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Legal VIEW

Executor's Functions Are Important

December 11, 1986|JEFFREY S. KLEIN

Who handles a person's financial affairs after death? Who makes sure that person's self-run business stays afloat or reinvests money when a CD account comes due?

The estate will eventually be distributed to the heirs, but they are not authorized to manage the property involved, at least not until it is formally transferred to them. So who takes care of things in the meantime?

The executor of the estate, that's who. The person is named in a will, or if death occurs without a will, is appointed by the probate court and is called an "administrator."

Two Inquiries

In the last few weeks, two readers asked the same question: What is it that an executor does? Both readers were about to be named the executor in the will of a colleague and wanted to know what they were getting themselves into.

The duties of an executor can be quite varied, depending upon the nature of the estate, but basically, the executor is the person legally charged with the responsibility for all of the property during probate and sees to it that the property is distributed as set forth in the will. So, during his tenure, an executor may buy and sell property, vote shares of stock, pay debts, sue or be sued on the deceased's behalf, collect rent, file tax returns and make many other business decisions.

As you can imagine, being an executor can take plenty of time and effort, and perhaps even some technical expertise, especially if the estate is large, complicated or includes an on-going business. In essence, the executor stands in the shoes of the "decedent" (that's how lawyers refer to the dead) and makes those reasonable business judgments that somebody has to make while the estate is winding its way through probate.

No Immediate Work

If you've been named an executor in a will, there will be no immediate work to do, as long as your colleague is still breathing. And you should breathe easier to know that all this hard work--and often quite simple work--does not go unrewarded. In fact, being an executor can be quite lucrative, again, depending on the size of the estate and the amount of work you'll have to devote to your new job.

In California, the executor receives a standardized percentage fee based on the size of the estate. As the value of the estate increases, the percentage decreases. The fee is 4% on the first $15,000, 3% on the next $85,000, 2% on the next $900,000 and 1% above $1 million. The court may also award additional fees for extraordinary services. The probate lawyer is paid the same percentage rate, and both are paid out of the estate at the time the heirs receive their loot.

The news that you've been named an executor of an estate should not come as a surprise, after death. You should know about it in advance. After all, you may not have the time, training or inclination to serve. Although you don't have to take the assignment, no doubt it will be more difficult to say "no" to someone who is not around to hear.

There are two lessons here, when it comes to your own will. First, before you select an executor, discuss the possibility with your prospective candidate. See if the person is interested in, or capable of, handling your affairs. And second, always name a successor-executor in case the primary choice dies, isn't available or refuses to serve. (That's another good reason to pick an executor who is in good health and isn't planning to move away from the area.)

Often, one of the heirs is named executor because of the obvious self-interest in caring for property that will be eventually be his. A family member or close friend are also good choices. But no matter what, make sure it is someone you trust completely.

You can name a financial institution as executor--most banks have departments to administer estates--but Denis Clifford, author of several estate-planning books, correctly advises against naming a corporate executor unless special expertise is needed to operate a business.

"You want someone human, with genuine concern, not an institution, to do the job," he writes.

Bond Required

The executor must post a bond to ensure proper performance. If you trust the person, there's no need for a bond, so make certain your lawyer includes a provision in your will relieving the executor of the legal obligation of posting a bond. (This is a standard clause in most lawyer-drafted wills.)

Although it may sound like a complicated process, being an executor of an estate is usually not too difficult. Your job is done usually between six months and two years, and the estate is often relatively dormant during that time.

And if your first decision is a good one, the whole process can be relatively painless. The first decision is the most important one: picking an experienced probate lawyer to represent the estate and guide you through the probate process. (A lawyer is not mandatory and with simple estates, you might even be able to handle probate yourself, after doing some research.) The lawyer, and especially his paralegal and legal secretary, can help you understand the seemingly endless probate forms.

Try to find a lawyer with experience in probate matters. Most local bar associations operate lawyer referral services and list attorneys who specialize in probate. It might also be helpful to find a lawyer who was familiar with the legal or financial affairs of the decedent. (You remember who that is.)

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