If you are wading into the estate-planning process, you might be overwhelmed by the decisions you must make. It can be a complex endeavor and having to understand the numerous documents and terminology involved doesn’t make it any easier. One of AmeriEstate’s roles is helping people understand an estate plan's structural and legal aspects to reduce confusion and make it easier to navigate the process.

We often find that people don’t understand the differences between terms involving wills and trusts. If you are in this position, don’t worry; you aren’t alone. We are here to clear things up for you and discuss the role of trustee vs. executor.

Defining the Key Differences Between Trustee vs. Executor 

Let’s begin by pointing out what these two roles have in common. Both are fiduciaries, meaning they are legally responsible for handling another person’s affairs while placing that person’s best interest over their own. Any time you appoint someone to manage your assets, that individual should act in your and your beneficiaries’ best interests. The second similarity is that both are responsible for some aspect of your estate after you pass.

Trustees and executors fulfill similar responsibilities, but trustees deal with trusts, while executors work with wills. When you appoint a trustee, they manage the trust for you and your beneficiaries when you are alive. After you pass, they manage and distribute the trust to your heirs according to the specifications you establish in the trust. Once asset distribution is complete, the trust term ends or the trust is revoked, the trustee’s job is finished.

If you create a will, you should appoint an executor. The executor is responsible for moving your will through probate when necessary and distributing your assets according to the directives you provide in the will. One difference between a trustee vs. executor is when their roles begin. An executor’s job doesn’t start until after you pass, and it ends after they finish distributing assets or the court releases the case.

Understanding the Role of a Trustee

Now that we’ve covered the basics, let’s dive deeper into each role, revealing more about what differentiates a trustee from an executor. A trust is a legal arrangement that protects your beneficiaries from the time, cost and emotional stress of dealing with probate court before receiving their inheritances.

When you set up a trust, you may see the term trust administrator and wonder about what a trust administrator vs. trustee is. There isn’t one. You can use the two terms interchangeably, but we tend to use trustee, as it is the word most people are familiar with.

When Do You Appoint a Trustee?

When you create a trust, you name both the trustee and the beneficiaries. You can choose an individual or an entity to act as your trustee. You can appoint yourself as a trustee while you are still alive. However, you shouldn’t wait to identify who will take over the role after you pass.

The role of a trustee vs. executor is more involved. Letting a trustee handle the trust from the beginning removes the burden of duties from your shoulders while still allowing you to have a hand in deciding how to manage the trust.

What Does the Trustee Do?

Regardless of whether your appointed trustee begins the job before you pass or after, they manage the assets in the trust and settle your estate after your death. To that end, they handle the trust’s investment portfolio, maintain trust records, oversee bank accounts and pay any bills associated with the trust.

Managing the assets also includes filing tax form 1041. The trustee may need to pay capital gains taxes on the income if investments result in gains. The trustee also maintains insurance on the relevant properties when assets involve property or vehicles.

In comparing a trustee vs. executor, the trustee’s roles include direct handling of financial affairs even when you are alive, whereas executors never complete these duties until after your death. Other jobs often include:

• Obtaining proof of death: After your death, the trustee will likely need to procure a copy of your death certificate to validate settling your estate.
• Accounting of assets: The assets in a trust can take various forms, from physical property to investment holdings. The trustee will need to account for each after you pass.
• Sending notices of death: The trustee may need to notify beneficiaries and any other relevant party, such as any bank accounts or insurance policies in the trust’s name.
• Distributing assets: Your appointed trustee distributes assets to beneficiaries per trust terms, which may occur all at once or over years.

The trustee gets paid for their services throughout the time they fulfill their responsibilities.

Understanding the Role of an Executor

Even if you set up a trust, you may also elect to establish a will to distribute assets not included in a living trust. Wills are also necessary if you want to nominate a person as guardian for minor children or incapacitated adults.

Comparing a trustee vs. executor reveals many of the same duties, except that an executor does not make investment decisions and must deal with the probate process. After your death, the person you appoint as executor files your will with the court if you have not already done so and submits a copy of your death certificate.

Your executor represents the estate during the probate process. Like a trustee, the executor notifies all relevant parties of your death, settles unpaid debts, accounts for all assets, and pays any estate taxes due. The probate process can be lengthy, and the executor is responsible for maintaining assets until it is over, and they can distribute your assets.

At the end of the court proceedings, the executor distributes the remaining assets according to the wishes identified in your will. Executors usually receive compensation, which the court determines.

Getting Assistance With Appointing a Trustee vs. Executor

AmeriEstate attorneys understand the challenges of estate planning. Our focus is helping you navigate the process, from informing you of your options to working with you to complete the legal documentation. We’re happy to assist you in determining what you need to consider when appointing a trustee vs. executor.

Sources:

https://www.irs.gov/forms-pubs/about-form-1041

https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax