The law is full of terms and titles that can seem confusing to the average person who is just trying to plan his/her estate. They can be even more daunting for individuals who have been appointed to manage the estate of someone who is recently deceased.
Trustees and Executors are similar in many ways. They are both fiduciaries (someone who is put in charge of someone else’s money). A Trustee is a fiduciary over a Trust, and an Executor is a fiduciary over a probate estate. Basically, the executor is the person in charge of your estate. By “estate” I mean everything that is owned by you at the time of your death – your house, your furniture, your bank accounts and investments, all your knick knacks… and even your debts. The trustee, on the other hand, has exclusive control over everything in the trust. The trust is treated the same as a business – it is its own entity and can own things in its own name, so anything owned by the trust is not part of the estate.
How Does a Will Work?
When a person dies, everything that they own – property, possessions, money, shares and everything else, is described collectively as their estate. Your last will and testament is a very important document that ensures your wishes are carried out after you die. You do not need to be old, sick or wealthy to need a will. The truth is, everyone of legal age should have a will. Even if you are young, you probably have possessions that you care about. In the case of accidental or unexpected death, without a will there is no way for the courts to know what your intentions were for your possessions.
When you write your will, you can decide to leave amounts of money, or particular property, or specific possessions to named people or charities: these would be called specific gifts. Everything not left in specific gifts is described as their residuary estate. So that means that if no specific gifts are listed, all property becomes the residuary estate. In a person’s will, the residuary estate is often called the “trust fund”. It is held by the trustees until it is distributed to the people who are going to inherit it.
A trust is a legal entity that can “own” assets. The document looks much like a will. And, like a will, a trust includes instructions for whom you want to handle your final affairs (the trustee) and whom you want to receive your assets after you die.
The trustee manages the assets that are in the trust. Many people choose to be their own trustee and continue to manage their affairs for as long as they are able. Married couples are often co-trustees, so that when one dies or becomes incapacitated, the surviving spouse can continue to handle their finances with no other actions or steps required, including court interference.
What Do Trustees Do?
The roles of executors and trustees are different, even though they may be the same people.
The most important thing to remember when you step in as trustee is that these are not your assets. You are safeguarding them for others: for the grantor (if living) and for the beneficiaries, who will receive them after the grantor dies.
As a trustee, you have certain responsibilities and you must follow the instructions in the trust document.
- Protect and preserve the trust’s property and assets.
- Defend all beneficiaries and the trust against legitimacy challenges.
- Separate the trust’s assets and property from the trustee’s property. Trustees who co-mingle assets are liable for any losses as a result of combining wealth.
- Handle all assets with care and attention to detail. Complex assets may require greater attention to detail.
- When acquiring, selling, managing or investing the trust’s property, the trustee must proceed with caution.
Trustees, Executors and Guardians
If you have children under 18 when you die, then any property you leave to them automatically goes into trust. So the role of the trustee is particularly important.
It is usually recommended that, if your executors are to be the trustees, they should not be the same people as the guardians, so that they can fulfill their trustee duties objectively.
Of course, you would expect trustees and the guardians to work closely together to ensure that the children are provided for properly before they reach 18. When the children become entitled to their inheritance, the trustees of course have the obligation to pay it over to them.
Being the executor of an estate is not a task to take lightly. An executor is the person responsible for managing the administration of a deceased individual’s estate. Although the time and effort involved will vary with the size of the estate, even if you are the executor of a small estate you will have important duties that must be performed correctly or you may be liable to the estate or the beneficiaries.
The executor is either named in the will or if there is no will, appointed by the court. You do not have to accept the position of executor even if you are named in the will.
What Do Executors Do?
- Distribute assets according to the will
- Maintain property until the estate is settled (e.g., upkeep of a house)
- Pay bills for the estate
- Pay taxes on the estate
- Make court appearances for the estate
Should Your Executor and Trustee Be the Same Person?
Your executor and successor trustee can be the same person, and it’s actually a quite common arrangement. But whether they should be the same individual can depend on several factors. It helps to understand the roles of the executor and the successor trustee in your estate plan as you make a decision because some of factors can be personal.
- Advantages of Naming the Same Person
Naming the same person as the executor of your estate and the successor trustee of your trust will minimize expenses and will streamline the probate process. The attorney helping to settle the estate and the trust will only have one person to work with when addressing any complicated issues that may come up. Your estate is responsible for paying the attorney, so the less work they have to do, the more money remains for your beneficiaries.
- Disadvantages of Naming the Same Person
You might want to name a different executor and successor trustee to provide checks and balances when it comes to settling your estate and trust. No one single person would have unilateral control over everything. Many actions would require cooperation between the two of them. Of course, having multiple people involved can bog down settlement of your estate if they don’t get along or have diametrically opposed ideas about actions that should be taken.
Do I Need an Attorney for Help with Probate Issues?
A skilled and knowledgeable probate attorney will make the probate process easier and run much more smoothly. Timing is incredibly important, and state laws vary widely. A probate attorney can help you understand your state’s laws, and will ensure all deadlines are met. Intestate estates and contested wills could especially benefit from the assistance of an experienced probate attorney.
If you would like some guidance as you go through the process, a probate lawyer can help. To schedule a meeting with an attorney from Olson Probate, please call 714-847-2500.