What Is the Job of an Executor of a Will When There Is Also a Trust?

A person who creates a trust before his death typically identifies an executor and a trustee in his will. After the creator of a trust dies, his executor and trustee assume responsibility for a portion of the assets as prescribed in the decedent's will. The size and complexity of a decedent’s estate generally dictate the length of time a person will serve as an executor while a trust document tends to determine how long a person will act as a trustee.

Roles

While both serve as fiduciaries, the purposes of a trustee and executor differ in terms of tenure and goals. An executor attempts to settle a decedent’s estate as quickly as possible with the intent of efficiently dispensing the decedent’s assets to the beneficiaries named in his will. An executor normally achieves his goal within three years. A trustee, on the other hand, manages the assets placed in a trust to make money or interest, which he disburses to the trust’s beneficiaries at his discretion. A trustee continues to manage a trust’s assets for the exclusive benefit of the trust’s beneficiaries until the trust either terminates in accordance with the trust document or depletes its assets. A person may act as a trustee for decades before a successor replaces him.

Trustee

In addition to managing the assets placed in a trust, a trustee must record the transactions he makes on behalf of the trust and its beneficiaries. The Internal Revenue Service also requires a trustee to file taxes for the trust he manages and to prepare tax paperwork needed by the trust’s beneficiaries. If a trust identifies a nonresident alien as a beneficiary or earns more than $600 in a year, a trustee must file Form 1041 with the IRS. A trustee also prepares and distributes a Schedule K-1 to each beneficiary who received payments from the trust in a year.

Executor

Before an executor can settle a decedent’s estate, he must locate all of the decedent’s assets and obtain appraisals of them. If an estate lacks sufficient liquidity to settle the debts of a decedent, an executor decides which assets to sell to raise funds to pay the decedent’s creditors. An executor also files paperwork with the appropriate court to validate the decedent’s will and guides the decedent’s estate through probate if necessary. Before dispensing assets to the beneficiaries named in a decedent’s will, an executor transfers assets specified in either the decedent’s will or trust document to the decedent’s trust at which time the trustee assumes responsibility for them.

Estate Taxes

The IRS mandates that an executor file a final tax return on behalf of a decedent using Form 1041 and a return for the decedent’s estate. An executor files Form 1041 each year until he settles the decedent’s estate. An executor also sends a Schedule K-1 to a beneficiary who received a disbursement from the decedent’s estate during a given year.

References

• IRS.gov; Publication 559; Survivors, Executors, and Administrators; March 2011
• IRS.gov; Abusive Tax Evasion Schemes - Questions and Answers; January 2011
• American Bar Association: Choosing the Executor or Trustee
• Find Law: Executor Definition - What Exactly Does an Executor Do?
• The Elder Care Team: What Does an Executor Do?
• Norhern Trust: Testamentary Trusts - Northern Trust