Estate executor: No job for amateurs

Too often, people view being asked to serve as executor as something akin to being a godparent, a largely ceremonial position that is considered an honor. It is anything but, and estate-planning experts say most people who serve as an executor have no idea what they're getting into.

At the very least, it will involve 12 to 18 intensive months of tending to duties that require dealing with heirs, courts and the IRS. At its very worst, it could get you sued.

"I won't do it," says Howard Zaritsky, a former estate attorney and author of Tax Planning for Family Wealth Transfer.

Neither will many financial services professionals because money just brings out the worst in people. Families that have gotten along famously for years suddenly are at each other's throats over coffee tables and tea sets.

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Zaritsky remembers a phone call he once got from a client. The FBI was at his door. Seems his brother was unhappy about something he took home from their parents' house and reported him for crossing state lines with stolen property.

Sherry McGillicuddy, executive vice president for Frost National Bank's financial management group, works as a trust officer and has served as an executor for many estates in her job. She has politely declined several requests from family members to serve as their executor.

"The pure liability of it scares the tar out of me as an individual," says McGillicuddy. "It's a lot of responsibility with lots of places you can make mistakes. You're considered a fiduciary. You can be sued personally if any family member doesn't like what you did. It jeopardizes my own children's inheritance of anything I might have."

Executing the job
If you have been asked, or are considering asking a friend or relative to take on the job, here are some of the tasks that will need to be performed:

Perform an inventory of the deceased's assets. This involves locating and making a record of everything the person owned, including investments. If there are antiques, artwork, collections or other valuables, appraisals will need to be obtained. "It doesn't mean you have to count the drawer full of socks," Zaritsky says, "but you have to say 'drawer full of socks.'"
Locate heirs. "This may be the family member no one has talked to or seen in 10 years," McGillicuddy says. "You may have to hire an investigator. You can't make distributions until you have them. If the will says, 'I leave this to all my living nieces and nephews,' you have to track them all down. It can be wonderfully fun at times, and sometimes it's extremely stressful."
Give notice of the death to institutions where the deceased had accounts. Some states may require putting a legal notice in the newspaper notifying creditors that they need to make a claim.
Petition the court to probate the will.
Safeguard the assets of the estate, which includes paying outstanding bills, managing any investments, making necessary repairs to keep the family house in good condition, keeping needed insurance in force and keeping the heirs from walking off with the personal property until probate is completed.
Prepare and file the federal estate income tax return, which is due nine months after the person died. File it late or screw it up and there can be penalties, for which the executor is personally responsible.
File their last tax return.
Distribute the remaining assets to the heirs as per the instructions in the will.
Possibly be responsible for arranging for the care of minor children, or handling their money for several years.

Of course, executors do get paid. The fee often is set by state law, but the industry standard is in the neighborhood of 3 percent of the value of the estate.

"Believe me, if you're dealing with a disputed estate, they're earning every penny," Zaritsky says. "And they earn the same amount whether it's disputed or not. No one gets paid enough if it's disputed. People yell and scream, they call you in the middle of the night and on the weekend. You never know someone until you divide an estate with them."

See the will first
If you're seriously considering taking on this responsibility -- and the experts are unanimous in their advice to hire a professional to do it unless you have a financial, legal and tax background and tons of time to devote to it -- you should do the one thing that hardly anyone does before saying yes. Ask to see the will.

"Well over 90 percent of my clients have not seen the document before the person died," says Jon Gallo, senior partner in estate planning for the law firm of Greenberg, Glusker, Fields, Clayman, Machtinger and Kinsella in Los Angeles. "Even more rarely have they seen a financial statement. They don't know what they're getting into."

Taking a look at the will gives you critical insights, such as whether the person plans to "disinherit" anyone (a lawsuit in the making), if he plans to donate everything to a charity (several lawsuits from unhappy heirs), or if there are substantial assets to manage, such as a business or investment property.

Zaritsky says that just asking to look at the will should tell you a lot about the person, who usually is thinking that by asking a friend or family member, they're going to save a lot of money.

"Say, 'Fine, let's sit down with your attorney and go over it,'" he says. "They'll understand what they're asking you to do, and they'll think, 'Oh hell, they're already spending my money.'"

It also will tell you if the estate is large enough for a bank's trust department to mess with it, or if you're going to get stuck doing it all yourself (after you hire an accountant to file the taxes and an attorney to handle the probate court filings). Some banks won't act as executor of small estates; McGillicuddy's bank charges a flat fee of $3,500 to serve as executor of an estate of less than $500,000. She recommends visiting two or three trust departments to see what they charge.

While you're there, make sure you ask to see their form letters, Zaritsky says. Most disputes relate to heirs who claim they weren't kept informed. Good form letters will take care of that.

If your heart is telling you to say yes, but your head is begging you to run in the other direction, agree to be a co-executor with a bank or a trust company. That way, the bank handles the legwork and you provide guidance on how the deceased would or wouldn't have liked his assets disbursed or his investments managed. For instance, a co-executor could nix an investment in a casino if he knew the deceased strongly opposed gambling.

When everything is said and done, it just makes more sense to tell Cousin Fred to hire a professional who has the right background, is adequately bonded (your state may require it), and can be sued if there's any negligence or funny business.

"People need to look at this as a business and a professional duty, not as an honor," McGillicuddy says. "When money is involved, people go nuts. I've seen the closest knit families get into rifts over small amounts of money. When it's large amounts of money, they just go crazy."

-- Posted: Nov. 11, 2002

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