Executors and trustees play important roles in estate planning. Although both have similar responsibilities (e.g. managing and distributing estate assets), executors and trustees have significant differences that clearly define one from the other.
An executor is assigned to carry out instructions contained in a will. The person who initiated the will (legally called a testator) can either handpick or nominate the executor but he must be legally appointed by the court.
A will is a legal document in which a testator declares how his estate should be handled in the event of his passing. When this happens, it is the executor’s responsibility to distribute the property as specified in the will. The executor is also required to manage the debts of the estate, including creditor’s claims. He is also required to ensure that estate taxes are managed accordingly by making sure tax calculations, payments, and tax forms are duly accomplished. In most cases, the executor represents the estate, and as such, can sue or be legally liable on its behalf. In addition, the executor is not allowed to use the estate for his benefit, unless stated otherwise in the will. The appointed executor is legally bound to provide a full accounting of the estate assets to the courts.
A trustee is responsible for carrying out the instructions in a trust. A trust is a legal entity, and as such, has legal capacity to assume obligations, enter into contracts, acquire assets, file lawsuits, get sued, and be held liable for its actions. The person who creates the trust is a settlor while the one who benefits from the trust is the beneficiary. It’s common for an executor to work in conjunction with a trustee. If a will states that the affairs of the estate be transferred to a trust, the executor is legally bound to give the trustee full management of the assets. The trustee then carries out the instructions contained in the trust. In a living trust (created while the settlor is still alive), probate is not required for the assets, and neither is court supervision. Here, a trustee performs the roles the executor would otherwise do.
It is important to remember that this article is a quick comparison, and there are other legal complexities and minor details involved. However, the main difference is determined by identifying who manages the estate as specified in the will.
An executor is specified in a will and duly appointed by the court to manage all the affairs of the estate. This includes gathering up assets of the estate, paying taxes and creditors, and distributing estate assets to heirs as mandated by the will.
A trustee manages the assets of the estate that are held in a trust, which is a legal entity that can enter into business agreements, contracts, and even acquire assets in behalf of the estate. It is a trustee’s responsibility to look after the trust assets and distribute them accordingly to the beneficiaries as stated in the trust.
|Manages estate affairs as determined in the will||Manages estate affairs and assets held in a trust|
|Required to do full reporting for estate assets to the court||Not required to report to court, but may report to beneficiaries|
Learn more about executors and trustees from the pros with this YouTube video.