Legal documents can be difficult to understand, containing unfamiliar words. In the case of Wills, certain key terms frequently cause confusion – specifically, Executor, Trustee, and Testamentary Guardian. We hope the following discussion will help clarify these three very different terms.
1. The Executor
Many of us have accumulated assets over the years (for example, a house, stocks, jewelry and personal mementos). When you prepare a Will, you can specify how you want these assets (your “estate”) distributed once you’re gone. In your Will, you can designate the Executor – the person, persons, or entity responsible for “settling” the estate. Once the estate is settled, the Executor’s job is done.
Among the key things the Executor must do is to:
– identify all the assets left upon your death and determine the value of those assets. For example, if you left behind a house, the Executor must get your house appraised.
– use your estate assets to pay off all your debts and expenses, including all outstanding federal and state taxes.
– distribute to the beneficiaries whatever assets remain after all debts, expenses, and taxes have been paid.
Please note, if you neglect to designate an Executor, one will be appointed by the surrogate court upon your death.
2. The Trustee
Trusts are often established in Wills. Such trusts are called testamentary trusts. The trusts can be for the benefit of the spouse, children, grandchildren or other beneficiaries. Generally speaking, the testator (the person making the Will) directs that certain assets or portion of the estate be held in trust. The Executor distributes the assets left in the estate after paying debts, taxes, expenses and any specific bequests to the Trustee. The testator designates the Trustee, a person or bank or trust company that is to administer the trust for the benefit of beneficiaries specified in the Will. The Trustee must manage the trust in accordance with the terms and conditions directing how the Trustee must manage the assets.
Confusion often arises as to what role the Trustee has vs. the Executor. As noted above, in settling the estate, the Executor must determine the sum total of all assets in the estate, including those assets set aside for the Trust. While the Executor’s role ends once the estate is settled, the Trustee, responsible for managing the assets in that Trust, will continue in that role according to the terms of the Trust until such time as the Trust ends. It should be noted that a Trustee may serve for a prolonged period of time. So, for example,
John establishes a Trust in his Will for his grandson, Jim.
– The Trust stipulates that once Jim turns 35, the Trust will terminate and all assets will be distributed to Jim outright.
– John passes away when Jim is three years old.
– The Trustee oversees the Trust for the next 32 years until Jim turns 35.
3. Testamentary Guardian for Minor Children