Managing Assets During Probate & an Executor's Legal Duties
The probate process can last for months or years, in some cases. You have a high level of responsibility as an executor during this time to prevent assets in the estate from being damaged or suffering a steep depreciation in value. This is known as a fiduciary duty, which means that you must make decisions regarding the estate’s assets based on the best interests of beneficiaries and creditors. Executors who violate their duty may face legal action by beneficiaries or creditors, although they cannot be held accountable for a decline in asset value unless it resulted from their unreasonable actions.
You should make sure to avoid actions that put your interests above the interests of the estate, such as lending yourself money from the estate or selling an estate asset to your family or you. You should keep your own assets separate from estate assets and keep records of your actions. Also, you should treat each beneficiary impartially and document your interactions with them. Any investments that you make should be especially prudent and conservative, even if you would invest your own money more aggressively. The goal is to prevent depletion of estate assets rather than maximizing gains. If the will provides specific instructions for a certain asset, you will need to carry them out even if you disagree with them.
Accounts for Managing Assets
Opening an account in the name of an estate or trust can be a helpful way to manage assets, deposit estate income, and pay bills, taxes, and probate costs. A simple checking account may be enough during the time that probate lasts. If the decedent already has a bank account as the trustee of a living trust that you are managing, you probably can use that existing account. In the event that you are managing a trust over the long term, you may want to set up an account to handle both investments and cash. You will need to get a taxpayer ID number for the estate to open any type of account.
The account can contain all of the funds from the decedent’s bank accounts, as well as any income created by estate assets. However, it should not contain the contents of payable-on-death accounts, since these can be transferred directly to beneficiaries. You should keep records of each transaction involving the account.
Managing Real Estate and Vehicles
If you are managing the decedent’s home or vacation home, you will want to take security measures to protect the property if it is vacant. You also will want to keep up with maintenance, handle insurance and mortgage payments, and pay utilities and property taxes. In the event that the decedent was renting out a property that they owned, you should make sure that tenants continue to pay rent and comply with the lease terms. You have the right to end a tenancy and possibly evict a tenant if problems arise. Often, a pre-existing property manager can help you.
You will need to keep up with any loan payments on vehicles in the estate, as well as handle maintenance and keep them safe. An insurance policy may not cover you if you plan to drive an estate vehicle, but you may be able to get the estate and the executor (you) named as the insured on the policy. Generally, as with real estate, you should try to get vehicles transferred to their intended new owners efficiently.
Managing Money and Investments
Stray cash that you find when going through the decedent’s belongings should be placed in a sealed envelope in the presence of a witness. It should be signed and dated before being put in a safe place. An executor may also collect money owed to an estate from individuals or entities in debt to the estate (or the decedent) and deposit those funds into the estate account.
Once you have opened a bank account for the estate, you should close the decedent’s existing bank accounts and transfer all of the funds to the estate account. You should also review the decedent’s investment portfolio to identify any stocks that appear to be volatile. While you probably do not need to take any action regarding conservative, ordinary types of stocks, you may want to sell volatile stocks and put the money in safe investment types like government bonds or in the estate bank account. (Some examples of stocks that tend to be volatile include individual and small business stocks.) Any dividend checks or other income from investments also should go into the estate bank account.
Managing Business Assets
While you probably should transfer or sell a business as soon as possible, you will be responsible for operating it in the meantime. This may require retaining someone else to operate it and getting help from other people who are already involved in running the business. However, you will be responsible for keeping up with business taxes and making sure that any money problems are addressed. In deciding whether to sell or close a business, you will need to follow the wishes of the decedent or, if those are unclear, the best interests of the beneficiaries.
If the decedent was involved in a distinctive form of business, such as a limited liability corporation (LLC) or a closely held corporation, you will need to research the governing documents of the business and state law for guidance on how to handle the decedent’s interest.
Selling Assets as an Executor
You may want to sell property if it is depreciating rapidly and resulting in a loss to the estate or if the decedent left behind significant debts that need to be paid. Also, selling an asset may be inevitable if beneficiaries who have been left an asset to share do not want to share it.
You should consult the terms of any will as well as state law. The will or the law may specify certain types of assets that you should sell first if you need to pay off debts. You also may need to get permission from the probate court or permission from a beneficiary to sell an asset. Or you may need to notify anyone with a potential interest in the asset before you sell it, allowing time for an objection.
Some wills authorize the executor to sell assets or pay creditors’ claims without court approval under the Independent Administration of Estates Act. An executor may also petition the court for independent administration, under which the probate process may be simplified. An executor will generally be able to sell assets, pay debts, and take other actions without court approval. Independent administration also often allows executors to simply forward the inventory or accounting to interested parties instead of filing them with the court.
Transferring Assets to Beneficiaries Early
Executors may want to transfer certain assets to beneficiaries before the probate case closes. Sometimes beneficiaries are simply eager to receive their inheritances, but other times it makes financial sense to transfer the asset quickly. Assets like cars and real estate are at risk of damage or depreciation if they are not properly managed or maintained. Thus, transferring these assets to beneficiaries early decreases the risk that an asset will suffer as it sits in the estate. Assets without much value, such as common household items, may also be transferred early if the transfer will have no impact on the outcome of the probate case.
An executor should guarantee that the estate can pay all of its debts and taxes before distributing any property to beneficiaries. An executor may also need to ask the court for permission before the transfer, and state law may limit the value of the assets that an executor may transfer early.
Probate Law Center Contents