Estate planning can be difficult. In addition to the fact that it may bring up some uncomfortable feelings – like grappling with one’s mortality – there is also the fact that it can be a complex legal process. There are ways to make estate planning easier, though, such as trusts. If you form a trust, there are a few terms you’ll need to know: trustee and executor. These terms are sometimes used interchangeably, but they actually have distinct roles. A trustee manages a trust and the assets inside, while an executor is responsible for fulfilling the deceased’s wishes and distributing property and assets as proscribed. For help with trusts or other estate planning items, consider working with a financial advisor.
What Is a Trustee?
A trustee is the person who manages the assets in a trust. This is different from the trustor, who’s the person who creates the trust. When it comes to estate planning, the trustee normally plays their most important role after the trustor passes away.
Trustees are especially important when the assets in the trust are being held for a minor who’s set to receive the assets inside the trust once they reach a specific age. For instance, let’s say someone forms a trust full of investments they want passed on to their children, who are teenagers. If that person dies before their children turn 18, the named trustee will manage the assets in the trust for those minor children.
The trustee has a legal responsibility to act in the best interest of the eventual beneficiaries of the assets in the trust. This means making the smartest investments, not taking unnecessary risks and doing anything else that will lead to the best results for them.
What Is an Executor?
An executor, on the other hand, is the person who makes sure that a recently deceased person’s wishes – as expressed in a will – are carried out. They make sure that the correct assets are passed on to the right family and friends. This can include following through on any charitable donations the decedent wanted to be made with the money they left behind and defending the will against any challenges.
The executor also has legal responsibilities, such as making sure that the estate’s probate paperwork is filed. They also must oversee the probate process in the name of the estate. This could also include making sure the estate tax is dealt with correctly.
While some states have their own estate and inheritance taxes, the premier one is the federal estate tax. For 2021, this only applies to estates worth more than $11.7 million, meaning most estates won’t end up owing anything. Executors will need to know the state laws for the place where the deceased died as well. States have different exemption amounts too.
Finally, the executor has to settle any debts the estate has. This includes credit cards, mortgages and any other loans the person still owed when they died.
Choosing Trustees and Executors
There are many estate planning choices, but picking trustees and an executor are among the most important. For both, you’ll want to pick someone you explicitly trust. A trustee should be someone who’s willing to manage the trust for as long as necessary. In addition, you should trust their ability to make decisions in the best interest of the beneficiaries.
For an executor, the right choice is someone who you know will make sure your wishes are respected. While you’ll likely be leaving a will with detailed instructions, it may even make sense to talk with your executor before you die so they are clear on your wishes. This can help ensure your needs are carried out exactly how you envision them.
A trustee is the person who manages a trust on behalf of a beneficiary. They are legally obligated to always manage the assets in the best interest of said beneficiary. An executor, on the other hand, is responsible for carrying out the wishes of a recently deceased person. This includes distributing assets and fulfilling any debts incurred while the person was alive.
Both executors and trustees are equally important to the entities that they represent. They are each also central parts to many people’s estate plans, which is one of the last marks you’ll leave on your family. In turn, make sure your selection process for them is as complete as possible.
Estate Planning Tips
A financial advisor can help you make all the right choices when it comes to estate planning, and finding one doesn’t have to be hard. SmartAsset’s free tool connects you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors, get started now.
Another person you’ll need to name is a guardian. This is who will take custody of any minor children you have if you and your spouse die. Though this isn’t pleasant to think about, if you take care of it now it can save everyone a big headache later.
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