By Jeffrey J. Buonforte, CERTIFIED FINANCIAL PLANNER™
Estate planning is an important financial step, and a lengthy process. One of the final details of your estate planning is to name an executor. This family member, friend or professional serves a vital role in fulfilling your wishes, and will spend a significant amount of time and effort performing the responsibilities of this role. Choosing the right person for the job is often the difference between a seamless transfer of assets and a stressful one.
If you’re in the process for preparing for a future transfer of wealth
and you need to select an executor, here’s what you need to know.
What is an executor?
An executor is a person named in the will who is in charge of settling the estate. They have the legal responsibility of paying final expenses and taxes, collecting and managing assets, and distributing property and other inheritance to beneficiaries.
However, simply being named in the will does not obligate someone to serve as executor. A named executor may be relieved of the responsibility at any time during the process, even before it starts, at his or her request.
Why and when do you need an executor?
You need an executor in order to finalize your affairs once you are deceased. If there is no executor named, one will be appointed by the state. The New Jersey surrogate court – a specialized court that deals with the administration of estates – is in charge of appointing an administrator to serve as executor. The court will contact the surviving spouse or domestic partner, followed by other family members.
If family members are unable to perform these duties, the family may elect to hire a professional executor. Professional executors are often lawyers, accountants, bankers or other financial professionals.
What if you don’t have a will?
If you don’t have a will, an administrator will still be appointed by the Surrogate Court to finalize your affairs.
The appointed executor can take advantage of the simplified process in New Jersey to settle an estate if there is no will and the estate value is less than $20,000.
The executor’s job is to probate the will. What does that mean?
Probating is the process by which a will is determined to be valid after the person is deceased. The executor files paperwork with the county in which the decedent lived, and the probate court then validates the will. Once the will is probated, That allows the executor can carry out the terms of the will which includes locating beneficiaries and distributing assets after taxes and bills are paid.
What are an executor’s duties?
Following is a list of duties performed by the executor in New Jersey. If the process goes smoothly, it should take less than a year to complete.
What fees are incurred for the duties performed by an executor?
- Request to be formally appointed as executor. The executor presents the surrogate court with a certified copy of the death certificate and will. If they are not a resident of New Jersey, they must post a bond, an insurance policy that protects the estate if it is mismanaged. The court will issue a document that gives the person authority to be executor.
- Take inventory of the deceased person’s assets. The executor will record an inventory of your assets which includes bank, brokerage and retirement accounts, property, collections, antiques and other valuables.
- Within 60 days, contact all heirs. The executor must mail a notice of the proceeding to all beneficiaries named in the will.
- Pay off any debts. The executor pays outstanding bills, such as credit cards, utility bills, etc.
- File a tax return for estate taxes. The executor can handle this with or without the help of an attorney or accountant.
- File a final income tax return. This step is required to settle any taxes owed or to receive any refunds that would then be passed on to the beneficiaries.
- Show evidence to the court. This is done to prove that all liabilities have been settled.
- Distribute the remaining assets. The executor distributes assets to the beneficiaries, according to the terms of the will.
Whether a family member or professional, an executor is entitled to compensation. Under New Jersey law
, “the commission is 6% of income received by the estate plus 5% of the value of the gross estate for estates up to $200,000, 3.5% on the excess above $200,000 to $1 million, and 2% on amounts over $1 million.”1 This payment is a one-time fee. However, an executor does not have to take a fee for services.
Tips for Choosing an Executor or Trustee
Using a family member versus a paid professional really is a matter of preference. The advantage of using a family member is that they understand the family dynamics. They also most likely understand your intentions better than an outsider, and they can readily locate your assets. The advantage of using a paid professional is that they provide a more objective view and understand the probate process better than a family member. Whichever option you choose, following are tips to help you select the right person for the job.
- Choose someone detail-oriented. An executor should be well organized, and good with paperwork and deadlines.
- Choose someone whom you can trust. Honesty is a prerequisite for an executor.
- Choose one person. You may have two children, but don’t appoint them both as executors. With co-executors, it’s easy for items to “fall through the cracks.” If you want to include everyone, consider appointing one as executor and the other as an alternate.
- Choose a “people person.” The executor may need to explain to family members why they didn’t get something. It’s important to be able to tactfully address jealous beneficiaries in order to prevent a contest of the will, which could drag out the process.
- Consider choosing someone you trust to find a paid professional. You do not have to name a specific individual or firm as executor. You can appoint someone you trust to interview professionals once the need arises.
- Name someone who resides in your state. Having them close by simply makes the process easier by eliminating extensive travel. Also, some states don’t allow you to name an executor who lives elsewhere, unless it is a family member. In New Jersey, you can appoint an executor who resides out-of-state, but they will need to post a bond.
- Make sure the person you choose is qualified to be an executor. Your executor must be at least 18 years old and a citizen of the United States.
- Talk to that person first. Make sure they want this responsibility.
- Review your choice of executor with your attorney when you review your will. It is a good idea to schedule a regular review to check that nothing substantial has changed.
For more details, consult this resource on the New Jersey probate process
. For information on new tax rules, consult the IRS’ Frequently Asked Questions on New Tax Rules for Executors
If you’d like to speak with someone about estate planning, Lakeland Bank Financial Services consultants are available to offer one-on-one counseling. For more information or to set up an appointment, click here
or contact me at (973) 208-6214 or JBuonforte@lakelandbank.com
*Securities are offered through Essex National Securities, LLC, member FINRA & SIPC. Insurance products are offered through Essex National Insurance Agency, Inc. Neither are affiliated with Lakeland Bank. Products are not guaranteed by the bank, not FDIC insured, not a deposit, not insured by any federal government agency, and may lose value including loss of principal.