When drawing up an estate plan, most people are concerned with what happens to their assets after passing and often don't understand or know the different roles involved. While it is essential to draft clear instructions for whomever you assign to handle your personal and financial affairs after you die, choosing the right people to manage your affairs is just as important. While assigning specific assets to your heirs may bring peace of mind regarding your belongings after your passing, appointing a trusted individual to oversee your estate and abide by your wishes is also essential.
What Is an Executor?
An executor, also known as a personal representative, is the person who administers and manages your estate after you die. Your executor will follow the instructions in your will and settle your estate by paying off any debts and distributing the remaining funds amongst the beneficiaries listed in your will.
What Does an Executor Do?
The executor of the estate will fulfill several tasks, which include:
- Collecting debts from individuals or businesses that owe the deceased money
- Paying bills and closing bank accounts
- Liquidating assets such as real estate and retirement accounts
- Filing income taxes for the deceased and paying the required estate taxes
Executors work closely with accountants and lawyers to settle affairs correctly under the law. Once they settle the estate, the executor will distribute the remaining assets to the designated beneficiaries.
What Is the Beneficiary?
A beneficiary is a person or organization you have named to receive your assets after your death. It is common to name spouses, children, siblings, relatives, or friends as beneficiaries in a will. You'll also want to list your beneficiaries in your life insurance policies to ensure they receive any death benefit directly without having to work through your estate. With life insurance policies and wills, we recommend listing a contingent beneficiary if the primary beneficiary cannot accept the asset.
Who Can Be an Executor?
When choosing an executor to manage your estate, appoint an individual you can trust; you can choose to appoint family members or close friends or pass the responsibility onto a lawyer. Your executor is expected to act in your beneficiaries' best interests and distribute your assets according to your wishes.
What Is an Administrator?
In the event that you do not have a will or fail to name an executor to manage your estate, the court will appoint an administrator to manage your estate after your death.
Enduring Power of Attorney for Financial Decisions
When an illness or injury leaves you cognitively incapacitated, it's important to designate someone to make financial decisions on your behalf. This person is called your attorney. To ensure an enduring power of attorney is legally binding, you must create it while in a sound mental state and be able to make your own financial decisions.
While an enduring power of attorney can be exercised in the event of mental incapacitation, you can also draft it up to come into effect as soon as it is signed or on a specific date. If family members have concerns about the actions of the attorney you designated to make financial decisions on your behalf, they can take their concerns to court for review.
What Happens if You Don't Have a Power of Attorney
Suppose you don't have an enduring power of attorney to manage your financial affairs once you suffer from mental incapacitation. In that case, your family members can petition the court to become a trustee on your behalf.
A Personal Directive for Health Care Decisions
A personal directive for health care outlines your wishes if you are unable to make personal decisions for yourself. The instructions may include resuscitation orders, refusal of medical treatments and sustenance, and sedation options to improve your comfort during end-of-life. For this responsibility, it is vital to name a trusted individual, known as the 'health care agent,' who can make these decisions for you.
What Is a Trustee?
In a situation where you die and leave your child or children, who are still minors, as the beneficiary of your estate, it's common to appoint a trustee. The trustee manages the trust assets and distributes funds as needed to provide for the care of your child.
Administering an estate can be time-consuming. At MerGen Law, our lawyers have extensive experience planning estates and assisting personal representatives in administering estates. We work efficiently to help you plan your affairs or assist your personal representative in administering and managing the estate. Contact us today to discuss planning your will and managing your estate.