them.

Can we talk?

If you’re asked to serve as the executor of a friend’s or family member’s estate, you might want to ask a few questions before you say “yes.”

  • Ask the person to describe the terms of his or her will to you so you are better prepared to carry out their wishes, and can determine whether you’re comfortable with the plan.
  • Determine the location of his or her legal documents, and how to access them in a timely manner.
  • Request lists of their assets and liabilities, including his or her financial accounts and passwords (or ask that this information be stored with their legal documents, and update it regularly).
  • Ask why he or she selected you, and what they hope you will accomplish, on their behalf, after their passing.

Executor’s checklist

The length of time required to close an estate depends on the complexity, assets, debts and family relationships. If you’ve been named executor of an estate or are considering the choice of executor for your own estate plan, it’s important to understand the process and responsibilities. While not all inclusive, this checklist is designed to help. Most importantly, laws governing the administration of estates vary from state to state. Please consult with your attorney or other advisor to see how this information applies to your particular situation.

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Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

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