The terminology in the administration of the estate of a deceased person can be confusing. Three of the principal terms one needs to understand are executor, trustee, and administrator. An administrator processes the estate of a person who dies without leaving a valid will or trust, a situation called dying intestate. An executor follows the instructions of a deceased person’s will. A trustee manages and distributes the assets of the decedent according to the terms of a living trust.
This article will focus on the question of what is the difference between an executor and trustee? A California estate planning attorney can help you set up your estate plan to protect you during your lifetime and your loved ones after your life. It makes things more difficult for your family if you do not prepare a will or trust.
The Duties of an Executor
If you get appointed as the executor of a person’s will, you will have many responsibilities. A quick overview of these duties is that you will marshal the assets of the estate, pay the debts, and then distribute the assets to the heirs. These deceptively simple tasks require a multitude of steps.
First, you will have to open a case in the probate court and submit the will for approval by the judge. If there is a will contest, it might take months or longer to resolve that dispute. Once the judge approves the will, you will need to get legal authority to perform the functions of the executor. The judge will issue letters of administration that you will have to show to banks and other financial institutions to gather the assets and do your work.
You will contact the known creditors and provide legal notice to potential creditors. Once you have determined all the valid debts of the estate, you will pay those obligations out of the assets of the estate. Serving as an executor also means making a detailed inventory of the assets, obtaining appraisals when necessary, and filing reports and other documents with the court.
The executor prepares the income tax return for the last year of the decedent’s life and the tax return for the estate. As many estates are open for at least a portion of two different calendar years or longer, the state will have to file tax returns for each of those years.
After the executor pays all of the financial obligations of the estate, including valid debts, taxes, and administration expenses, the executor submits a proposed distribution of assets to the heirs. The executor can make these distributions after the judge approves of the proposal.
The Duties of a Trustee
Administering the terms of a living trust is a less formal process than administering a will. The trustee performs their work outside of court. Unless there is a significant dispute, the trust does not get filed with the court or have any other court involvement. For this reason, the terms of living trusts are generally more private, as they do not become a matter of public record.
The trustee gathers the assets, pays the debts, and prepares and files the tax returns, but does not have to draft formal inventories or reports for anyone to approve. Also, the trustee distributes the assets to the beneficiaries without having to get a judge’s approval.
The work of an executor is much more public, with direct oversight by the court. All interested parties can look at the inventories and proposed distributions to satisfy themselves that things are being done fairly and correctly.
The work of a trustee is much more private, with little or no oversight. Often, a trustee’s work can get concluded more quickly than an executor’s duties. The beneficiaries of the trust can generally expect to receive their asset distributions in less time than people who inherit under a will.
A California estate planning attorney can talk to you and help you create an estate plan that meets your needs and goals. For a free consultation, get in touch with our office today.