Executors and beneficiaries have a unique relationship under the law. An executor manages a deceased person’s estate and a beneficiary is an individual who will inherit that property. While the executor and beneficiary can be the same person, you should give it some thought when drawing up your Will.
An executor is an individual who is in charge of managing a deceased person’s estate. An executor’s duties include gathering assets, notifying creditors, paying valid claims, and distributing assets to beneficiaries.
An executor has a fiduciary duty, which means an obligation of utmost loyalty; he or she must not take actions that would benefit him or herself or other beneficiaries at the expense of the other beneficiaries. The executor must ensure the deceased’s assets are accounted for, debts paid, and estate taxes filed, if necessary. The executor is also responsible for ensuring there are as much of the deceased’s assets to distribute to the beneficiaries as possible.
Even if a person is named as the executor, he or she does not have to accept that position. He or she may decline the appointment immediately or during the process if unable to complete the executor’s responsibilities. An executor is also able to consult with attorneys, accountants, and other professionals to ensure the estate is being properly managed.
A beneficiary is the individual or individuals named in a will that will inherit property from the deceased. Anyone can be a beneficiary, a spouse, children, other relatives, friends, and even charities.
Beneficiaries have rights that entitle them to information about the estate from the executor. Beneficiaries may ask what assets are included in the estate, how much debt the estate must pay, and which assets will be used to settle the said debt. Asking for ongoing reports from an executor is perfectly normal.
Yes, the executor and beneficiary can be named as the same person in the Will. It’s perfectly normal and legal. It’s actually a common approach because the executor should be someone you know and trust and it’s common sense that your beneficiaries fall into that column.
Conversely, an executor may be someone you know that is not a beneficiary. Maybe you want your four children to inherit everything, but instead of putting one of them in charge, you name your sister or best friend to act as an independent executor.
The beneficiary is the one who benefits from the executor’s work, so if you have a number of beneficiaries, it may be easier to separate those roles in order to simplify relations among all parties.
The executor has an equal responsibility to each beneficiary to ensure the property that the deceased wanted them to have, gets passed on. If one of the beneficiaries is also the executor, this process can become difficult, especially if assets must be sold to pay debts. Closing an estate and dividing assets can become increasingly difficult if there are multiple beneficiaries with one of them acting as executor.
Choosing your executor is important. You want to be confident that whomever you choose will be able to carry out the role of finalizing your estate and doing so fairly. Remember, being an executor may involve calculating the value of your estate, calculating any taxes owed, selling or transferring property or investments to pay off debt, and that’s all before the duty of distributing your estate to your beneficiaries.
Because of the work involved, and the fact that an executor can be found personally liable if anything goes awry, choose carefully and ask their permission first. Whichever route you go, it is vital that the executor and all beneficiaries have a clear understanding of their rights in regards to an estate in order for things to go as smoothly as possible.
If you have any questions about your estate or need help choosing the appropriate executor, please contact us.