In this article:
If you're creating or revising your estate plan, you'll likely create a will and potentially form a trust. When you do, choosing the executor of a will and a trustee of the trust fund will be important decisions. These are the people or organizations that will be responsible for settling your estate and distributing your assets after you die.
How Are an Executor and Trustee Different?
Your will's executor and trust's trustee (or successor trustee) play important roles in managing your estate after you die. Here's a quick overview of what they are and how the two duties differ:
|Executor vs. Trustee|
|Document||Last will and testament||Trust agreement|
|Responsibilities||Distributing an estate's assets after someone dies in accordance with the person's will||Managing the trust for its beneficiaries and distributing assets according to the trust's specifications|
|End of responsibilities||The estate's assets are distributed and the court issues a release||The trust is revoked, its term ends or all its assets are distributed (possibly many years after a death)|
Both executors and trustees are considered fiduciaries, which means they have a legal obligation to act in the best interest of the will's or trust's beneficiaries.
What Will the Executor of Your Will Do?
The executor of a will, also called a personal representative in some states, is responsible for managing an estate's financial affairs after someone dies. The executor will oversee the implementation of the instructions in your will, and their duties may include the following tasks:
- File the will. Unless you already filed your will with the probate court, the executor may need to file the will and a certified copy of the death certificate.
- Decide if the estate needs to go through probate. Probate is a court-supervised process for validating the will and settling an estate. Some assets are passed to beneficiaries outside probate, including assets in a trust. Depending on the state's laws, the probate process might not be necessary.
- Notify relevant parties of the death. These could include beneficiaries, heirs, other family members, government agencies and companies, such as a bank or lender.
- Find and secure assets. The court may request a detailed list of the estate's assets, and the estate may need a new bank account to collect and send payments. The executor may also need to maintain assets (such as a home) until they're passed on.
- Pay debtors. While the deceased person's debt might not pass on to their heirs, the debts may still need to be repaid from the person's estate.
- Pay taxes. Similarly, the executor is responsible for filing the required tax returns and paying the estate's outstanding taxes.
- Distribute remaining assets. In your will, you might name how you want specific assets distributed, and the executor is responsible for following the will's requests.
A court may appoint an administrator (which could be a close relative) to take over these responsibilities if you don't have a will, didn't name an executor in your will or the person you named declines.
What Will the Trustee of Your Trust Do?
A trustee is a person or organization that helps manage the assets in the trust for the trust's beneficiaries. Unlike an executor, a trustee's responsibilities start when a trust is formed and can continue for many years.
When you create a trust, you'll choose its beneficiaries and the trustee(s), who manage the assets on behalf of the beneficiaries. You may also choose one or several successor trustees, who will take over the trustee's duties if the original trustee(s) die or aren't capable of continuing.
For example, you might create a shared living trust and name yourself and your spouse as co-trustees and beneficiaries. You might also name your three children as beneficiaries and one of the adult children, a family member, a friend or someone else as a successor trustee. If you and your spouse die, the successor trustee will take over the trustee role.
The successor trustee's specific responsibilities can depend on the type of trust and the wishes outlined in the trust document. However, the successor trustee's duties may include these tasks:
- Share copies of the declaration of trust. These will be given to the trust's beneficiaries.
- Get a copy of the death certificate. The trustee may need this to perform their other responsibilities.
- Notify relevant parties of the death. This may include the trust's beneficiaries and companies that have accounts in the trust's name, such as banks. Life insurance companies may also need to be notified if the payout is going to the trust.
- Coordinate with the executor. The trust's assets may still be part of the estate, and may need to be used to pay off outstanding debts. Or, the executor may need to send excess assets from the estate to the trust.
- Manage the trust. The trustee may continue managing the trust, which can involve choosing how to invest the trust's assets, keeping detailed records, filing a tax return and paying taxes.
- Distribute assets. The trust's assets may need to be distributed to its beneficiaries according to the trust document's instructions.
The trust may be settled soon after a death if the instructions are to distribute all the assets right away. However, that's not always the case. For instance, if the beneficiary is a minor, the trustee may be responsible for managing the trust for years to come.
How to Choose an Executor and Trustee
Choosing an executor and trustee can be a deeply personal decision. You'll want to consider who can handle the responsibilities and whom you can trust to carry out the directions in your will and trust document. Additionally, consider the responsibilities that come with each role and how they could impact family dynamics.
Sometimes, it might make sense to name a single person as both the executor and trustee, or to make sure that both parties get along with each other since they'll likely have to work together to settle the estate.
If your trust will need to be managed for a long time after you pass, you may also want to consider a financial advisor or trust management company. Choosing the proper investments can be a complicated job, and the trustee may be personally liable for the decisions. You may also be able to name a family member and professional as co-trustees.
An executor and trustee aren't the only roles you'll need to consider when preparing your estate plan. If you have minor children, you may want to name a guardian or guardians, which you can do in your will. The guardian could, but doesn't need to be, the executor. They could also be a trustee. Or, you could give the trustee instructions about how to distribute assets to the guardian to help care for your child.
Don't Wait to Start Planning
Estate planning is an important part of making sure your wishes are clear and followed after you pass. Starting your estate plan early could be a good idea, and even simple steps like naming beneficiaries on your bank and investment accounts can keep those assets out of probate and simplify passing on inheritances. You can also always revisit your estate plan as your circumstances change.