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Mistakes to Avoid if You Are Named an Executor of an Estate
Published December 26, 2017
Serving as the executor of an estate is a serious responsibility that brings with it legal duties. Executors who fail to properly manage an estate can face legal consequences, including personal liability for losses. If you have been named as an executor, you should be aware of common mistakes that you should avoid.
- Paying the wrong bills first. Estates typically have a variety of debts, and one of the executor’s responsibilities is to settle them. However, simply paying invoices as they come in would be an error. Executors must familiarize themselves with state law requirements regarding the priority order of debt payments for estates. For example, funeral expenses and tax debts take priority over credit card bills. An executor who pays off lower-priority debts and leaves no way to pay a tax liability may become personally liable for the payment. When in doubt, executors should consult with an experienced estate planning attorney who can advise them as to which debts take priority.
- Making risky investments. Settling an estate takes time, and during that time the executor has a responsibility to manage the estate’s assets responsibly. That generally includes a duty to preserve the value of assets, not increase them, which means that an executor should err on the side of more conservative investments. If the estate holds investments in bonds or money market funds, an executor should not sell them to invest in a riskier stock portfolio, even if the expected return is much higher. If the stocks lose value, the executor could face a lawsuit from the estate’s beneficiaries for breach of fiduciary duty.
- Failing to secure tangible assets. As of the date of death, both tangible and intangible assets belong to a new entity, the estate. Executors have a duty to safeguard the estate’s assets while the estate is being managed. When the home of the deceased contains valuable tangible assets, such as jewelry or art, and family members have access to the home, disputes can arise. The executor must act quickly to take an inventory of the estate’s assets, and have tangible items appraised and securely stored until they are ready to be distributed according to the decedent’s plan.
- Failing to manage real estate properly. Real estate can be a difficult asset to administer. If one or more beneficiaries is living in a home and another wants it sold quickly, this can cause problems. The executor must handle responsibilities such as choosing a real estate agent and deciding the listing price. Before property is sold, the executor must make sure that homeowner’s insurance continues to be paid and the property is properly maintained.
Learn more about elder law, estate planning and special needs planning at littmankrooks.com, elderlawnewyork.com & specialneedsnewyork.com. Have questions about this article? Contact us.
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