Trustee vs. Executor: What’s the Difference?

Published June 11, 2024

If you’re on the journey of crafting and revising your estate plan, you’ll likely craft a will and potentially form a trust. In doing so, choosing the Executor of a will and a trustee of the trust will be crucial. You’ll task These people or organizations to settle your estate and distribute your assets after your passing.

The two have critical distinctions, and it’s worth educating yourself about the topic. Your will’s Executor and trust’s trustee play vital roles in handling your estate after your passing.

In this article, we’ll examine trustees vs. ExecutorExecutors, discussing how their duties differ and all the essential topics related to them. Let’s begin.

How are an executor and a trustee different?

Document

An executor handles the last will. A trustee handles trust agreements.

Responsibilities

An executor distributes an estate’s assets according to a person’s will. The trustee manages the trust for its beneficiaries and distributes assets according to the trust’s specifications.

End of responsibilities

When the court issues a release, the estate’s assets are distributed, and the Executor’s responsibilities are ended. When the trust is revoked, its term ends and all its assets are distributed.

What will the Executor of your will do?

In some states, a will’s Executor is also acknowledged as the personal representative. Its duties revolve around managing an estate’s financial affairs after someone dies.

1. File the will

Unless you have already filed your will with the probate court, the Executor may need to file it with a certified copy of the death certificate.

2. Decides if the estate needs to go through probate

Probate is a court-supervised activity that manages the validation of wills and settles estates. Some assets, including assets in a trust, are passed to beneficiaries outside probate. Depending on the state’s laws, the probate procedure might be needed.

3. Notify relevant parties of the death.

These could include beneficiaries, heirs, and other family members. They may also contact government agencies and companies, such as banks or lenders.

4. Find and secure assets.

The court may request a thorough list of the estate’s assets. The estate may require a new bank account to collect and send payments. The Executor may also need to sustain assets until they are passed on.

5. Pay debtors

The debt of the deceased may not pass on to their heirs, but the credits may still need to be reimbursed from the person’s estate.

6. Pay taxes

The Executor is responsible for filing the required tax returns and reimbursment the estate’s outstanding taxes.

7. Distribute remaining assets

You might name how you want certain assets distributed in your will. The Executor is accountable for following the will’s demands.

What will the Trustee of your trust do?

A trustee is a person or organization that assists manage the assets of a trust for its beneficiaries. Unlike executors, their responsibilities are benign when a trust is formed and can persist for many years.

When you craft a trust, you’ll decide its beneficiaries and the trustee, who will manage the assets on behalf of the beneficiaries. You may appoint one or several successor trustees who will continue the trustee’s duties if the original trustee dies or cannot continue.

1. Share copies of the declaration of trust

These will be passed on to the trust’s beneficiaries.

2. Get a copy of the death certificate

The trustee may need this to perform their other responsibilities.

3. Notify relevant parties of the death.

This may include the trust’s beneficiaries as well as the companies with financial affairs in the trust’s name, such as banks. If the payout goes to the trust, life insurance companies may also need to be notified.

4. Coordinate with the Executor.

The trust’s assets may still be part of the estate. Thus, it must be leveraged to pay off outstanding debts. Or, the Executor may need to transfer excess assets from the estate to the trust.

5. Manage the trust

The trustee may continue overseeing the trust. This can involve choosing how to invest the trust’s assets, keeping detailed accounts, filing a tax return, and paying taxes.

6. Distribute assets

The trust’s assets may need to be allocated to its beneficiaries based on the trust document’s demands.

How To Choose an Executor and Trustee

Choosing an Executor

Trustworthiness

Select someone who values integrity and is reliable. An executor will handle sensitive financial and personal matters, so trustworthiness is paramount.

Organizational skills

he Executor must manage various tasks. They pay bills, file tax returns, and distribute assets.

Impartiality

Choose someone who can remain neutral. It is vital, especially if your estate plan involves multiple beneficiaries. Daily dynamics can be complex.

Availability

Ensure the person you choose has the time to live their role.

Financial acumen

Having financial expertise aids in handling investments and taxes effectively.

Willingness

Always ask the person if they are willing to take on the responsibility. It is a significant commitment, and they should fully understand the duties involved.

Choosing a Trustee

Experience and knowledge

Depending on the complexity of the trust, you might want someone with experience in all things trusts. This can include its management, investment, and legal requirements.

Objective decision-making

A trustee should be able to make decisions that are in the best interest of the beneficiaries, even if those decisions are difficult or unpopular.

Financial responsibility

Trustees handle funds and assets. It is vital to choose someone who is financially responsible and savvy.

Longevity

Consider someone who will likely be around for the duration of the trust, especially if it’s a long-term trust.