Guest column: How executors and trustees protect families

Since you care about your family, it’s important to choose the right people to help them when doing your estate planning. That’s where an executor or trustee comes in.

Although both manage assets and distribute them to beneficiaries, an executor is the person named in your will to carry out your wishes, and the job typically lasts two to three years. A trustee is the person — or bank or trust company — named in a trust agreement to carry out your wishes stated in the trust, and the job usually lasts longer.

Some trusts are revocable; others are irrevocable, meaning they generally cannot be revoked once created. The trustee of a revocable trust functions much like an executor, and the role is similarly temporary. The job of a trustee of an irrevocable trust often lasts much longer. Let’s look at what executors and trustees do.

The Executor’s Role
For North Forkers, an executor submits a will for probate to the Suffolk County Surrogate’s Court in Riverhead. Once the court declares the will valid — that is, admits it to probate — the executor is appointed and receives what are called “letters testamentary” evidencing the appointment. Then the practical work the family depends on can begin.

The executor’s first step is to identify, collect and protect the assets. This includes transferring bank and brokerage accounts into the estate’s name and taking action to protect the assets, such as changing locks, keeping insurance in place and controlling the decedent’s investments.

Once the decedent’s assets have been identified and collected, the executor determines the decedent’s debts and estimates the expenses anticipated during the administration of the estate, including appraisal fees, estate taxes, executor commissions, legal fees and accounting fees. The executor should raise the cash needed to cover debts and anticipated expenses as quickly as possible to avoid market risk.

Depending on the estate’s size and complexity, the executor may have many duties. For example, if a person owned a business — say, a shop in Greenport, a farm in Mattituck or a service company in Southold — the executor must either sell it or provide for its continuation.

The executor also may have to file state and federal estate tax returns, which are due nine months after the date of death. Once the taxing authorities accept the estate tax returns, the executor can move forward to close the estate. That includes informing the beneficiaries about the estate’s administration, obtaining approval of those actions, distributing the remaining assets and filing the estate’s final income tax returns.

Because executors take on real responsibility, New York law allows them to be paid for their work. An estate lawyer often helps the executor understand deadlines, paperwork and next steps, and prepares the necessary documents.

The Trustee’s Role
The trustee’s job is to carry out the trust’s directions. Typically, a trust provides that the trust’s income or principal be paid to certain people in the trustee’s discretion for a defined period of time. Then the trustee must distribute the trust assets to named beneficiaries or hold the assets in further trust for certain people.

For example: Dan in Southold sets up an irrevocable lifetime trust for his daughter, Kate, and her children and grandchildren, directing the trustee to make distributions among them in the trustee’s sole discretion for their health, education, maintenance and support. When Kate dies, the trustee is directed to split the trust into separate trusts for Kate’s then-living descendants, with similar terms.

How long can that “new trust for each generation” pattern continue in New York? Under New York’s rule against perpetuities law, the trust must end no later than 21 years after the death of the people who were alive when the trust was created. When that outside limit is reached, the remaining trust property must be paid out to the people then entitled to receive it.

Because a trust may last longer than any one person’s working life, trust documents usually name successor trustees who can step in if the original trustee cannot serve.

A trustee has a fiduciary duty to both the current beneficiaries and potential future beneficiaries of the trust, and must carry out the job thoughtfully and fairly. A trustee also has the duty to invest the trust assets prudently by growing the value of the trust assets, rather than simply preserving them.

A trustee can be held liable to beneficiaries for misconduct — for example, unreasonably refusing to make distributions, making imprudent investments that harm performance, or using trust assets for the trustee’s own benefit.

The job of a trustee is significant and, as with an executor, New York law entitles a trustee to be paid for the work. The payment depends on the size of the trust. A trustee should work with an investment adviser during the term of the trust, but usually will not work regularly with a lawyer unless an issue arises involving the beneficiaries or the trust assets. Trustees also should work with a lawyer if significant time has elapsed and they want to report their actions to the beneficiaries.

For many North Fork families, proper planning can help keep a home, local business or family savings from turning into confusion during what may already be a difficult time. The right documents — and the right people chosen to carry them out — can bring clarity and continuity for future generations.

Ms. Marcin is a partner at Rivkin Radler LLP, where she concentrate in trusts, estates and tax law.