subject: How To Be A Good Executor, Part One [print this page] This is Part One 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. The discussion that follows 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.
1. Diary everything that has a filing or payment deadline. This includes reports that will be required to be made to the Surrogates Court, the decedents income tax returns, the estates income tax returns, estate tax returns and estimated estate tax payments. Related to this is that the executor should always apply for and obtain an extension of time when necessary, for example, if an estate will not have the federal estate return or the New York estate tax return prepared within 9 months from the date of death, then the executor should apply, before the end of the 9-month period, for an extension of time in which to file. This will avoid penalties for late filing. Also related to this is that an executor should never place him or herself in the situation where the estate incurs a financial penalty of any kind. Such a penalty likely will be surcharged against the executor. (A surcharge occurs when an executor makes a mistake and the Surrogates Court orders the executor to personally pay to the estate or to pay directly the cost or expense or penalty caused by the mistake).
2. Always retain professional help, typically an accountant/tax preparer and an attorney. As an executor, you will not be criticized for doing so, even though the estate incurs an expense, but you likely will be criticized for not retaining professional help.
3. Keep detailed, contemporaneous records. At a minimum, such records should include an estate checking account and check book, a contemporaneous detailed explanation of each expenditure, and a daily log of your activities, travels, meetings and decision-making as executor.
As an executor, you will be entitled to be paid statutory commissions for your services. However, many Surrogates Courts will require that you earn the commission, and a very good way to demonstrate that you have earned a commission is through the daily log.
4.Collect and place under your control all assets and all benefits to which the estate may be entitled. If you miss an asset, and eventually are unable to collect it because you delayed or were not diligent, you may be surcharged and have to personally pay its equivalent in value to the estate.
5. Always protect personal and real property of the estate. Protection includes keeping adequate insurance in place, including fire, casualty and liability insurance on real property. It also includes winterizing vacant real property. Any damage caused to property because you did not do so or because you failed to keep property insured will be surcharged against you.
6. Do not hang on to stocks, bonds, and other securities and financial investments. You will need to sell or otherwise liquidate them as soon as possible or, if prudent, distribute them in kind as soon as possible. If you hang on to securities beyond a reasonable time (a reasonable time being the time it would take you to sell in the ordinary course after you are appointed as executor), and the securities decline in value, you will likely be surcharged. Remember, your duty is not to make money for the estate - your duty is to preserve what the estate has, that is, to not lose money.
In Part Two, we will discuss avoiding other mistakes that Executors may make.
