subject: How To Be A Good Executor, Part Two [print this page] This is Part Two of a short article on how to avoid some of the mistakes that executors of wills may make during the administration of an estate.
Much of the discussion that follows will be easier to understand if you keep in mind that an executor is a fiduciary, that his or her primary obligation is to the estate and to the beneficiaries of the estate, and that the estate is a liquidating entity, that is, a goal of the executor is to distribute assets and go out of business. Our discussion that continues below is by no means exhaustive but is intended only to highlight mistakes commonly made by executors, especially executors who are proceeding without an estate attorney.
7. Certain expenses have a priority over payment of income and estate taxes. Such expenses generally are the funeral bill and estate administration expenses. Administration expenses would include such things as expenses for accounting services, tax preparation services, legal services and appraisal fees for appraising personal property and real property. Administration expenses also include the statutory commissions to which you would be entitled for your service as an executor. Generally speaking, only after reserving a sufficient amount for these expenses should you pay such things as estate taxes or estimated estate taxes, debts and bequests.
8. In New York State, a creditor or claimant has seven months from the date of your appointment as executor to file a claim against the estate. If you do not wait the full seven-month period and you fully distribute prior to the end of the seven-month period, and then a claim is made against the estate, you may end-up being personally liable for payment of the claim.
9. Keep contemporaneous records and always be prepared to fully account and to fully explain each expenditure. Keep in mind that an estate accounting to the beneficiaries is more than just keeping a ledger. The burden is on you to justify each and every expense and payment that you have paid.
10. Do not continue in a business, except upon informed consent from all beneficiaries and, in most cases, obtaining an order of the Surrogates Court permitting you to do so. If you do continue in a business that the decedent had owned, you should in most cases separately incorporate or form a limited liability company for the business, to protect the estate from liabilities and claims that might arise in connection with continuing the business.
11. Maintain a periodic update, perhaps something in the nature of an email newsletter, to keep the estate beneficiaries advised of what you are doing and of the status of the administration of the estate. An informed estate beneficiary is, in my view, someone who is less likely to be adversarial and less likely to be impatient with you.
12. Do not list real property for sale with a broker without including, as part of the listing agreement, a disclaimer concerning title. The reason for this is that you, as an executor, do not necessarily know the state of title to the real property but, when listing the real property for sale with a broker, you will be representing that the estate has good title. The disclaimer addendum to the listing agreement would be along the lines of representing that you as an executor do not have actual knowledge of any title defects or marketability problems but that if a closing does not take place due to unknown title defects or marketability problems, then a commission will not be payable by the estate.
13. Do nothing that may be construed to be self-dealing or which even has the appearance of being self-dealing. As a fiduciary, you must make a diligent effort to not personally benefit (other than by earning commissions) from your administration of the estate.
