Transferring Wealth: Administering Trusts and Estates with Clarity and Compassion

Why is it usually a good idea to get legal help when administering a trust or estate?

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Imagine your family having to sell your home just to pay for taxes. So San “Susan” and Dai Min “David” Kee were confronted with this possibility as they began their estate planning. In his mid 70s, David was beginning to have some health problems, so the Kees felt some pressure to act quickly. If they were to leave their home to their only son, John, however, they ran the risk of having it sold. The Kees worked with Grimaldi & Yeung to:

  • Create an estate plan that by-passed their son in favor of their grandsons in order to preserve the family’s assets.
  • Initiate a frank family dialog that resulted in the more qualified younger grandson being named as executor — with no resentments.
  • Straighten out previous erroneous legal work — including a deed that inadvertently conveyed the entire house to neighbors.
  • Administer the estate after David’s and Susan’s deaths.

Grimaldi & Yeung was able to function as a trusted advisor to and advocate for the Kees over three generations, helping them preserve a cherished family home and maintain peace within the family.

Estate Administration/Trust Management: Role of Fiduciary

Being selected as an executor is an honor but it is also a responsibility to both the person who named you and to his or her heirs. Acting as executor is a complex job that requires working with many types of professionals. It is best to rely on a specialized attorney — such as an elder law or estate attorney — to guide you through the steps in settling the estate. The executor’s role and necessary qualifications are described below.

Executor’s Role

An executor may either be an individual, often a family member. Other choices are close friends, attorneys, accountants or an officer of a financial institution, such as a bank or trust company.

When settling an estate, an executor performs four basic functions:

  • Locates, collects and has responsibility for the estate’s assets until they are distributed to the beneficiaries.
  • Pays the decedent’s funeral expenses, debts and estate administration expenses.
  • Handles tax matters.
  • Pays the decedent’s final income taxes.
  • Pays the estate’s income and estate taxes.
  • Coordinates tax planning for the estate.
  • Files the required income and estate tax returns.
  • Distributes the remaining assets in accordance with the terms of the will.

Choosing an Executor

Consider these qualities when choosing an executor:

Integrity
When selecting an executor, a primary consideration should be the integrity, honesty and ability to act impartially toward all beneficiaries.

Knowledge
An executor’s initial task is to locate, collect, and if necessary, take physical possession of assets owned by the decedent. An executor must also protect, insure and appraise the assets. When necessary, the executor must raise the cash required to pay debts, taxes and administrative expenses.

These financial responsibilities require the executor to make an investment analysis of all assets in the estate, determine which to retain and which to sell, and the plan for meeting the estate’s cash needs.

Experience
Much of the administrative work in handling an estate is record keeping and giving close attention to detail. An executor prepares and files the decedent’s final federal and state personal income tax returns.

For estates of decedents with assets exceeding the estate tax exemption act, an executor is responsible for filing the federal estate tax return and, depending upon the jurisdiction, a state estate or inheritance tax return. The federal estate tax is a complex return, due nine months after the date of death. Since the estate is a separate taxpayer, an executor is also required to prepare and file annual income tax returns for the estate.

Impartiality
Depending on the nature and value of the assets, their form of ownership and the relevant provisions of the will or trust agreement, the executor will be faced with decisions, — referred to as elections — on the federal estate tax return, which could determine the amount of taxes due.

Certain decisions the executor must make, such as tax elections, have a direct financial impact on each beneficiary. Therefore, the executor — whether family member, friend or institutional officer — must be able to make these decisions impartially. In addition to having the education and training to make these decisions, an executor must have the objectivity to handle such issues without favoring one beneficiary over another. It is advisable to secure professional help such as an attorney or CPA in making these decisions.

Financial Responsibility
Another major consideration is the accountability and financial responsibility of the individual or entity selected to be the executor. Settlement of an estate can be a time-consuming venture. This is why banks and trust companies maintain dedicated estate administration departments. Individuals must usually treat the executor role as a part-time job. The guidance and assistance of a qualified attorney or accountant can be very helpful in assuring that the executor’s work is completed thoroughly, accurately and in a timely manner.

Conclusion

An executor should not be selected solely on the basis of family relationship or years of friendship. The factors discussed above are helpful in selecting the best executor for your estate. Your Grimaldi & Yeung attorney can help you select the right executor and then can work in conjunction with the appointed executor for the efficient and successful settlement of the estate.