Trustees and Executors

Trustees and Executors are similar in many ways. They are both fiduciaries. A fiduciary is someone who is put in charge of someone else’s money. A Trustee is a fiduciary over a Trust, and an Executor is a fiduciary over a probate estate. Trustees are responsible for administering a trust to the beneficiaries according to a legal agreement, whereas Executors distribute a deceased person’s assets according to a will. Executors must obtain a court order to act on a will.

Trustees

Trustees are named in Trust documents to act when the original Trustee(s) dies or stops acting. Usually, the person who creates the Trust (the settlor) is also the Trustee to start with. Once the settlor dies or stops acting, the named successor Trustee takes over. Trustees can take over management of the Trust without court intervention. The Trust document provides the procedure, and the successor Trustee usually agrees to act. Once the Trustee agrees to act, then they assume the powers of a Trustee under the Trust documents. It’s just that easy.

Once acting, the Trustee also assumes all of the duties and responsibilities outlined in both the California probate code and the Trust document. Keep in mind that the Trustee is not the same thing as the Trust beneficiary. The Trustee does not receive the Trust assets (unless the Trustee is also named as a beneficiary). And the Trustee does not have the right to change the Trust terms in most cases. Instead, the Trustee must manage the Trust assets according to the Trust documents. Eventually, the Trustee must also distribute the Trust assets as provided in the Trust document.

The Trustee is someone who will look after the things that will become the property of other people…….. such as beneficiaries who are under 18 (the Will may refer to members of the family who may not have the gifts until they are 18 or 25 or any age in between).

If the testator (the person making the Will) does not want the money and any bequests (i.e. jewellery, or valuable collections) to be inherited until a specified age the Trustees must look after the gifts and keep them safely (and properly invested in the case of money) until the Minor reaches that age. Perhaps the Testator has made it quite straightforward, if not this might be a complicated task requiring the help of a professional to set up a Trust.

It is possible that the Executor might not be able to do this job for a number of reasons. He or she may relinquish the task at the outset and an alternative must then be found, either already appointed by the testator (something that we encourage) or the next of kin or chief beneficiary.

A family member or friend who is Executor has control of what is happening and if there are complications which require the in-put of a solicitor or accountant their contribution is only temporary and of no real significance in the final denouement.

Professional help may be sought and paid for from the estate if necessary, control regarding timing and speed of delivery remains with the appointed Executor who should be in charge throughout. They thus retain the right to hire and fire and remove the Will from someone who turns out to be incompetent, who procrastinates or who overcharges.inheritancetaxtax01.jpg

It is a powerful appointment and one made in absolute Trust and confidence that the appointee is the right person to carry out the task and should be taken as a great compliment.

In summary, an Executor is the person responsible for the administration work connected with a Will, a Trustee looks after something that will become the property of somebody else.

Executors

Executors are people named in a Will to manage the probate estate after a decedent dies. However, unlike a Trustee, an Executor cannot begin acting until they first obtain a court order. When someone dies with a Will, the named Executor must submit the Will to the Probate Court along with a petition asking the court to open “probate.” Probate is just a court process where the management and distribution of a person’s assets are overseen by the court.

By the way, when a person dies without a Will their probate estate can still be opened, but the person appointed to manage the estate is called an Administrator rather than an Executor. It is the same thing, just different titles based on whether there is a Will (Executor) or not (Administrator).

Once the court grants the petition for probate, the court will issue an order and Letters Testamentary. Letters Testamentary is a form document signed by the court clerk that officially appoints the Executor and gives the Executor the power to act over a person’s assets. The Executor can then gather the assets together and take all appropriate actions required to ready the estate for distribution to the named beneficiaries.

The first thing an Executor must do is to take the Will to the Probate Office, together with a death certificate and show them the documents. If all is well with the Will (properly attested, unmarked and clear) a certificate known as a grant of Probate is given to the Executors. This important piece of paper gives government approval for the Executor to carry out his or her task immediately.

The Executor will have to approach banks and other financial organisations, employers, etc. in order to call in any money owing to the Estate. A bank account is opened in the name of the Trustees and money paid into it as it arrives. Outstanding bills and debts (credit cards, rent and rates, telephone, gas, electricity bills etc.) must be paid from this account.

When all the money owing to the estate has been paid into the Trustees account and all outstanding debts paid (including the Executors out-of-pocket expenses) the Executor must go back to the Probate office and show them what has been done.

If the Probate Office is satisfied with these accounts it will give the Executor authority to distribute the legacies, bequests and residuary gifts to the beneficiaries. Each of these beneficiaries (people receiving gifts from the Estate) and, if there is tax payable, the Inland Revenue, will be required to sign a receipt after which the account should be empty and then closed.

In this definition we have referred to the Trustees and Executors as one person. As the two roles run parallel it is normal practice to make them the same person.