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 The duties and obligations of an executor in relation to accounting for beneficiaries include the following:

  1. Accurate accounting records must be maintained in relation to all estate assets.  The executor will need to have these accounts approved by the beneficiaries periodically and at the conclusion of the administration of the estate.

  1. Estate money cannot be mixed with any other money.  A separate account must be maintained for all estate funds.

  1. The source data (receipts, cancelled checks, bills, etc.) must be maintained in order to prove the accounts, if that should be necessary.

  1. Beneficiaries who are entitled to share in the residue of the estate are entitled to require that accounts be provided to them from time to time.  These beneficiaries are entitled to look at the source documents in order to verify the information that is contained within the accounting.

  1. There are rules that govern the type of investments that can be made by the executor.  These provisions may be set out in the will.  If they are not, there are rules created by statute.  A breach of the rules with respect to investing by an estate is a breach of trust.

  1. Executors have to make beneficiaries aware of their rights with respect to information, and with respect to requiring that accounts be proved in court, if the beneficiary wishes.

  1. Executors owe a duty of care to an estate and its beneficiaries.  Claims in negligence can be made against estate trustee for a number of reasons, including the following:

(a)    If an executor makes investments that are not authorized by a will or by the law or if the investments do not generate an appropriate rate of return, a claim in negligence may be advanced against the executor for any loss incurred ;

(b)    An executor should make an appropriate blend of investments.  Some of these investments will be income generating and some will be capital in nature (stocks).  An executor should obtain the advice of a financial advisor prior to making any investments although, it is presently considered that a mix of 60% income-generating and 40% growth investments is an appropriate mix of investments for estates;

(c)    There is generally little point in an executor considering investments in a speculative investments.  If a speculative investment is highly successful, the estate will benefit although, the executor will not necessarily, directly benefit.  In the event of a loss, the executor may be found liable to the estate for the entire amount of the loss and have to pay it to the estate together with interest.

(d)   An estate trustee has an obligation to preserve and maintain all estate assets.  If there are estate assets such as equipment or vehicles, they must be properly secured (i.e. in a safe place) and maintained;

(e)   The executor must make all appropriate elections and filings under the Income Tax Act in a timely fashion, or they may be responsible for any loss occurred by the estate.

 In the event of a court supervised review of the accounting, all financially interested beneficiaries must be notified.


 Executors Compensation

Many people feel uncomfortable accepting payment for helping out family members during a tough time. And there’s nothing wrong with serving as an executor without pay.

But if you’re weighing this decision, remember that being an executor requires a commitment to working on behalf of the estate beneficiaries for months or even years. It’s a big responsibility to deal with other people’s money - and there may be a lot of work required.

Executors are entitled to compensation for the work that they do for the administration of an estate.  The general rule is that an executor is entitled to 2.5% of the assets of the estate gathered in, 2.5% of the value of the estate assets distributed, and 2/5 of 1% of the average value of the estate, if the estate is invested for a period time.  In a typical estate where the assets are gathered in and distributed relatively quickly, the executor’s compensation would be 5% of the value of the estate. 

 The amount of the executor’s compensation may be adjusted up or down based upon a number of factors.  These factors include:              

(a)    The total value of the estate;

(b)    The complexity of the estate;

(c)    The time spent by the executor in the discharge of their duties;

(d)   The skill displayed by the executor in the administration of the estate;

(e)   The degree of care exercised by the executor;

(f)    The results of the administration and any investments made by the executor.

 Generally at the conclusion of an estate (or periodically during the administration of the estate, if the estate is administered over a period number of years), the beneficiaries are asked to approve the level of executor’s compensation.  If the beneficiaries do not agree (or cannot legally agree because of the nature of the beneficiaries – for example if one of the beneficiaries is a minor or mentally incompetent), then the executors have to have the compensation fixed by the court.

 There used to be a rule, which prohibited an executor from “pre-taking” compensation before it had been approved by the beneficiaries or fixed, by the court.  This rule has been modified by recent court decisions.  As a result, an executor is entitled to “pre-take” compensation before it has been approved by the beneficiaries or by the court.  It is still generally prudent do obtain beneficiary or court approval before taking the compensation.  In the event that compensation is pre-taken, if it is ultimately determined by a court to have been excessive, the executor will be required to pay the excessive amount together with interest.

 The preparation of accounts, income tax returns, management of investments, and other estate administration are the duty of the trustee.  In appropriate cases, these functions can be delegated to qualified experts (accounts, lawyers, property managers, etc.) and the cost of such experts will be paid in addition to the executor’s compensation.

State rules vary widely. California, for example, lets an executor charge 4% of the first $100,000 of an estate's value; for a $1 million estate, the fee is $23,000. A most complex fee schedule, California, provides for different percentage amounts depending on the size of the estate -- the executor may receive up to 4 percent of the first $100,000 of the estate, up to 3 percent of the next $100,000 and up to 2 percent of the next $800,000.


When creating an estate plan, it may be necessary to name a trustee to handle your assets.

trusteeA frequent example is when you create a revocable living trust to pass on assets to your children. You must name a trustee to manage those assets. You might name yourself as trustee, although some situations may require that it be another individual or organization. An issue to consider are the trustee fees. Trustees assume responsibilities when managing assets, and the fees can compensate them for their time and efforts.

Yahoo Finance’s recent article entitled “Trustee Fees: What Are They and Who Pays?” explains that trustee fees are a payment for services rendered. A trustee can be an individual or an organization, like a bank, wealth management company or other financial institution. Trustees will do various duties, depending on the instructions in the trust document. However, their primary job is to make certain that the assets held in a trust are managed according to the trust grantor’s (creator’s) wishes for the trust’s beneficiaries.

The trust creator will usually set out the terms of payment for a trustee in the trust document. Let’s look at some different ways to structure trustee fees. One fee structure is to pay the trustee a set percentage of the assets in the trust each year. This is typically used with larger trusts with significant assets that continually appreciate or generate ongoing income. With a smaller trust, a different fee structure might be used. Instead of a percentage, you might pay the trustee a flat dollar amount, each year. If they don’t have as many duties, they could be paid an hourly rate.

When drafting a trust document with the help of an experienced estate planning attorney, the grantor can set the terms of payment, including capping how much can be paid in trustee fees.

If a trust doesn’t mention trustee fees in the trust document, state law can determine the fee. Typically, fees can either be charged as a percentage of assets or as a percentage of transactions associated with money moving in or out of the trust.

There are no set rules for calculating the amount trustees can charge for their time. However, there are some common guidelines. In many instances, a trustee will charge a minimum of 1% when dealing with larger trusts with significant assets. Smaller trusts frequently use a flat fee model. The fees are paid out of the trust’s assets. Fees are typically paid quarterly.

Trustees are also entitled to reimbursement for any expenses, such as travel expenses, storage fees, taxes, insurance, or other expenses they incur related to the management of the trust. These expenses are reimbursable, regardless of whether the trust document specifies any guidelines for reimbursement.

The trustee fees are tax deductible to the trust, and the fees are considered taxable income for the trustee. If you’re uncertain what to pay (or what to charge if you’re acting as a trustee), speak with an estate planning attorney.

Reference: Yahoo Finance (Aug. 14, 2020) “Trustee Fees: What Are They and Who Pays?”



Rights of Beneficiaries

Beneficiaries in an estate have certain rights.  These rights include the following:

  1. The right to be notified when the estate trustee (executor) applies to court for a Certificate of Appointment of Estate Trustee (probate).  A beneficiary may make representations to the court whether or not the beneficiary has any objection to the proposed executor being appointed.


  1. An estate beneficiary is entitled to information concerning the original assets to the estate and in relation to the ongoing accounting of the estate.  If the executor does not produce this information voluntarily, a beneficiary may require that the executor complete a court supervised review of the accounts.


  1. A beneficiary is entitled to receive their entitlement under the estate in a timely way.  The length of time will depend on the nature and complexity of the estate.  Generally, if the executor completes the administration within one year, they will not be criticized.


  1. Prior to the completion of the estate, a beneficiary is entitled to see a complete list of all of the accounting for the estate and any relevant other source documents (receipts, invoices, cancelled checks, etc.). 


  1. An executor is entitled to compensation.  The beneficiaries are entitled to review and approve or disapprove of the level of compensation.  If the beneficiaries do agree with the level of compensation, a court must set it.


  1. If a beneficiary is unhappy with the job that is being done by the estate trustee, that beneficiary can apply to the court for an order to remove the trustee.  A court will remove a trustee if their removal is justified.


Contact an attorney licensed and experienced in your state for your state law.

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 The executor of an estate is named in one's will and has many duties and responsibilities, including the following:

 1. Find the latest will and read it.

 2. File a petition with the court to probate the will.

 3. Assemble all of the decedent's assets.

  • Take possession of safe deposit box contents.

  • Consult with banks and savings and loans in the area to find all accounts of the deceased.  Also, search for cash and other valuables hidden around the home.

  • Transfer all securities to his or her name (as executor) and continue to collect dividends and interest on behalf of the heirs of the deceased.

  • Find, inventory and protect household and personal effects and other personal property.    

  • Collect all life insurance proceeds payable to the estate.

  • Find and inventory all real estate deeds, mortgages, leases and tax information.  Provide immediate management for rental properties.

  • Arrange ancillary administration for out-of-state property.

  • Collect monies owed the deceased and check interests in estates of other deceased persons.

 4.   Find and safeguard business interests, valuables, personal property, important papers, the residence, etc.

 5.   Inventory all assets and arrange for appraisal of those for which it is appropriate.

 6.   Determine liquidity needs. Assemble bookkeeping records. Review investment portfolio. Sell appropriate assets.

 7.   Pay valid claims against the estate.  Reject improper claims and defend the estate, if necessary.

 8.   Pay state and federal taxes due.

  • File income tax returns for the decedent and the estate. .

  • Determine whether the estate qualifies for "special use valuation" under IRC Sec. 2032A, the qualified family-owned business interest deduction under IRC Sec. 2057, or deferral of estate taxes under IRC Sections 6161 or 6166.

  • If the surviving spouse is not a U.S. citizen, consider a qualified domestic trust to defer the payment of federal estate taxes

  • File Federal Estate Tax return and state death and/or inheritance tax return

 9.   Distribute specific bequests and the residue plus obtain tax releases and receipts as directed by the court. Establish a Testamentary Trust (or pour over into a Living Trust), where appropriate.

 10. Prepare statement of all receipts and disbursements. Pay attorney's fees and executor's commissions. Assist the attorney in defending the estate, if necessary.

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LOIs (Letter of Instruction) may also include whatever you think may help the people you leave behind or who would take over if you are not capable.

A letter of instruction, or LOI, is a good addition to the documents included in your estate plan. It’s commonly used to express advice, wishes and practical information to help the people who will be taking care of your affairs, if you become incapacitated or die. According to this recent article “Letter of instruction in elder law estate plan can help with managing important information” from the Times Herald-Record, there are many different ways an LOI can help.

In our digital world, you might want to use your LOI to record website names, usernames and passwords for social media accounts, online accounts and other digital assets. This helps loved ones who you want to have access to your online life.

If you have minor children who are beneficiaries, the letter of instruction is a good way to share your priorities to the trustee on your wishes for the funds left for their care. It is common to leave money in trust for HEMS—for “Health, Education, Maintenance and Support.” However, you may want to be more specific, both about how money is to be spent and to share your thoughts about the path you’d like their lives to take in your absence.

Art collectors or anyone who owns valuable items, like musical instruments, antiques or collectibles may use the letter of instruction as an inventory that will be greatly appreciated by your executor. By providing a carefully created list of the items and any details, you’ll increase the likelihood that the collections will be considered by a potential purchaser. This would also be a good place to include any resources about the collections that you know of, but your heirs may not, like appraisers.

Animal lovers can use an LOI to share personalities, likes, dislikes and behavioral quirks of beloved pets, so their new caregivers will be better prepared. In most states, a pet trust can be created to name a caregiver and a trustee for funds that are designated for the pet’s care. The caregiver and the trustee may be the same person, or they may be two different individuals.

For families who have a special needs member, an letter of instruction is a useful means of sharing important information about the person and is often referred to as a “Letter of Intent.” It works in tandem with a Special Needs Trust (also can be known as a Supplemental Needs Trust), which is created to leave assets to a person who receives government benefits without putting means-tested benefits in jeopardy. If there is no Special Needs Trust and the person receives an inheritance, they could lose access to their benefits.

Some of the information in a Letter of Intent includes information on the nature of the disability, daily routines, medications, fears, preferred activities and anything that would help a caregiver provide better care, if the primary caregiver dies.

The LOI can also be used to provide basic information, like where important documents are kept, who should be notified in case of death or incapacity, which bills should be paid, what home maintenance tasks need to be taken care of and who provides the services, etc. It is a useful document to help those you leave behind to adjust to their new responsibilities and care for loved ones.

Although you can do a LOI without the help of an attorney, it is recommended that you visit with your elder law attorney or estate planning attorney so that your LOI doesn’t have any conflicting provisions with your estate plan.  The last thing you want to do when you are trying to help those who survive you is to actually make it more difficult.  Your attorney will help guide you through the process and make sure your LOI compliments and enhances your planning.

Reference: Times Herald-Record (Sep. 8, 2020) “Letter of instruction in elder law estate plan can help with managing important information”



Probate and trust administration are not the same

There are important differences and similarities between administering a decedent’s probate estate and administering a decedent’s trust estate.

Many people get these two things confused. A recent article, “Appreciating the differences between probate and trust administration,” from Lake County News clarifies the distinctions.

Let’s start with probate, which is a court-supervised process. To begin the probate process, the applicant files the required pleadings with the clerk of court and, then, may need to appear in court.  Notice to creditors may be published in the local newspaper to minimize the time that unknown creditors may make claims against the estate. However, to start a trust administration, a letter of notice is mailed to the  beneficiaries of the Trust. Trust administration is far more private, which is why many people chose this path.

In the probate process, the last will and testament and almost all documents in the court file are available to the public. While the general public may not have any specific interest in your will, estranged relatives, relatives you never knew you had, creditors, and scammers have easy and complete legal access to this information.  If a person dies without a will, the court documents created in intestacy (the heirs inherit according to state law) are also available to anyone who wants to see them.

In trust administration, the only people who can see trust documents are the heirs and beneficiaries.

Costs also differ for the two administrations.  To commence probate in South Dakota, a court filing fee must be paid to open the probate.  In addition, a publication fee may be paid if notice is published in the local newspaper.  On top of court costs and publication fees, attorney’s fees and personal representative’s fees (which may be waived) are also added.  Some fees are on an hourly basis, while other fees may be on a flat fee basis.  All fees may vary depending upon the jurisdiction.

For trust administration, the trustee and the estate planning attorney are typically paid on an hourly basis (however, an attorney may have a separate fee structure). Expenses are likely to be far lower, since there is no court involvement.

Probate and trust administration do have similarities. Both require that the decedent’s assets be collected, safeguarded, inventoried, and appraised for tax and/or distribution purposes. In addition, tax obligations, debts, administration expenses, and valid creditor claims must be paid; and interested parties are to receive certain required information. In a probate, the personal representative is required to notify known creditors; whereas, under trust administration, the trustee may choose to notify known creditors. Further, creditors in a probate, whether known or unknown, have a minimum of four months from the date the personal representative is appointed to present claims. In trust administration, known creditors may be barred after sixty days when properly notified.

The use of trusts in estate planning can be a means of planning for family assets to be passed to future generations in a private and controlled fashion. For this reason, the use of trusts has become a popular estate planning tool.

Reference: Lake County News (July 4, 2020) “Appreciating the differences between probate and trust administration”

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