What Power Does an Executor of a Will Have – Examples and Duties

An executor of a will has many powers. The executor manages the estate’s assets, including bank accounts, stock, bonds, retirement accounts and pensions; takes inventory of the personal and real property; invests assets; sells personal and real property; and pays creditors and other claims, including funeral expenses and any estate taxes that may be due, out of estate assets. The executor may contact an employer to find out about the testator’s employee benefits and may manage the testator’s business. The executor makes accountings to the beneficiaries and the court, communicates with the beneficiaries regularly to keep them informed of important financial matters, resolves disputes that arise between them, and finally winds up the estate, distributes the assets and closes it out.

An executor is named by the testator (the person who made the will) at the time the will is made and executed. The executor has the power to carry out the wishes and intent of the testator and must do so by acting in good faith and representing the best interests of the beneficiaries at all times during the probate administration and the winding up and closing of the estate.

When choosing an executor, the testator should keep in mind qualities such as experience, ability to handle and manage business matters, competency and availability. The testator may appoint a spouse, another family member, a friend, an attorney or any other person over the age of 18 to act as executor. It is also common for a testator to appoint a co-executor or a successor.

Examples of the Power of an Executor

An executor has the power to initiate a probate proceeding in the Surrogate’s Court by filing the original will and the death certificate, and to obtain and file any other documentation the court may require.

An executor has the power to enter into contractual and legal relationships, to an extent. For example, if the testator owned commercial property with tenants, the executor may have to collect rent and work with a property management company, or hire one, depending on the size of the building and the number of tenants. The executor has the power to work with attorneys and accountants to make sure assets are properly valued and contractual obligations are completed.

An executor is entitled to compensation for his or her services in accordance with the law. The executor also has the power to decline compensation, in order not to pay income tax on it. When a spouse or family member acts as executor, they often do not take compensation, especially when they are also a beneficiary receiving a distribution under the will.

Fiduciary Duty as a Limit on an Executor’s Power

Because an executor has so much power and discretion over the affairs of the estate, an executor is held to a higher standard of behavior and is expected to act in an honest, fair and ethical manner. An executor who breaches that fiduciary duty can be held legally liable for any losses suffered by the estate or the beneficiaries, can be removed on the beneficiaries’ petition, can be ordered to make restitution of the financial losses, and can even face criminal charges for a crime such as embezzlement of estate assets.

Acting as executor comes with power but is also a responsibility, especially if the estate is large and has substantial assets. That is why some spouses or family members decide they do not want the job and end up resigning and having an attorney or another personal representative replace them to administer the estate.

The Sources of an Executor’s Powers

An executor’s powers come from several places: the will itself, which often contains express grants of power in a broad “fiduciary powers” article; EPTL Article 11, which grants statutory powers to all fiduciaries unless the will restricts them; SCPA Article 21, which supplies procedural powers and obligations; court orders that authorize particular actions; and the common law of fiduciaries in the background. The will’s specific grants typically supplement the statutory powers. Where the will is silent, the statutory defaults apply.

EPTL 11-1.1 Fiduciary Powers

EPTL § 11-1.1 grants extensive default powers to fiduciaries: to retain estate property; to invest in various asset categories; to sell real and personal property at public or private sale; to lease property for terms not exceeding the estate’s likely duration; to borrow against estate assets in appropriate circumstances; to compromise claims; to make distributions in cash or in kind; to engage agents and professionals; to vote shares of stock; to insure assets; and to allocate items between income and principal. These default powers allow effective administration without requiring the will to spell out every power that may be needed.

The Duty of Loyalty

The executor’s most fundamental duty is loyalty to the estate. It requires the executor to act solely in the interests of the estate and its beneficiaries, to avoid conflicts of interest where possible and disclose those that cannot be avoided, to refrain from using estate property for personal benefit or competing with the estate, and to treat multiple beneficiaries impartially. Self-dealing transactions violate the duty of loyalty even when the terms appear fair. The no-further-inquiry rule voids self-dealing transactions without examining their actual fairness.

The Duty of Prudence

The executor must manage estate assets with reasonable care and skill. The Prudent Investor Act, EPTL § 11-2.3, governs investment decisions. It calls for diversification where appropriate, consideration of the estate’s particular circumstances, a risk-return analysis suited to the estate’s objectives, reasonable costs, attention to tax consequences, loyalty to the estate, and periodic review and adjustment of the investments. Departures from prudent investment practice can result in surcharges against the executor for the resulting losses.

The Duty to Account

The executor must account to the beneficiaries. That means maintaining detailed records of every estate transaction, giving beneficiaries periodic informal accountings during the administration, filing the inventory within six months of appointment, providing an accounting before final distribution, producing supporting documentation when reasonably requested, and filing a formal accounting if the beneficiaries compel one. Our estate accountings page explains how informal and judicial accountings work.

Statutory Commissions

Executors are entitled to commissions under SCPA § 2307 on the following schedule.

There is also a separate income commission on income received. Where more than one executor serves, SCPA 2307 limits how many full commissions the estate pays: under $100,000 one commission is shared; from $100,000 to under $300,000 each of up to two executors takes a full commission; at $300,000 or more each of up to three does, with any additional executors sharing, according to the services each rendered unless they agree in writing on a different split. You can run the numbers on our executor compensation calculator.

Executors who are also beneficiaries face a choice about commissions. Commissions are taxable as ordinary income, while an inheritance is generally not taxable (and comes with a step-up in basis), so taking commissions may produce a higher tax liability than simply taking the inheritance. The executor can waive commissions for tax efficiency; a non-beneficiary executor may weigh the question differently. The decision involves tax planning and family dynamics, and counsel can advise on the best approach.

Resignation and Removal

An executor may resign voluntarily, typically following the procedures in the will or with court approval. The court can remove an executor for cause, such as misconduct or a conflict of interest. An executor who becomes disqualified, for example by a felony conviction, loses authority. When the original executor cannot serve, the will’s alternate executor or a court-appointed successor takes over.

Court Involvement

The Surrogate’s Court provides oversight throughout the administration. It issues the letters testamentary that appoint the executor, may require a bond, decides petitions for instruction or direction, resolves disputes between the parties, reviews and approves accountings that are filed with it, and can remove a fiduciary for misconduct and impose surcharges for breach of duty. The court’s involvement is most active when disputes arise. In uncontested estates, the executor handles most matters with attorney guidance and only limited court involvement.

If you would like a New York estate attorney to assist you with your powers as executor, or you are a beneficiary who believes an executor is overstepping them, call us at 212-233-1233 or email [email protected].