If you have children, a home or financial assets, you should prepare a “last will and testament.” This is a legal document that expresses your wishes on selecting a guardian for your children, how your assets should be distributed and other end-of-life issues.
One of the most important considerations is selecting an executor (the recognized term in Florida is personal representative) for your estate, someone who will carry out the instructions in your last will and testament. Because the executor is your personal representative, you should select a person with the intelligence and experience to make good legal and financial decisions, such as a family member or a professional who has assisted you with other matters during your life.
In most cases, a family member who serves as executor will need to consult with an attorney and a financial professional in order to fulfill his or her responsibilities.
The role of the executor can be complex and time-consuming — it is not a task to be taken lightly. It may involve participating in a probate court proceeding or possible litigation if there is a dispute among the heirs or creditors of the estate.
But the primary role of an executor is winding down the decedent’s financial affairs so the assets and property can be distributed in accordance with the terms of the will. The executor has a fiduciary responsibility to the estate and must act honestly and fairly in making decisions.
In Florida, an executor may be paid for his or her time, but many provide their services on behalf of a loved one without seeking compensation.
One of the duties of an executor is to find the decedent’s assets, determine their value and safeguard them until they can be distributed to the beneficiaries. That might involve working with banks, brokerage firms or the family’s financial adviser to prepare a detailed list of those assets. Life insurance companies also need to be notified of the policyholder’s death so the beneficiaries can receive those funds.
While it’s easy to determine the value of stocks, bonds or a mutual fund investment, the estate may require the services of an appraiser to determine the worth of a rare coin collection, fine art or antique furniture. The issue can be even more complex if the decedent owned a share of a business or income-producing real estate, such as a rental apartment building.
Some assets, such as a valued painting or the family home, may be conveyed directly to a beneficiary, while others may need to be sold in order to distribute the assets in a fair and equitable manner to all the beneficiaries. In many cases, the advice of a tax attorney can be very helpful in assessing the tax considerations involved with the sale of those assets.
An executor is also responsible for identifying the liabilities and debts of the decedent, including taxes, notifying credit card companies, banks and government agencies, such as the Social Security Administration, Medicare, the Agency for Health Care Administration and/or the Department of Veteran Affairs and setting aside money from the estate to pay those debts. To fulfill this obligation, an executor may set up a separate bank account for the estate to hold the cash that accumulates from the sale of assets and to pay any debts.
The job of the executor (personal representative) is to make sure there are funds to satisfy all debts and liabilities of the decedent before he or she can be formally discharged and the estate is closed. Once those responsibilities are completed, the executor can breathe a sigh of relief with the personal satisfaction that comes from completing a complex task in a successful manner.
Andrew Menachem, CIMA, is a wealth adviser at the Menachem Wealth Management Group at Morgan Stanley in Aventura. Views expressed are those of the author, not necessarily Morgan Stanley, and are not a solicitation to buy or sell any security. The strategies and/or investments referenced may not be suitable for all investors. Follow @AMenachemMS on Twitter.