When someone dies, their estate’s assets and debts must be settled. This process can be complex, so choosing the right person to handle your assets is essential. Both executors and trustees have a legal obligation to distribute assets to beneficiaries. However, they tackle different responsibilities after paying off creditors and debts. Let’s take a closer look at the roles of executor vs trustee and see which type of estate planning might be right for you!
What’s the Difference Between an Executor and a Trustee?
Both the executor and trustee work with all the assets in your estate and carry responsibility for the payment of debts and the proper distribution of assets to each beneficiary.
Estate Executor Duties: Working with Probate Court to Settle An Estate
You may appoint an executor in your will. But your last will and testament can’t help your estate avoid probate court. And, your will cannot name a trustee.
The executor of your will oversees the estate administration process. Executors must go through probate court to settle your estate. If no executor is named in the will, the probate court appoint an administrator. Executors and administrators are both known as “personal representatives.”
The probate court asks the executor to make an inventory of the estate to begin. They then must keep exacting records of everything they do for the court as they pay creditors and debts, pay taxes, and eventually pay inheritance from a person’s estate to their heirs.
They have no authority to handle any of your estate affairs without the court’s permission. For example, if your sister is in dire need of an emergency operation, but you passed away before you could give her the money she needs, it could be a long wait for her. The executor cannot take money out of your bank account and give it to your sister or even pay her medical bills.
Instead, an executor must work the estate settlement in an organized fashion. They cannot decide to sell your home immediately and give the proceeds to your sister who is in desperate need.
Without a trust, your loved ones go through the probate process and may need to wait years to get their inheritance. Probate courts can cost your family time and money that your estate can’t afford.
Trustee Duties: Avoid Probate Court With a Trust
Because probate court can be a long and expensive process, many individuals choose to open a trust. The person they appoint to manage the trust is called the trustee. A trustee is not appointed by will- instead, a named trustee manages trust assets outlined in a trust document.
Often, individuals choose to act as their own trustee and name someone else to act as trustee once they pass away.
With a trustee in charge of your estate settlement, they can act immediately based on the trust documents. For example, if you say that when you pass away, the proceeds from your home’s sale should go to your sister, your trustee may sell your home the day after you pass away! There is no court involvement, only a person you trust whom you name as trustee.
Skip the Probate Process Entirely
A trust is like a business in that it owns your assets for you. If you have a living trust when you die, your estate has no assets. Instead, your trust owns your assets.
The probate court has no jurisdiction over your assets because you do not own them anymore. So, your estate never goes through the probate court. Instead, your trust owns your assets, managed by your trustee.
Creating an estate plan with an experienced attorney allows you to name a responsible trustee. Your trustee, by law, will act in the best interest of the beneficiaries named in your trust.
Both an executor and a trustee pay creditors and debts, pay taxes, and act in the best interest of your estate. Once they pay creditors and debts, they pay any inheritance from your remaining assets to the heirs.
Open a Revocable Living Trust to Name a Trustee
Accounts and property in a revocable living trust do not go through probate. With this type of trust, your trustee handles all of the estate proceedings. The trustee is the person responsible for paying outstanding debts and ensuring beneficiaries receive the trust’s assets in a timely fashion.
During life, you may serve as the original trustee; upon death, it is up to your chosen successor trustee to assume this responsibility. By working alongside an experienced attorney in creating a trust and adding all assets into it, you may avoid probate entirely for your estate!
A revocable living trust also gives you many other benefits, as we will see next!
Consider These Reasons to Open a Revocable Living Trust
Avoiding Guardianship
If you cannot manage your affairs yourself, your trustee can begin to manage any funds or properties in your trust. Depending on the terms of your trust, they can manage the care you receive and handle everything when you cannot.
Privacy Issues
A will is accessible to the public, meaning prying eyes such as nosy neighbors, malicious predators, and untrustworthy distant family members can glimpse into your assets. Trusts are not open to the public. A trust lets your private matters stay private.
Avoid Court Challenges
Sometimes, disgruntled family members will contest your will. For example, your stepbrother may feel angry when he sees what you left to another brother. Because the will is public knowledge, it’s much more likely that others will contest the will in a court challenge.
Keep Creditors Out of the Loop
An executor must distribute funds from a probate estate, whether your heirs are ready to receive them or not. With a trust, the assets in your trust stay safe from creditors. You may set up a trust for making payments monthly or only when contingencies are met.
Because trusts lay out the terms of distributions, a trust may protect assets from:
- Divorce judgments
- Business litigation damages
- Civil suits
- Bankruptcies
How a Trustee Handles Your Estate Administration
As a fiduciary, the trustee is responsible for safeguarding your assets while acting in the best interest of your estate. This individual has complete authority over all aspects of managing and overseeing your estate assets.
Trust management may involve:
- Managing your care or the care of minor children
- Managing trust assets for beneficiaries until contingencies are met or minors reach a certain age
- Handling trust assets in line with trust documentation
- Distributing monthly payments to disabled or special needs beneficiaries
- Investing finances
Choosing reliable trustees, successor trustees, and co-trustees can help ensure that whoever is distributing assets can handle their responsibilities when the time comes.
Our Experienced Estate Planning Attorneys Can Help
At Cape Fear Law, we understand how important it is to have an estate plan. We can explain the estate planning process and help you create a revocable living trust that meets your needs while protecting your assets.
Our experienced attorneys look forward to helping you create an estate plan that ensures your wishes are honored. Get in touch and get started on your plans today!