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Executors are individuals that are named either in a final will and testament or by the courts, following an estate owner’s death, and are responsible for carrying out the wishes of the decedent according to the instructions of the will. Once named, the executor assumes administration of the estate, its assets and the decedent’s will. In this way, an executor serves a double role as fiduciary and administrator.

It can be an honor to serve as an executor as the position implies trust, but it also comes with many responsibilities. Often the responsibilities are so great that executors do not have the time or expertise to handle them. In those cases, probate attorneys and accountants can provide expert guidance and assist with case management.

 What Are an Executor’s Responsibilities?

An executor is entrusted by the decedent, or the court, to carry out the decedent’s wishes. This includes proper management of the decedent’s estate.

Some of the executor’s duties include:

• Gathering all documentation relevant to the estate’s finances.
• Submitting the will to a probate court.
• Communicating with anyone who has an interest in the estate. This could include heirs and creditors, as well as agencies like the Social Security Administration.
• Taking an inventory of the estate’s assets and presenting it to the court.
• Ascertaining fair market value (FMV) for all inventoried assets.
• Determining which assets are required to pass through probate.
• Alerting all beneficiaries, heirs, and creditors to the probate process.
• Managing the estate’s assets and transferring them to beneficiaries.

Executors can be paid for their time, but in many cases where the executor is a family member, executors will forego payment for their executive duties as the compensation must be declared and is still taxable. Furthermore, any compensation paid to the executor is paid out of the estate’s assets. In many cases, executors are also beneficiaries of the estate, and taking payment would reduce the amount left to disperse to themselves as a beneficiary. The duties of an estate executor can be a major undertaking . Beyond simply taking inventory and dividing and distributing property, the executor must create a tax ID number for the estate, and must file estate tax returns. For large estates, it is common work with an accountant and probate attorney to ensure that all assets are properly accounted for and forms are filed on time.

Challenges That Executors May Face During Administration

Although some estates are small and simple enough to manage without difficulty, executors regularly face additional complexities, such as:

• Discovering assets that may not be clearly defined anywhere in the decedent’s documents
• Establishing accounts just for the estate
• Dealing with potential conflicts of interest
• Resolving outstanding lawsuits or other legal actions involving the estate
• Mediating conflict between beneficiaries
• Demonstrating validity of all documentation to the court
• Resolving confusion or uncertainties in the will
• Handling complex assets or investments, such as business ownership

If any of the above are present, an accountant or probate attorney can advise the executor on making legally defensible decisions. Probate attorneys can also walk the executor through the process and ensure it is properly managed.

For example, a client we recently represented was the executor of an estate that included a condo. While selling the condo, the court disputed whether it was being sold at FMV. We had to reach out to an independent appraiser to prove to the court that the transaction met FMV standards. Our firm regularly encounters and resolves roadblocks like this.

Executors: Independent vs. Dependent Administrators 

Executors may be considered independent or dependent administrators of the decedent’s estate and affairs. Here are the differences between the two:

• Independent administrators – Independent executors are either named in the will or are appointed by the court if all beneficiaries agree with the decision.
  In Texas, independent administrators are given additional latitude to engage in transactions on the estate’s behalf.
  Independent administrators must submit an inventory of all assets, a value appraisal of those assets, and any claims against the estate. Once this is provided, the court’s involvement will be minimal. Essentially, the executor will have the agency to pay creditors and transfer assets to beneficiaries without notifying the court of every decision.There are limitations in place to prevent independent administrators from breaching their fiduciary duty. For instance, the court may appoint a lawyer to represent any heirs that are not present during the probate process, to ensure they are fairly considered.

   

• Dependent administrators – Dependent administrators are usually appointed by the court if no executor is named in the decedent’s will, or if the decedent died intestate (without a will).Dependent administrators must receive court approval before finalizing any transactions between the estate and other parties, including beneficiaries, creditors, or financial institutions.

  The added court oversight can slow the administration process down, but it’s helpful for contentious or complex cases. Dependent administration is also recommended if the executor is inexperienced in estate management or has potential conflict of interest issues.

Three Things to Remember if You’ve Been Named an Executor 

Our firm has assisted many executors entrusted with high-value estates. Along the way, we’ve compiled a short list of important things to remember when being named an executor, including:

• Bring everything to the court at the same time – Dependent administrators have to verify every estate-related decision with the courts. Given the court system’s procedural nature, this can be time-consuming. As such, we advise our executor clients to consider every possible decision before approaching the judge. If you can get everything approved at once, it will save multiple trips to the courthouse and prevent bottlenecks from emerging while managing the estate. 
• Observe a clear division between estate and personal accounts – Prior to and throughout the probate process, the executor will need to prove they are properly managing the estate’s assets. That means clear accounting. To establish this accounting transparency, it’s vital that the executor create a separate set of bank accounts just for the estate. This will make it easier for the executor to organize the estate’s finances and to establish a clear accounting trail for all transactions. 
• Get the process started early – Probating an estate can take years, and it’s an expensive process. It isunwise to prolong probate. If you get started right away on gathering documentation, getting court approvals, and appraising assets, you’ll extract maximum value out of the estate and lose less of it to probate.

Why Should Executors Work with a Probate Firm? 

If you’ve got the time, experience, and confidence to administer an estate, you may only need an attorney or accountant when complicated questions arise. For everyone else, there are good reasons to partner with a probate attorney or accountant. For example:

• An accountant can create a clear division between personal and estate finances – Accountants can establish a clear division of accounts and assets between the executor and the estate. This will protect the executor from a common, and potentially serious, mistake – intermingling personal assets with estate assets. 
• An attorney will ensure their client acts as a proper fiduciary – Executors must make reasonable financial decisions on the estate’s behalf. For example, all assets must be liquidated at fair market value and creditors must be paid according to priority. A probate attorney will advise their client on how to meet these fiduciary requirements. 
• A law firm will prevent their client from becoming overwhelmed – Estate administration requires an attention to detail and organization, as there are rigid procedures to follow at every step. For inexperienced executors, it can be too much for one person to take on. A law firm which specializes in probate will oversee important details such as deadlines and documentation, preventing their client from becoming overwhelmed in the process.

Estate administration is a major undertaking, even for those who have done it before. If you have recently been named the executor in a will or by the courts, a probate attorney or accountant can guide you through the process and ensure you take every necessary step in acting as an effective executor.

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As individuals take steps to prepare for their future, one of the more confusing areas for many are fiduciary roles in estate planning and probate. Questions about this topic can range from, “What is a fiduciary?” to “What are their roles?” To create a proper estate plan and create a trust, it is critical to first understand the answers to these questions to ensure that your wishes are followed and your assets are protected.

Fiduciary Roles in Estate Planning and Probate

Before we begin talking about fiduciary roles in estate planning and probate, it is important to review the definition of a fiduciary. This role is filled by a person who is willing to take on the highest legal responsibility one can have when it comes to taking care of another party’s assets and property. This means the fiduciary is a person who is willing to act on behalf of another individual in a legal capacity. A fiduciary agrees to put a client or beneficiary above any interests of their own, avoid related conflicts, and fulfill their legal duty in a manner that can be accounted for in a court of law.

A fiduciary trust involves a trustee who has fiduciary responsibilities to manage an individual’s assets and/or act on behalf of the individual when necessary. This is often used as an estate planning tool designed to help delegate inheritances and arrange for charitable contributions, among other things.

There are two primary types of trusts:

1. Intervivos trust. This type of trust is created immediately by simply transferring property to a trust or trustee for the benefit of one or more beneficiaries. An intervivos trust is created while a person is still alive. For this reason, it is sometimes referred to as a living trust.
2. Testamentary trust. This type of trust does not exist until the grantor dies, at which point there will be a set of provisions stated in the grantor’s will which then constitutes a trust agreement by appointing trustees, funding the trust with corpus or property, and determining how it will be distributed amongst beneficiaries (such as at a certain age, for the purpose of college, for the purpose of maintenance support standards, etc.).

When forming a trust, trustee(s) must be named who will have fiduciary duties.

Other fiduciary roles in probate and estate planning are executors and guardians. The executor is a person named in a testamentary will who will be the person in charge of administering the decedent’s estate – inventorying and dispersing property to decedents, filing tax returns on behalf of the decedent and the estate, and all other miscellaneous tasks. A guardian is typically a person (or a couple) named to take care of minor children, but a guardian can also be responsible for taking care of certain property or the testator, if they are not deceased, but simply incapacitated. It is not possible for a fiduciary to be both a guardian and an executor if the guardian role occurs while the testator or grantor is still alive. It is, however, possible to be an executor of the probate and estate and also be the trustee of a trust that is created out of it.

Responsibilities of a fiduciary in the trust of an estate could include:

• Adhering to all specifications and directions stipulated in the Declaration of Trust.
• Maintaining precise financial records to be used for taxes and to supply to beneficiaries.
• Investing trust assets when needed in a conservative manner that requires only a small risk.
• Relaying actions to the beneficiaries as stipulated in the trust.

The fiduciary does have a responsibility to get someone else involved if investments must be made to keep the money in the trust growing. In this respect, a trustee does have a prudent investor duty that comes with a certain level of discretion.

The duties of the executor include adhering to the decedent’s wishes and prioritizing the interests of the beneficiaries. This includes protecting the decedent’s assets, paying debts and taxes, as well as distributing the estate according to the terms of the will. Proper accounting and reporting to the probate court is also required.

When Fiduciary Duties Are Breached

The above levels of discretion for trustees are where issues can and do occur – and can manifest in the following ways:

• Using the trust’s or estate’s assets for personal gain rather than beneficiary gain.
• Comingling the fiduciary’s funds with the trust or estate funds
• Dispersing funds to one beneficiary more favorably than another beneficiary
• Allowing estate or trust property to be wasted, fall into disrepair, or not be invested wisely

A fiduciary’s responsibility is to protect the trust or estate. Therefore, in the case of a trust, it would be a breach of duty for the trustee to invest trust money into something simply because the trustee has access to it. This is primarily an issue for unsophisticated trustees who are anxious to support pet projects they like. It would also be a breach of duty for a fiduciary to use the trust money to work out their own deals and loan the money back and forth.

When appointing guardians, many individuals choose two guardians as fiduciaries—one to aid the person with doctor appointments, living arrangements, and medications, and the other guardian to control the assets and real property of the incapacitated person’s estate to make sure nothing is wasted. In the case where a fiduciary is the guardian of the estate of an incapacitated person, there may be issues with beneficiaries or family members. For instance, if a mother is allowing her two daughters to spend their mother’s money, a guardian can step in and stop this from happening so the mother will still have enough money left to provide for herself.

Fiduciary duty is the highest level of legal standard that a person can be held to under U.S. law. Fiduciaries are required to uphold a duty of care and a duty of loyalty to the beneficiaries of an estate or trust at all times. That is why it is important to use discretion when choosing who will be named as your executor, trustee, or guardian.

Unfortunately, and in spite of a grantor’s best effort to choose a trustworthy fiduciary, breach of fiduciary duty is not uncommon. These types of situations are handled by law firms annually. Beneficiaries who feel they have been wronged by trustees can make a claim against a fiduciary and enlist legal representation.

How An Attorney Can Help with Understanding Fiduciary Roles in Estate Planning and Probate

Before creating a trust for estate planning and probate, it is wise to consult with an estate planning attorney. Legal counsel can help educate you about the types of trusts and which might be the best for your specific needs and goals. This can go beyond establishment of the trust and extend to other financial areas such as taxes.

All too often, individuals who use inexperienced family members or trustees as fiduciaries can experience unnecessary complications that could potentially have been avoided by enlisting the help of reputable legal counsel.

Beneficiaries of trusts and estates who feel they are not receiving distributions as a grantor intended can also enlist the help of an attorney to determine if the trustee or executor is acting according to legal standards and best practices. An experienced attorney can also help beneficiaries bring claims to remove a trustee or executor, so the beneficiary can access assets that are rightfully theirs.

For more information about fiduciary roles in estate planning and probate, make an appointment for a consultation with a reputable estate planning attorney who has demonstrated proven experience and success in this particular area of law.

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Foreclosure is a legal process in which a borrower or debtor forfeits their right to property by defaulting on payments or other obligations. In Texas, once a debtor is in default, the creditor must send notice to the borrower that they are in default and have 20 days to cure. If, after 20 days, the default continues, the creditor has the right to post notice of a public foreclosure sale. It is during this process that a debtor will file for bankruptcy. The foreclosure process would then be halted by an automatic stay – a provision in the bankruptcy code that kicks in as soon as a debtor files for bankruptcy. While in effect, an automatic stay prevents the creditor from pursuing collections against the debtor – with some limitations.

On the creditor’s side, automatic stays complicate the collections and foreclosure processes. However, creditors may move to lift a stay to resume foreclosure and recover payment.

Automatic Stay Details: What it Prevents and How Long it Lasts

As per Section 361 of the U.S. Bankruptcy Code, an automatic stay goes into effect as soon as a debtor files for bankruptcy – either Chapter 7 or Chapter 13 (or Chapter 11 for business entities). Because it is implemented instantly, it is common for debtors to wait until the last moment before filing bankruptcy to give themselves maximum time to act.

Once an automatic stay is in effect, it will prevent the following actions:

• Moving to foreclose a property
• Creating, perfecting, or enforcing a lien
• Repossessing collateral
• Garnishing wages

Automatic stays only provide temporary protection. If the debts are not discharged in bankruptcy, they remain the debtor’s obligation.

If the stay is not lifted by a court order, it will typically remain in effect as long as bankruptcy proceedings are ongoing. For Chapter 7, this could mean several months. For Chapter 13, this could mean several years.

Debtors must continue making post-petition payments, including taxes, and maintaining insurance on the property. If debtors fail to do so, they risk losing their objection to lift the stay.

Bankruptcy courts may alter an automatic stay if a debtor is potentially “gaming” the system to avoid payment. For example, if a debtor has filed for bankruptcy more than once within the previous calendar year, the stay may be reduced to 30 days total. If the debtor has a history of bankruptcy filings, the court may remove the automatic stay entirely.

When an Automatic Stay is Helpful for Creditors

Automatic stays are primarily a tool for debtors, but they can benefit some creditors, too. If a property has multiple liens against it, an automatic stay freezes collection attempts by all creditors. This gives the court time to organize repayment to all lien holders, giving every creditor a fair chance to attain compensation, though lien priority dictates who is paid back first.

Lifting an Automatic Stay to Continue Foreclosure

Bankruptcy delays the foreclosure process, but creditors may continue foreclosure if they have the stay lifted. The burden of proof falls on the creditor to demonstrate why the automatic stay should be lifted, and reasons given may include:

• Insurance doesn’t adequately cover the property. We recently participated in a case where two hearings were needed to determine whether a particular commercial insurance policy was sufficient for the property in question. After determining that the policy was not sufficient, the stay was lifted.
• The creditor’s business stands to lose money if the stay is not lifted.
• The property is falling into disrepair.
• The property’s value will decline to the point where selling it will not cover costs following bankruptcy proceedings.

Motions to lift an automatic stay are considered on a case-by-case basis by the bankruptcy court. Prior to making a decision, the court will hold a hearing for both sides to make their argument. Sometimes the court will agree with the creditor that the stay should be lifted and foreclosure may continue. Sometimes the court will keep the stay in place.

Courts are more likely to keep the stay in place if the debtor is only a few payments behind and can continue making payments. The debtor must also be able to maintain insurance and tax payments. The court will also be more likely to keep a stay in place if the debtor elects to sell the property and use the proceeds to pay creditors back.

When is the Court Likely to Lift an Automatic Stay?

The court will be more likely to lift a stay and allow foreclosure to continue if:

• The debtor’s equity does not cover the liens held against the property. This is more likely to be the case if there are multiple liens taken against the property. If the liens held against the property are worth more than the property itself, the debtor cannot sell the property unless secured lien holders agree to take less. In this case, the bankruptcy court may force a sale to liquidate the property and pay off lien holders in priority order.
• The mortgage is greater than the property’s worth.
• The debtor is too far behind on payments to catch up within a reasonable timeframe. 

Delayed by an Automatic Stay? An Experienced Real Estate Attorney Can Help

Foreclosure battles can be contentious between creditors and debtors, especially when a bankruptcy stay is involved. And ultimately, whether the stay is lifted or allowed to stand is based on subjective factors. This means either side can win with better preparation and knowledge of the law.

An experienced attorney can provide both for a client. Our practice, for example, specializes in representing creditors involved in bankruptcy proceedings. We can help organize motions to have a stay lifted, allowing creditors to complete foreclosure and recoup what they can on the property.