What’s the difference between a trustee and an executor?
Simply put, a trustee is the person or legal entity that is entrusted to carry out a trust’s provisions by the trust’s grantor. On the other hand, an executor is the the person who carries out the decedent’s wishes as expressed in a last will and testament.
In this article, we’ll explore the differences between a trustee vs executor in the estate planning process. Specifically, we’ll cover:
- Differences and similarities between a trustee and an executor
- What the roles and responsibilities of a trustee look like
- What the roles and responsibilities of an executor look like
- When do the responsibilities begin and end
Before we start, we should probably clarify something about trustees.
What is a trustee?
When most people establish a trust, they create a legal document called a revocable living trust, also known as a revocable trust. The person who creates the trust is known as the grantor.
In a revocable trust, when the grantor names the trustee, that person is actually known as the successor trustee. In other words, that person only becomes the trustee as a successor to the grantor.
Let’s continue with how trustees and executors differ.
How are trustees and executors different?
The main difference between a trustee and an executor is that every estate has an executor, while a trustee only exists if there’s a trust.
Every estate has an executor, even if the decedent dies intestate
Most people have a last will and testament. When someone passes away, the decedent’s estate is subject to the probate process with three exceptions, based upon the applicable state law:
- Assets that pass by state contract law: Assets that pass by beneficiary designation, like retirement accounts or investment accounts with named beneficiaries, fall under this category
- Assets that pass by state titling law: These would include assets titled under joint ownership, such as joint with the rights of survivorship, or tenants by the entirety. Married couples often title bank accounts and primary residences jointly, which allows bypass of the probate process.
- Assets that pass by state trust law: These would include assets in a trust.
Any assets that do not bypass probate are part of the decedent’s probate estate. The role of an executor, or personal representative, is to distribute the probate estate estate according to the terms of the will.
If the person dies without a will, then they are said to have died intestate. In that case, each state has a process by which the probate court will appoint an executor of the decedent’s estate. That executor’s responsibility then becomes to distribute the estate according to state laws regarding intestate succession.
Conversely, a trustee can only exist on behalf of the trust that was created. If there is no trust, there cannot be a trustee.
A trustee might be called into action sooner than an executor.
The executor’s duties don’t begin until the person dies. If the person becomes incapacitated before passing away, then the legal responsibility of handling financial affairs or making decisions falls upon the person named in a durable power of attorney. Upon death, the power of attorney ends, and the named executor of a will is now responsible for the administration of the decedent’s estate.
Conversely, the role of a trustee is defined by the trust document itself. A successor trustee’s role usually begins upon the death or incapacity of the grantor. In other words, the duties of a trustee may begin while the grantor is alive, but unable to manage trust assets in a competent manner.
Below is a simple table to outline the differences between an executor and trustee.
Trustee vs executor responsibilities in an estate plan
|Estate planning document||Last will and testament||Trust document|
|Duties & responsibilities||Distributing the assets of the estate in accordance with decedent’s stated wishes||Managing a trust for its beneficiaries and distributing assets per the terms of the trust|
|End of obligation||When assets have been distributed and the estate is released by the probate court||When the trust is revoked, terminates, or when assets are distributed|
What do a trustee and executor have in common?
The primary commonality between a trustee and executor is that they both have a fiduciary duty to the beneficiaries of either the estate or the trust.
A trustee’s duty, on behalf of the trust, is to ensure the proper distribution of assets for the benefit of the beneficiaries of the trust.
The role of an estate executor is to settle all outstanding debts and responsibilities of the estate, then distribute the remaining assets in the best interest of the beneficiaries.
What exactly does the executor do?
The executor has several important roles in the estate administration process. These roles might include:
- Filing the will. If the estate attorney doesn’t do this, then the executor’s job is to make sure the will is properly filed in accordance with the state’s probate laws.
- Notify affected parties of the death. This might include notifying:
- Family members
- People with named roles in the will, like guardians of minor children
- Beneficiaries and heirs
- Financial institutions
- Obtain copies of the death certificate
- Locate estate assets
- Pay debts and taxes on behalf of the estate
- Distribute remaining assets, like real estate or personal property, in accordance with the terms of the will
Usually, the executor is a close family member or friend of the deceased.
What does a trustee do?
A trustee might have slightly different responsibilities than the executor of an estate, but they’re largely similar. It’s important to note that a trustee might be one or more named individuals, or may be a corporate trustee.
If the grantor is deemed incapacitated or no longer able to manage the trust properly, the trustee may assume duties and responsibilities before the grantor passes away.
After death, the trustee continues to serve in a fiduciary capacity for the remaining beneficiaries. In many cases, the trust’s assets may be distributed more quickly than through the probate process.
However, trust administration may be required in certain circumstances, such as:
- Care of minor children
- Special needs cases
- Trust provisions precluding immediate distribution to one or more beneficiaries. This might happen in a spendthrift trust or for young adult children.
In this case, the trustee’s responsibilities also include managing and investing the trust assets so they do not lose value over time. In this case, the trustee may wish to talk with a financial advisor about the best way to invest trust assets in a responsible manner.
Both executors and trustees play a distinct role in a comprehensive estate plan. It’s important to have a clear idea of your intentions, and properly drafted estate documents stating those intentions. This will help you avoid some of the common estate planning mistakes many people make.
If you enjoyed this article, and would like to learn more about estate planning, feel free to check out our estate planning archives!