Oh, I wish I had had this list before engaging as an executor before starting Executor Support. There are so many ways to get off track, but none of them are rocket science. Maybe it will help save you significant time, frustration, and money!
1. Not being prepared to begin the process.
The first mistake? My friend calls it “Ready, fire, aim!” I’m a smart, well-organized person with an advanced degree. How hard can this be, really?
It’s not rocket science, but it requires extreme organization, excellent record keeping of legal, financial, and personal documents, and persistence in abundance. In dealing with family members, a degree in psychology and advanced listening skills would come in handy. A false move can be costly in time or money.
2. Not counting the cost in time—an average of 570 hours.
This is the average time—apart from lawyers, realtors, advisors and others—it takes an executor to perform their duties.[footnote] Most people have no idea how much work there is.
3. Not realizing that an executorship involves fiduciary duty, putting the interests of others ahead of their own: the estate itself—carrying out the stated instructions of the deceased person—and the beneficiaries of the estate. It’s a high bar to clear and the executor may be personally liable for mistakes in certain circumstances.
4. Not realizing the additional complexities of carrying out executor duties in the context of a pandemic. For example, one executor in a higher risk covid category needed a “signature guarantee” (not notary) on a document, something which can typically be obtained from a bank where the individual has an account (not the deceased person’s bank). The executor went by the bank, but the branch was closed in the bank’s effort to cut back on expenses. Calling the “1-800” number, they were put on hold for over an hour. Since the person was in a high risk category, they asked if a representative of the bank could meet them outside the front door. Bank policies precluded that. The bank also declined to do it at the drive through window. Finally, deciding to go ahead and go inside, they were left waiting in a crowded lobby while other customers were served.
5. Not communicating well with all parties involved: beneficiaries (some communications are required by law—you can’t keep them in the dark), lawyer(s), tax advisors and/or book keepers, beneficiaries, other family members in some circumstances, and professionals involved in safeguarding, selling, and disposing of assets.
6. Discounting the “44% rule”—families are complicated. 44% of families have experienced family conflict while settling a loved one’s estate. It’s a huge number and many executors have a horror story of family members who cut off communications, get angry, or may even sue over a will. If you step back, it’s understandable: people are grieving, they are under stress, they may feel they were promised something that does not appear in the will (the executor does not have the authority to override the will), they may be mad about some aspect of the outcome (including who was appointed executor), the list is as long and complicated as the families themselves.
7. Asking for help from friends rather than professionals. Generally people do this in order to save money. Frequently is doesn’t. Timeliness may become a costly problem as people feel they are “volunteering,” don’t follow through well, or don’t meet the executor’s and estate’s requirements.
8. Waiting too long or failing to act. Executors may already have a full-time job or family responsibilities. It’s important not to miss certain legal, communications, or tax deadlines. Generally speaking, it costs the estate less money when all the work is completed in a shorter timeframe. You can imagine that if an estate stays open into another tax year, that will require the expense and frustration of another estate income statement and tax return. Similarly, assets such as houses and cars may deteriorate over time if not used or maintained properly.
9. Seeking to make the estate more profitable. This is not the executor’s job if it means taking on undue risks. It is especially unwise if it is not the expertise of the executor.
10. Advertising the estate to creditors incorrectly. This can open up the estate to future claims even after the estate is closed and distributed, exposing the executor to potential liability.
11. Not following the court’s or the lawyer’s instructions. Every executor should obtain the services of an experience lawyer at a negotiated fee and with a signed agreement.
12. Not having a budget. You need one at home, and you need one for the estate as well. Planning for the timing of “cash flows,” revenues, and expenses is crucial.
13. Not staying organized. Having a detail orientation is crucial. If this isn’t your natural gift, make sure you get help.
14. Failing to: Document. Document. Document. Make sure you have a great physical and electronic filing system. We recommend getting a scanner capable of scanning longer documents. You’ll need these records for tax returns, to file with the court, and to protect yourself if someone questions your work.
15. Improperly paying claims. Follow the lawyers‘ instructions.
16. Closing the estate improperly. Again make sure you’re consulting your lawyer and following instructions specifically.
17. Not distinguishing “probate” from “non-probate” property. Certain property may fall outside the estate and may not be your direct responsibility. You may still want to assist to protect the beneficiaries, but don’t improperly include them in the estate.
18. Not appraising and paying tax on tangible personal property as required by federal and state tax laws.
19. Not fully understanding and following the exact terms of the will. Consult your lawyer.
20. Incorrectly allocating income between the tax returns of the estate and the person who has died.
21. Failing to choose an advantageous fiscal year for the estate.
22. Making early distributions to beneficiaries that expose the executor to personal liability.
23. Improperly allocating taxes among beneficiaries.
24. Not getting legal authority (letter of administration) to act as executor on an expedited basis. You can’t fulfill many tasks of executorship without them.
25. Not getting securities into the name of the estate and liquidating them on expedited basis, thus exposing the estate to market fluctuations. Consider this theoretical case. A large estate is invested entirely in stocks. Taxes are based on the value on the date of death at a rate of 50%. The stock market declines 50% from the date of death to the date the securities are sold. All of the proceeds are used to pay taxes and nothing is left for beneficiaries or to pay other estate expenses. This is perhaps a farfetched example, but the risk of a major decline is real.