Being an Executor can be tough. Even when things look simple, odds are they are not. Here’s a quick run down on some of the most common mistakes executors make. Please note, these may seem to go against common sense … because they often do.
It’s a natural instinct to want to pay the ‘bills’ as quickly as possible. Just get them out of the way. You know, go through the mail, grab the credit card bills and other normal invoices and pay them, This seems like the thing to do, but not only isn’t it, it’s also potentially a breach of fiduciary duty. These day-to-day bills don’t have to be paid in a timely fashion, and in the hierarchy of debt, they actually are way down on the list of priorities.
Taxes, for instance, are high up on the list. Paying the credit cards off and not having enough liquid funds to pay the IRS is a major problem.
Executors have no obligation, in any regard, to make the estate bigger than what it was when it was entrusted to them. So, investing in the stock market is not only unnecessary, it’s potentially a major problem for an executor. Loss of principal could adversely effect other aspects of the estate and estate plan – like funding trusts for a spouse and/or children.
Real estate is quite often an accident waiting to happen. When to sell and for how much, what should the realtor’s commission be, should improvements be made (and paid for) before selling… and a host of other questions have to be addressed well before the ‘For Sale’ sign goes up. One beneficiary might be living in the house, while another might want it sold quickly. Also, note that insurance companies do not like to insure uninhabited houses for very long.
We’ve written (a lot) about tangible and intangible assets. Art, collections, antiques, more. Not only do they need to be properly valued, they have to be kept safe. These assets belong to the estate. Many times, a beneficiary believes – rightly or wrongly – that a certain item was promised to them and may take it. This can only lead to problems. Executors must go through all the personal belongings of the deceased – well before any of the relatives and/or beneficiaries. Then, it’s the executor’s responsibility to keep the assets safe while arrangements are made to distribute them.
Any kind of shortage is or lost asset, is a problem for the executor.