Making plans for what happens to your estate after you die ensures that your loved ones are cared for. You can name an executor or a trustee to manage your estate after you die. So, what’s the difference between trustee vs executor? You may appoint an executor in your will. An executor must go through probate court to settle the estate. On the other hand, a trustee manages trust assets – all without interference from the court system. Let’s take a closer look at both roles and see which type of estate planning might be right for you.
Trustee vs Executor: What’s the Difference?
Executors and trustees are both in charge of settling an estate’s assets. Both the executor and trustee have a legal obligation to distribute assets to beneficiaries. The person responsible for your assets should be trustworthy.
A named trustee handles trust assets following a trust document. This trust document outlines how beneficiaries receive assets. On the other hand, an executor handles all the assets with the guidance and oversight of a probate court.
If there is no will, the probate court names an administrator. The court calls both executors and administrators “personal representatives” of a deceased person’s estate.
Both an executor and a trustee pay creditors and debts, manage bank account issues, pay taxes, and act in the estate’s best interest. Once they’ve paid all debts, a personal representative pays the inheritance using the remaining assets.
An Estate Executor Settles Your Estate for NC Probate Court
There are good reasons why many estate plans create processes to avoid probate! The executor of your will handles this estate administration process, which begins with an inventory of your entire estate. The court oversees each step of the estate administration process.
Although having a will is a good basic form of planning, a will does not avoid probate. Instead, a will simply lets you inform the probate court of your wishes and who you’d like to serve as your executor.
Your loved ones still have to go through the probate process unless you’ve placed your assets into a trust. Without a trust, when you pass away, your family will likely go through a probate process to claim their inheritance.
The probate process, designed to wrap up a person’s affairs after satisfying outstanding debts, is public and can be costly and time-consuming – sometimes taking years to resolve.
Reasons to Avoid Probate
Everything is public record.
Almost everything that goes through the courts, including probate, becomes a matter of public record. This means that in order to properly wind up your affairs (i.e., pay your bills, file any remaining tax returns, and distribute your money and property to your chosen recipients), documents—including associated family and financial information—could become accessible through the probate court to anyone who wants to see them.
This does not necessarily mean that account numbers and Social Security numbers will go public, as the courts have at least taken some steps to reduce identity theft risk. Information the court makes public may include:
- The value of your accounts and property
- Creditor claims
- The identities of your beneficiaries
- Contact information for your loved ones
- Family disagreements that affect the distribution of your money and property
Most people prefer to keep this type of information private, and the best way to ensure discretion is to keep your affairs out of probate.
Probate can be expensive.
Thanks to court costs, attorney’s fees, executor fees, and other related expenses, the price tag for probate can easily reach into the thousands of dollars, even for small or simple matters. These costs can easily skyrocket into the tens of thousands or more if family disputes or creditor claims arise during the process.
Your money and property should go to your loved ones, but a significant portion could go to the courts and legal fees instead if it goes through probate.
Of course, setting up an estate plan that avoids probate does have its costs. Benjamin Franklin wrote, “An ounce of prevention is worth a pound of cure.”
Making an estate plan now is worth avoiding future costs to your grieving loved ones. Proper planning can minimize the risk of costly conflict and reduce or eliminate some costs for your family. If there is no probate case, there will likely be no probate filing fees, court costs, or will contestation costs.
Probate can take a long time.
While the time frame for probating an estate can vary widely by the value, amount, and complexity of the deceased person’s accounts and property, probate is not generally a quick process.
It is not unusual for probates, even seemingly simple ones, to take six months to a year or more. During this time, your beneficiaries may not have easy access to the money and property you intended to leave them. A delay can be especially difficult for loved ones experiencing hardship.
In contrast, the living trust administration process is much more efficient. Bypassing probate can significantly expedite the disbursement of money and property so that beneficiaries can benefit from their inheritance sooner.
If you have property in multiple states, your family must repeat the probate process in each state where you hold property. This repetition can cost your loved ones even more time and money.
The good news is that with proper trust-centered estate planning, you can
- Avoid probate in all states
- Simplify the transfer of your financial legacy
- Provide lifelong tax savings and asset protection for your family
What Are Revocable Living Trusts?
Accounts and property in a revocable living trust do not go through probate. Accounts and property that pass using a will guarantee probate.
When you draw up a living trust with your estate planning attorney, you appoint a trustee and a successor trustee. You act as the original trustee during your lifetime, while the successor trustee serves as your estate’s trustee after your death.
Working with your estate planning attorney to create a trust and place all assets in the trust can avoid probate entirely.
However, avoiding probate is not all a revocable living trust can do for you.
Consider These Reasons to Open a Revocable Living Trus
Avoid Guardianship If You Become Incapacitated or Legally Incompetent
A revocable living trust allows you to name your spouse, partner, child, or another trusted person to manage your money and property. If you become unable to manage your own affairs, your trustee will begin managing any assets you transferred to the trust.
In contrast, a will only becomes effective when you die, so a will is useless in avoiding guardianship proceedings during your life.
Maintain Privacy After Death
A will is a public document. Anyone, including nosy neighbors, predators, and unscrupulous distant relatives, can discover what you owned. They can also see who your heirs are if you have a will.
A trust is not a public document. It allows you to maintain your loved ones’ privacy after death.
More Protection From Court Challenges
Although court challenges to wills and trusts occur, attacking a trust is generally much more complex than attacking a will. The reason? Trust provisions are not made public.
Protection from Creditors
A trust also often allows your beneficiaries to receive benefits from trust assets while keeping them safe from seizure by creditors. Your beneficiaries’ creditors may include:
- Divorcing spouses
- Car accident litigants
- Bankruptcy trustees
- Business failures
How a Trustee Handles Your Estate Administration
A trustee manages your assets as a fiduciary. A trustee fiduciary is charged with acting in the best interest of the person’s estate. The trustee handles all aspects of the estate duties.
Trust management may involve:
- Responsibilities to manage the care of minor children
- Managing trust assets for the beneficiaries until a certain age or the satisfaction of other contingencies
- Handling all of the trust’s assets according to trust documents
- Making monthly payments to special needs or disabled beneficiaries
- Investing finances to manage the trust assets on behalf of beneficiaries
- Distributing assets
- Other responsibilities
Our Experienced Estate Planning Attorneys Can Help
At Vail Gardner Law, our knowledgeable estate planning attorneys can help you look at your goals and financial and family situation to design an estate plan personalized to your needs.
We will help you determine if a revocable living trust is the best choice for you and also provide counsel on other estate planning documents, such as advanced healthcare directives and power of attorney forms.
Call us today at (919) 246-6676 to get started on your estate plan and give your loved ones peace of mind.