It is no secret that estate planning is not an easy task, however many people do not realize how difficult serving as an executor can be in Virginia.
What is an Executor?
When people draft their wills, they usually name a trusted family member or close friend as their executor. This person then has a legal responsibility to follow the terms of the will, make sure all debts and credits are paid, and make sure all of the property is distributed according to the language of the will. The job of an executor is filled with lots of paperwork and deadlines, but the job also requires dealing with a lot of family issues. Because of the great responsibility that executors have, they also face a lot of risks, including being sued. Below are some of the biggest mistakes that executors should try to avoid.
Paying Bills Too Quickly
Usually, an executor will start receiving the deceased’s mail and bills immediately. Typically, the executor will try to pay these bills as they arrive because they believe that timely payment is required. However, the truth is bills are way down the list of priorities for payment. In fact, paying these debts before all other classes of debts (such as taxes) is a breach of the executor’s fiduciary duty and can potentially expose the executor to personal liability.
Before paying any creditors, it is important to consult with an attorney to figure out the priority of payments. Additionally, the executor should ask an attorney to estimate all administrative expenses and payments due to the surviving spouse or children.
Playing the Market
In order to increase the value of the estate, some executors invest an estate’s assets immediately. However this is especially risky when an estate plan calls for giving a trust or individual a precise amount. This specific amount must be distributed to the trust or individual regardless of any fluctuations in the value of the assets. If the market declines so much that the spouse’s trust could not be fully funded, the executor could be subjected to a lawsuit.
In addition to the risks associated with investing, there is no need to try and play the market because in most states the executor has a duty to conserve the assets, but not increase the value of the assets during the estate settlement.
Mishandling Real Estate
Real estate is one of the hardest assets to administer. Often, the beneficiaries will not agree about what they think should happen with property. For example, one beneficiary might be living in the house already and the other beneficiary may want the house to be sold as quickly as possible. If the beneficiaries cannot come to a compromise, the executor may have to go to probate court in order to get assistance and figure out what to do.
Executors also have to make sure they do not hold on to a house for too long. Insurance companies do not like to insure empty houses for extended periods of time. It is also important to continue to hold on to the homeowner’s insurance on the decedent’s house in case of a fire or accident.
Losing Tangible Assets
One of the executor’s main jobs is to make sure the assets of the estate are safe while arrangements are made to distribute them according to the decedent’s wishes. In order to make sure all the assets are protected, the executor must find all of the deceased’s assets and sort through all of their personal belongings to make sure they have accounted for the entire estate.