Q: I’ve recently agreed to be the executor of my elder sister’s estate. What should I watch out for when this role becomes necessary and maybe even before? -Uneasy Brother
Dear Mr. Brother: Huge responsibility rests on your shoulders, unless your sister’s estate is extremely small. Even so, you’re no longer just the sibling; you are the legal guardian of her assets and must be ultra-cautious to perform your duties in the correct manner.
If things go awry, you may find yourself a defendant in a lawsuit. While the path to trusteeship/executor is filled with complex and difficult rules you need to research, Bottom Line offers five mistakes to avoid at all costs.
1. Never merge estate/trust accounts with your personal account(s). While it’s tempting, especially for the surviving spouse, who also is the executor – to join these accounts, it becomes a nightmare at tax-time. Even what may sound like common sense, such as paying the estate bills from the couple’s existing checking account rather than setting up a brand new account, turns into the necessity for hiring an accountant to separate all the monies. Not only does this cost the estate or you money, it’s so labor-intensive that many accountants turn down the job.
2. Avoid buying items from the estate/trust. Again, some “solutions” seem common sense until you are handed a summons to appear in court. Bottom Line’s example is perfect: the deceased owns an auto that needs selling, and you’re in the market for a car. Win-win, right? Nope. In your position, you’re legally responsible for selling the car and all other assets for the best possible price. Regardless of how fair the price you think for selling an item to yourself, doing so leaves you wide open for any beneficiary to claim you didn’t try to get a better price elsewhere. On the other hand, if you really want something in the estate, such as the car, it’s imperative to get written permission from all beneficiaries and include the purchase price in the document. Do not buy said item(s) until the estate confirms there is enough money to pay all creditors or they, too, could sue you for not getting enough money for the item (i.e. to pay them off).