“What a job!” Goldberg now declares, having completed the process only recently. Sonny listed 11 beneficiaries, and many of them were impatient to receive their inheritance. At least one was unhappy with his share. Goldberg had to find and inventory all of Sonny’s cash, along with decades’ worth of art, furniture, jewelry and other possessions, while keeping anxious relatives at bay.

For a time, the estate was mired in a personal injury lawsuit involving Sonny and her husband. Goldberg had to work alongside their attorney to win them a posthumous settlement. Goldberg also toiled at translation and detective tasks as she corresponded with officials in Germany and France to pursue a monetary award for the descendants of Sonny’s husband, a Holocaust survivor who received reparations during his lifetime. All the while, she took time to archive photos, poems, letters and other mementos in individualized albums detailing each beneficiary’s unique relationship with Sonny. “If I had to do it again, I would,” Goldberg says. “But I would rather not.”

The Executor’s Song
The role of executor, or personal representative, is a tremendous commitment. “My father used to say that he did not know anyone he liked or disliked enough to name as his executor,” says Jeff Kanaly, vice chairman of the Kanaly Trust in Houston. Very often, the role falls to a surviving spouse or child, who works alongside the attorney responsible for drafting the will. While attorneys help executors manage the legal issues, they are often reluctant to take on the fiduciary aspects of the job. Financial services firms offer corporate executor services, but many attorneys and financial advisors say that clients prefer a representative with a personal touch—a close relative or friend. Most people, with input from an attorney, can handle the work, making the extra fees charged by a corpor-ate executor an unnecessary expense.

The role that an individual plays as executor is very much like that of an entrepreneur—in charge of everything and personally responsible for getting the job done. It means disposing of the estate’s assets according to the terms of the decedent’s will. It also requires alerting all potential creditors and paying existing creditors and the decedent’s final income and estate taxes.

The laws vary by state, but typically within a month of the date of death, the executor finds and files the decedent’s will to be probated with the appropriate registrar or court of jurisdiction. This body verifies the will, and gives the executor permission to access the decedent’s accounts and property. Upon receiving the permission, the executor takes an oath of fiduciary responsibility to make all decisions in the best interest of the estate, while handling the estate’s debts and other obligations.

Within three months or so, the executor must inventory the estate’s possessions, including accounts and assets, copies of trusts, deeds or other relevant documents, collectibles and personal effects. Valuables should be fully insured, and the executor should take possession of the decedent’s property promptly in order to safeguard all physical assets, storing valuables elsewhere or changing locks on the residence, if necessary, to prevent overanxious or disgruntled heirs from nabbing heirlooms and sentimental possessions before they can be distributed. “Personal effects tend to disappear; the stuff just walks away,” notes Fred George, an attorney with Eckert Seamans, a national law firm based in Pittsburgh. “And the personal representative is liable.”

An executor must next determine the value of the estate. Cash positions are easiest to value, safeguard and distribute, but most wills instruct the executor to distribute assets in-kind rather than in cash, George explains. Testators commonly leave in-kind shares of a family business or limited partnership that neither they nor the heirs wish to sell. Executors should consult with a business valuation professional to determine the fair market value of these shares.

Art, cars, jewelry and household furnishings can also be tricky to assess, says Jeff Maurer, CEO of Lehman Brothers Trust in New York. For collectibles of any value, executors should work with auction houses and appraisers to ensure the most accurate valuation. “You want to make sure it’s insured at a fair and complete value, but on the other hand you want the lowest valuation possible when filing the estate tax return,” he adds. “There is no pat answer for how to get both, but it is one of the many things that an executor should be aware of.”

TOP VIEW Serving as an executor requires no specialized legal or financial training, but it is a not a job for everyone. The position often calls for a significant amount of time and a thick enough skin to withstand assaults from impatient beneficiaries. Executors should work alongside attorneys—and, in some cases, professional fiduciaries—to meet the testator’s last requests.

The wrong valuation can be quite costly. Maurer once worked with a client who bequeathed to charity a favorite old-master painting appraised at several million dollars. Unbeknownst to the client, the painting turned out to be a fake and the charity rejected it. The consequences for this particular estate were insubstantial, but could have been dire if it had relied on the charitable donation to reduce its estate tax bill. Executors who intend to sell collectibles for the sake of liquidity should plan ahead, allowing enough time for the item to be sold at the highest or most accurate price, thereby avoiding a fire sale simply to pay estate taxes.

Defensive Posture
Protecting the estate’s assets goes far beyond insuring and valuing collectibles. Executors are also responsible for deciding which assets to sell in order to generate the cash needed to pay the estate’s bequeathments, bills and taxes. While executors may not sell bequeathed items or assets, wills typically specify a bequest amount. To pay this bequest, the executor many have to liquidate certain assets. What is left after paying debts and bequeathments is known as the “residue and remainder” of assets, which the will may instruct to be distributed among heirs or left in trust.

Timing is an issue when selling securities, bonds or pieces of property, and remainder-hungry heirs commonly balk at an executor’s decisions. Generally, because an executor is acting as a fiduciary for the estate, he or she cannot be faulted for turning the assets into cash to eliminate market risk. “A prudent rule is to raise sufficient cash within the first few months,” Maurer says. “Many executors liquidate everything immediately because they believe the duty is to preserve and protect the estate.” Such drastic action may not be necessary if the estate has enough available cash. The executor has a right to consult an investment advisor regarding the sale of portfolio assets, especially if family conflict is likely. If he or she does not liquidate the assets, the executor may want to take the precaution of explaining the risk of loss in writing to all beneficiaries, for the sake of both due diligence and the executor’s peace of mind.

Estate taxes are due nine months after the date of death. Estates valued at more than $1.5 million in 2005 require executors to file an estate tax return, and all estates must pay federal and state income taxes. If an unforeseen event, such as a stock market crash, lowers the estate’s value dramatically after the date of death, the executor can elect an alternative valuation date six months after the date of death.

Alternative valuations can be a particularly thorny source of friction for family members. An asset that declines in value will lower estate taxes for survivors. But it will also lower the tax basis, resulting in higher capital gains taxes for heirs when the assets are bequeathed to them and eventually sold. Determining which family member holds sway will vary according to the overall tax picture and the needs of the parties involved.

Another tax problem that usually requires Solomonic wisdom involves where to deduct the estate administration costs, which can eat up as much as 5 percent of the estate. Executors can claim these as a deduction on either an income tax or estate tax return; where it is applied can spark a tug of war between the surviving spouse and the heirs. In most families, the children want whatever is best for the surviving spouse, but that is not always the case when second marriages are involved. For this reason, financial advisors and attorneys discourage naming a second wife or estranged family member to the executor post.

In all cases, executors should not make any distributions before getting the all-clear from the IRS.

When Duty Calls
Most testators will ask for an individual’s permission before naming him or her an executor, but they are not required to do so. Nor is the named executor required to accept the position. If the named executor rejects the post, and there are no other volunteers, the court will likely name a corporate executor or attorney to the job.

But the arguments for having a personal representative, as opposed to a corporate executor, are persuasive. Family and friends have no learning curve in terms of the family tree, personal agendas or the wishes of the decedent. The job requires no specific financial or legal background, and experts agree that an executor’s tasks can be performed by just about anyone. “I recommend corporate representatives only if there is no other option,” explains Robert Glovsky, president of Mintz Levin Financial Advisors in Boston. “The reason is the fees get very high and there is no way to control them.” A corporate executor usually requires a minimum fee of two to three times the amount that an individual receives, but this can be justified for estates holding unusual assets, such as a closely held business or farms. In cases where such business interests are paramount, the testator is likely to have named a corporate executor in the will, as well as provided a detailed business succession plan or buy-sell agreement. An individual executor asked to take on this type of estate may request a professional fiduciary to provide guidance.

Goldberg was able to muddle through Aunt Sonny’s complex estate relying only on the advice of an attorney, leaving more assets to share with her family. She even declined to take the executor’s fee. The notion of never having to perform the job again would serve as gratitude enough, but she is no longer sure that will be the case. “One of my other aunts is already joking that now I am going to have to be her executor,” Goldberg sighs.

Melissa Phipps is a senior correspondent for Worth and a freelance writer specializing in wealth management and estate planning.
mel_phipps@hotmail.com