Estate plans consist of legal documents that are signed, notarized, and kept safe in places like safety deposit boxes. But they also consist of people. And while the documents themselves serve as the foundation for an estate plan, what ultimately makes the plan work is the people who carry it out and translate it into reality.
It takes a lot of leg work and logistics to turn an estate plan into a bequeathment, and it is the executors and the trustees of this world that carry out that important work. Yet while the two are similar, there are many fundamental differences between a successor trustee and an executor. Understanding their respective duties and differences can help paint a better picture of how estate plans work, and how you should approach them.
A successor trustee is someone called to take up the mantle of trustee after the death of the previous trustee, who is often also the grantor/trustor of a respective trust.
Trusts, in this sense, are both a legal agreement and a legal entity of its own kind. A trust exists to hold assets and property for a respective beneficiary or multiple beneficiaries. Until it is dissolved, the trust must be managed by a human element. This is the role of the trustee. In the case of most revocable trusts, the first trustee is also the trust’s grantor or creator.
This means whoever funds assets into a trust with the express purpose of bypassing probate and distributing them directly to their loved ones will also want to continue having access to said assets while alive. But after death, someone else must take on the mantle of trustee. This is where the successor trustee comes into play.
If the grantor of the trust named someone else as trustee while still living, they might also name a successor trustee in case the original trustee passes away, or no longer wishes to resume their duties as trustee. In either case, the successor trustee’s role is to take on the duties of a trustee, should the first trustee quit or die.
The duties of a trustee are defined by their respective trust document. Not all trusts are created equal – some act as vehicles for the bequeathment of assets after death, while others act as investment funds paying out income to multiple people over the course of a decade.
A trustee’s role ranges from taking care of property held within the trust to reallocating funds, making conservative investment decisions, buying and selling stocks, and managing financial instruments. When the grantor has died, it also becomes the trustee’s job to notify any relatives, family members, and relevant financial institutions of the death, and provide copies of the trust document to each respective beneficiary.
A trustee may also need to work with the grantor’s executor to close accounts and pay off any debts, if the trust is revocable. Then, the trustee will distribute the contents of the trust as per the trustor’s wishes.
While trustees are usually paid through the trust itself, they cannot act with their own enrichment first and foremost on their mind. A trustee has a fiduciary duty to the beneficiaries of the trust, meaning their priority is to act in the interest of the beneficiaries, rather than their own.
Being a trustee may require significant investment knowledge and experience in handling multiple assets. This is why, in many cases, banks and other financial institutions are named as trustees rather than individuals. The benefit of naming a bank as a fiduciary is that a trust fund managed by a bank can continue to exist for as long as the bank does.
But not every trust is designed to invest and reinvest the family fortune and pay out annual dividends. In most cases, the role of the trustee is like that of the executor: managing and executing the bequeathment of assets after the death of a loved one.
An executor is named by the probate court in the event of a person’s death, at the beginning of the probate process.
When we die, a medical professional creates a death certificate as legal proof of our passing. This document must be presented to the local courts of your county of residence to begin probate.
In a probate case, a judge will appoint a representative of the family to act as executor for the decedent’s estate, and carry out their will (or, in the absence of a will, the state’s intestacy laws).
Executors effectively manage and distribute the assets held within a person’s estate, under the supervision of a probate court. However, prior to splitting up the assets and distributing them among the living, an executor must first settle the decedent’s remaining debts and financial obligations, down to their last tax return (unless they are survived by a spouse and filed jointly).
An executor’s job officially begins in the probate court, but they are often also the ones responsible for kickstarting probate by filing for the respective petition to probate. A person can name their executor in their will – the probate court usually respects the decedent’s wishes with regards to their executor of choice.
An executor’s duties begin with notifying everyone to whom the death of the decedent might be relevant, including loved ones, relatives, beneficiaries, and of course, creditors.
Afterward, the executor must make a public announcement of the decedent’s passing and their probate case in the local newspapers. This is part of the process of notifying creditors.
There are state-specific differences in the way probate works, as well as the roles of the executor, and one common difference is the time creditors get to lay claim to an estate. During this time, the executor must wrangle and manage every item in the decedent’s estate, make a thorough and accurate inventory of their possessions and assets, and hire a professional valuator to determine the value of the estate around the date of death.
If there is no will, and multiple beneficiaries, larger assets such as investment properties might have to be sold before they can be distributed equally, in the form of cash. It becomes an executor’s job to play the role of realtor (or hire a realtor) and initiate a probate sale to liquidate the asset in question.
Probate sales are different from regular real estate sales, as they usually involve selling the property as-is (no home improvements), and at a reduced (quick sale) value. However, because there are also significant deposit requirements and a potential courthouse bidding war during each sale, most probate sales are picked up by real estate investment companies.
Once all accounts have been closed, all debts have been paid, and all assets are accounted for, an executor must distribute and close the estate.
A trustee manages a trust, which may involve managing investments and paying out dividends to beneficiaries until the requirements for the trust’s dissolution are met. An executor is in charge of managing an estate and distributing it under the supervision of a probate court, after satisfying a decedent’s final financial debts and obligations.
While similar, the two roles are often very different and work together to complement each other in a comprehensive estate plan.
You can use a trust to minimize the size of your probatable estate, then use a will to pour over any final large assets into your trust upon death, for example. This helps speed up probate while giving more control to your trustee. If you have been named as either a trustee or an executor, then working with an estate planning professional can help you navigate your newfound tasks and responsibilities.
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