In any asset division process, it is very important to understand the difference between executor and trustee. Both are roles that play a key role in dividing a person’s estate after death. In this article we will explain what each one does, and how they differ.
At Ortiz & Ortiz we have over 30 years of experience offering legal services in the United States. Our team of experienced New York estate planning attorneys will be able to guide you and resolve your questions about probate, wills and trusts.
Main difference between the role of an executor and a trustee in 2022
Executors and trustees are individuals selected by someone else to manage your estate after your death. Executors and trustees are very similar, which can be misleading. Although they are different roles, they could eventually be played by the same person. Below we review the essential differences:
- One of the main differences between the Trustee and the Executor is how they are appointed: A trustee is appointed in a trust document, such as a living trust, to manage the estate of the deceased person. An executor or personal representative is named in a last will, often called a will.
- The second big difference between the executor and the trustee is the process they must go through to liquidate an estate: Unlike executors, a trustee does not need to go through probate to liquidate an estate. This is because living trusts avoid probate court.
Read on, in this article we explain how both roles work in a succession process in the United States.
Successions in the United States
To understand the differences between executor of the estate and trustee, we must put ourselves in context. Both figures act in a process of succession. Succession is the legal process that develops after the death of a person. This must be completed in order to properly transfer the estate of a deceased person to his or her legatees. That is, the transfer of possession of the property and assets.
There are two kinds of sequences. Tested successions, and intestate successions. In each case the process has great differences for the distribution of assets.
Note: Check out our article that explains the difference between testate and intestate succession. You may also be interested in what happens when there is a breach of fiduciary duty.
What do executors do?
An executor is a person who was appointed by the deceased before their death. The executor is designated in a legal document, called a last will or testament. Instructions are set out in this document so that the probate court knows how your assets should be distributed when you die. Ultimately, the executor is the person in charge of liquidating the estate of the deceased. The executor must ensure that their wishes are carried out properly.
Some of the most common responsibilities of executors are:
- Handle problems with creditors.
- Fight the objections of the omitted heirs.
- Manage the transfer of the property and ensure that each of the heirs or beneficiaries of it receives their share of the inheritance.
The role of the executor in the probate process
One difficulty with the last will and testament is that the estate must go through an inheritance process. In some cases, probate can take years before assets are distributed and the decedent’s estate is liquidated. Cases in which probate can take years usually occur when the will is challenged.
You should consider that whoever is the person designated as executor in the will:
- They will be responsible for obtaining the letters of authority from the probate court.
- They must guide the estate through the complicated probate process.
If you are in the role of Executor, we recommend consulting with an experienced probate attorney. The process is complex and there are multiple legal and administrative actions that must be taken during the process. For example, the presence and action of the executor is required to:
- Appear in court on behalf of the estate and obtain a grant of succession, authorizing them to act on behalf of the estate
- Notify all interested financial institutions of the death (such as credit card companies and banks).
- Open a bank account for the inheritance.
- Pay inheritance bills and taxes.
- Take inventory of all assets of the estate
- Manage all the property and keep it in good condition until it can be distributed.
- Distribute the assets of the estate to the beneficiaries named in the will.
- Settle the inheritance with the probate court.
You might be interested in our article: Does An Executor Have To Show Accounting To Beneficiaries?
Can an appointed executor decline the function?
Indeed, if someone was appointed executor, they could resign from this role. That is, not because they have been appointed executor, they must act as such.
Any designated person has the option of declining to serve as executor. When executors refuse to act as executors, the corresponding probate court must appoint another executor. However, many people agree to serve as executor because they hope to honor the wishes of their deceased friends or loved ones.
Do executors receive a payment?
The role of the executor is unpaid. This is unless instead of a natural person, a law firm or other professional has been chosen to be your executor. In these cases, a fixed fee may be determined. It is also common that a certain value is charged by a percentage of the total equity.
Note: Do you know what happens if a person dies, who pays their debts? We recommend that you review our article where we explain what happens to a joint account with a deceased parent, and our article on the consequences of leaving life insurance without a beneficiary.
What do trustees do?
The role of trustee of a will trust begins after the period of administration of your estate. The process is the following:
- If the estate assets are held in ongoing probate trusts, the executors will pass those assets on to the probate trust trustees.
- Subsequently, the latter will become the legal owners of the assets and will manage them in accordance with the terms of the testamentary trust.
This process explains why a will that contains a trust refers first to the executors and then, later in the will, to the trustees. If the will creates a trust of the entire estate, or the residual estate, then the residual estate is generally called a “trust fund” in the will.
As we mentioned at the beginning of this article, in general, the responsibilities of a trustee are very similar to those of an executor. But there’s one big difference: Trustees don’t need to go through probate to settle the estate because living trusts avoid probate court. This is one of the main advantages of a living trust.
Duties of the trustees
Whatever the type of trust created by a will, trustees have a number of duties and powers. Some of them are described in the trust document, which in most cases is the will itself. Trustees must act in accordance with the terms of the trust and the law. The trust may include powers related to:
- Distribution of fiduciary assets.
- Property management.
- Use of capital.
- The exercise of discretion in relation to a discretionary trust.
Many of these duties that we mention are not directly stated in the will. But very commonly they are contained in a document called STEP Provisions. The will often contains a section that states that the STEP Provisions must be treated as part of your will, and this is what gives the trustees many of their powers.
In addition, of the aforementioned, the trustees must:
- Act in the interests of the beneficiaries.
- Act promptly and with reasonable care.
- Do not take advantage or personal benefit of the trust will.
As with executors, professional trustees can be appointed. For these cases, the STEP provisions allow professionals to charge for their services.
Many people choose executors to be their trustees as well, and many will make this a standard arrangement. This is worth remembering when considering appointing professional individuals as executors, because you may also be choosing trustees, so there may be additional fees if trusts are ongoing.
A trustee is named in your trust documentation and is the person responsible for distributing the trust assets to the beneficiaries in accordance with the terms of the trust.
Tasks to be performed by a trustee
- Manage the assets of the trust during the life of the trustor (person who creates the trust) and after the death of the trust, as long as the trust exists. This is a huge responsibility that involves making long-term property management and investment decisions.
- Manage a bank account for the trust.
- Maintain records of the trust.
- Pay the trust bills.
- Distribute the trust assets in accordance with the terms established in the trust, at the time indicated for their distribution. This may include making payments on behalf of the beneficiaries, as well as directly to them if indicated in the trust.
The person you designate to assume the role of Trustee after your death is known as your “Successor Trustee.” When you pass away, your successor Trustee assumes the position of Trustee and manages and distributes your assets in accordance with the strict instructions that have been described in the Trust document.
In addition to general trusts that cover residual estate, a will may contain other trusts for specific purposes. For example, gifts to people under the age of 18 go into a trust. Sentimental legacies as specific objects are also considered within this category.
There is the possibility of creating some of the other specific trusts in your Legacy Will. Some examples of them are:
- Life interest trusts.
- Discretionary trusts.
There are other types of private trusts for which it is essential to have the advice of a specialist. Examples of these are:
- The confidence of a disabled person.
- Confidence of a grieving minor.
Both are collectively known as the trust of a vulnerable person.
Trust companies can be created, for example, by law firms. They are created to carry out certain responsibilities that the law firm has assumed. These may include acting as an executor if you choose to have the law firm be your executor, or acting as an attorney under a finance and property management figure. The advantage of this arrangement is that it does not require a particular person to act, such as a designated partner who was named in a will but has since retired. Typically, the senior members of the firm at any time would be the individuals responsible for carrying out the functions of the trust corporation.
You may also be interested in our article on the Difference between executor and administrator of the estate, another figure in the probate process.
How to choose your executor or trustee
As you know after understanding both figures, and the differences between executor and trustee, you know that the choice of this person is important. The selection must consider several factors.
- You should look for someone you trust implicitly, who can handle the responsibility, and someone who is likely to outlive you.
- It is important to appoint a substitute for any position in case your first choice is not available. Before selecting someone as an executor or trustee, it is a good idea to speak with them and ask if they are comfortable taking on this responsibility.
- Most people prefer to choose a close relative, such as a spouse or child.
- You can also consider close friends or your lawyer. You can use a company that fills these roles if there is no one you are comfortable with in your life or if you do not want to be a burden to someone you love.
Before making the decision, we recommend that you fully understand the process and study the roles and duties of executors and trustees. This allows you to make an informed decision in your selection of the person who will manage and distribute your assets.
How to ask someone close to be your executor
We know it can be a complex conversation. Talking about what will happen to your estate after your death is difficult. And especially difficult when it comes to a relative or someone close to you. Feelings and emotion will inevitably be present, so we recommend:
- Find a suitable time and place to speak with the chosen person.
- Speak clearly and calmly.
- Be sure of what you are asking for. Know in detail the role and function that you are granting.
Since we know this is an important topic, it may take several conversations to convey your intentions for what happens to your estate after your death. We recommend consulting with a estate planning attorney. And put them in touch with your chosen person to be executor. This will ensure that you can solve all your doubts in advance.
There are some wishes about how you would like your family to act after your death that do not qualify for writing into a will. That is why you may want to create another document that informs your family of certain things that you wish to have done. This can be accomplished with a Declaration of Desires. This document may not be legally binding, but it will surely be of great value to your family members.
An example that seems like a detail, but is very important to many people is the detail regarding the type of funeral they would like. Matters about how the final burial unfolds do not correspond to a will. In fact, it is quite likely that the will will not be reviewed until after the burial. That’s why it’s not a good idea to include funeral and final burial instructions in your will.
Some examples to include in this document are:
- The location of your will.
- A list of family members, friends, and anyone else who you would like to be notified of your death (include their names, addresses, and phone numbers).
- Instructions regarding your funeral. Many people prefer to indicate that they want the least expensive burial to save assets for their heirs. Another common example is the preference for a cremation over a traditional burial.
- Any wishes you may have regarding the education and upbringing of your minor children.
- Provisions for the custody and care of pets.
- A list of your assets.
- A list of your life insurance policies, including the name, address, and phone number of the insurance company.
Something that you must consider for this document to be useful is that a member of the family knows of its existence. The document should be in a place where a family member can easily find it.
Why Hire The Attorneys At Ortiz & Ortiz?
Now you know the main differences between an executor and a trustee. If you are reading this article and got here, it is because you know the importance of estate planning. Resolving your will will give you and your family peace of mind. So there will be no room for misunderstandings or problems in the future.
Our team of experienced New York probate lawyers will be able to help you with your questions about:
We have offices in Queens and Manhattan. If you live in Brooklyn, the Bronx, Staten Island or Long Island, we can schedule a virtual consultation to review your case and advise you remotely.