If you are named as the executor of an estate, you might feel honored by the appointment.
That honor can turn to horror if you make a mistake that subjects you to personal liability.
The executor has to figure out what the estate assets are, pay any outstanding debts and distribute the remaining assets according to the wishes of the deceased as dictated in the estate plan. While that sounds simple enough, the path to success is full of potential pitfalls.
This was the message of a recent Wall Street Journal article entitled "The Biggest Mistakes Executors Make."
The article lists the following common mistakes made by executors:
- Paying Bills Too Soon – Many executors pay bills as soon as they come in. This can be a mistake as some debts, such as to the government, should be paid before other debts to ensure that there is enough money to cover higher priority debts.
- Investing Estate Assets – Some executors think they can invest assets to increase the value of the estate. While that is good in theory if the investments increase in value, the executor can be held personally liable if they do not.
- Mishandling Real Estate – Real Estate must be handled carefully. Houses should not be sold too soon or too late and it makes a big difference whether or not there is someone still living on the property.
- Losing Personal Property – Executors should conduct an inventory of valuable tangible assets to make sure they are properly stored and not taken away by someone else.
One way executors can avoid these mistakes is to hire an experienced estate attorney to help settle the estate. It is not a good idea for non-professionals to try to do it on their own.
Reference: Wall Street Journal (Jan. 31, 2016) "The Biggest Mistakes Executors Make"