Being an estate executor (now called “Personal Representative”) is an important and serious job. It also comes with potential liabilities. For instance, if you distribute assets to heirs before paying off necessary debts, you could be held personally responsible for that financial mistake. To protect your rights and interests while carrying out your duties, remember these 5 tips for estate executors.
1 – Keep Everything Separate & Secure
Think of the estate as a separate business entity. It should have its own tax ID number, bank account(s), etc. Never commingle funds with your personal accounts and do not allow anyone else access estate accounts.
2 – Document Everything
Good documentation is the best way to prove that you managed the estate properly. For paper documents, keep originals in a safe place and perhaps a scanned copy in the cloud. Store digital statements in the same cloud file. Email communications may be important as well; consider creating a separate email account for this purpose.
3 – Perform Due Diligence
As you liquidate assets, you may need to justify the price for which items sold. For example, if a car is worth $40,000 but you sold it for $10,000 to a friend, you may be accused of mismanagement of estate assets. Research the market value of items and carefully document your sources. If you relied on Kelly Blue Book or other third party sources of information, keep a copy of that report in your files. For items sold on websites such as eBay, you can generate reports on the sale of similar items as justification for your selected price.
4 – Rely on Experts
If you’re not an accountant, don’t manage the books for the estate yourself. If you’re not a tax professional, don’t prepare an estate’s tax returns on your own. Remember that the beneficiaries of the estate will be closely watching how well you manage things. Since you can use the assets of the estate to hire necessary professionals, there is no need for you to avoid doing so.
More Tips for Estate Executors
The biggest mistake you can make as an estate executor is not taking your job seriously. If you’re lax about any of the things noted above, you could face legal and financial consequences. The decedent chose you as an executor because they trusted you to carry out your duties carefully and responsibly, for the benefit of his/her heirs. You have a moral and legal obligation to do everything possible to fulfill that expectation.