Having a basic understanding of estate planning terms can be helpful when working through the process. However, it is easy to get confused. For example, two terms often used (and misunderstood) are “trustees” and “executors.” Both a trustee and an executor are persons selected to hold and manage assets of a decedent. The difference between the two is the manner and source of their appointment as well as the extent of their authority.
A trustee is named in a trust as the person (or one of several) in charge of the assets held in the trust, whereas an executor is named and appointed by the probate court to administer the estate of the decedent under the supervision of the court.
Whether he/she is named in a testamentary trust or a living trust, the trustee enters into an agreement to manage the trust assets and distribute the latter for the benefit of the beneficiaries of a trust. An executor is charged with protecting a decedent’s property until all debts and taxes have been paid. The executor must then transfer assets to the designated parties.
The basics are the same: executors are appointed by the court for the primary responsibility of administering the estate of the decedent, where trustees are nominated to administer the assets of a trust. Trustees owe fiduciary duties to the beneficiaries of the trust just as executors owe fiduciary duties to the beneficiaries and creditors of the estate.
The difference appears in the extent of their responsibilities: trustees of living trusts often do not deal with probate process whereas executors must work through the court proceedings. In fact, once probate is settled, the executor’s job is done whereas the trustee may have to manage the trust assets for a longer period, if they have not yet been distributed.
Selecting an Executor or a Trustee
Some consider the selection of a trustee or executor to be an easy process and often choose to nominate a family member or friend to hold and manage their assets. Yet, estate planning attorneys know that this is a common mistake that often leads to disputes among family members and misadministration or destruction of assets.
It is important to understand the value of giving a person the authority over your estate. Not everyone is qualified to assume such a task. Serving as a trustee or executor requires someone:
• Honest, trustworthy and conscientious • Available and willing to do the work • Organized, attentive to details • With basic knowledge about investments and taxes • Vigilant about keeping records • Able to resolve any conflicts • Neutral/unbiased
Many feuds have erupted because of problems with those who are managing a trust or named executor of an estate. Considering one of the main goals of estate planning is to transfer assets without conflict, it is critical to make executor and trustee selections that facilitate smooth asset management.
If you do not have an updated estate plan or have not yet created one, it is crucial to predetermine who is capable of administering your estate. To get tailored help with these issues in our area it is important to speak to a San Diego estate planning lawyer as soon as feasible.