What Is the Difference Between an Executor and a Trustee?
Two of the most important roles in estate planning and administration are the executor and trustee. While their functions may seem similar at first, it is crucial to understand the differences between the two.
Whether you are creating a will, establishing a trust, or navigating the complexities of estate management, knowing the unique responsibilities and authorities of executors and trustees is essential.
In this guide, we will explore the unique responsibilities that each role has and the functions they perform. By understanding these differences, you can make informed decisions when appointing individuals to carry out your estate plans.
If you have any questions about estate administration roles that we have not answered, or you need legal services related to estate management or planning, our expert Wills, Trusts & Probate solicitors are happy to help. You can contact us by completing the enquiry form below or by calling 0151 666 9090.
What is an Executor?
An executor is an individual appointed in a person's will to manage their estate when they die. Also referred to as a personal representative, the executor has a legal duty to carry out the administration of the deceased person's estate according to the provisions of the will.
They act as the legal representative of the deceased and are the person responsible for managing and distributing the estate's assets according to the instructions provided in the will. The primary purpose of an estate executor is to ensure that the wishes outlined in the deceased person's will are executed accurately and efficiently, in line with the law.
The tasks commonly assigned to an executor include:
- Registering the death
- Locating an original copy of the will
- Sorting funeral arrangements
- Gaining access to property
- Notifying banks, Government services and other financial institutions of the death
- Valuing the estate
- Calculating and paying Inheritance Tax
- Making payments and settling outstanding debts
- Applying for probate
- Distributing the estate's assets to the beneficiaries
You can read our guide on the Ten Key Tasks for an Executor for more information about the responsibilities and duties involved.
What is a Trustee?
A trustee is an individual assigned with the responsibility of managing and overseeing assets or funds held within a trust. In the context of a will trust, these assets are administered on behalf of chosen beneficiaries who are entitled to receive them under circumstances specified in the will.
When you create a trust in your will and transfer assets into it, the appointed trustees take on the responsibility of effectively managing and distributing those assets. Their primary duty is to use the money or distribute assets in the best interest of the beneficiaries, following any specific instructions or guidelines outlined in your will. For example, if your trust specifies that the funds are to be used for your child's university fees, the trustee cannot use that money for any other purpose.
Trustees hold a fiduciary duty, which means they have a legal obligation to act in a trustworthy and responsible manner. They must administer the trust, make informed decisions, and exercise due diligence in managing the assets for the benefit of the beneficiaries.
What is a Trust?
A trust is a legal arrangement for managing assets and money. A settlor (the person creating the trust and putting in assets or money) will appoint one or more trustees (the person or people who manage the trust) to handle the trust's assets for the benefit of individuals called beneficiaries. All of this is enshrined in a trust agreement, which provides a legal framework for the important decisions trustees must make.
The purpose of creating a trust is to ensure that assets are managed, protected, and distributed according to the settlor's wishes. Some of the most common reasons for setting up a trust include:
- Funding education for children or grandchildren
- Providing care for vulnerable loved ones
- Securing inheritance for a child or grandchild until they turn 18
- Providing income or property for a second spouse during their lifetime, ensuring assets are then passed onto the children from your first marriage after death
Trusts can hold various types of assets, including property, investments, bank accounts, businesses, and personal property. The trust agreement sets the rules and guidelines for how the trust should operate, including how the assets should be distributed to the beneficiaries named in the will.
What Is the Difference Between an Executor and a Trustee?
The roles of an estate executor and a trustee may seem similar as they both involve managing assets and carrying out certain responsibilities. However, there are key differences between the two positions. Here are the main distinctions:
Appointment and Purpose
Executor: An executor is named in a person's will and is responsible for administering the deceased person's estate after their death. The primary duty of an executor is to ensure that the instructions outlined in the will are carried out, including the distribution of assets, payment of debts, and handling of any legal or financial matters related to the estate.
Trustee: A trustee is appointed to manage assets held within a trust. The trust is a legal arrangement created by a settlor, and the trustee's primary role is to protect and manage the trust assets on behalf of the trust's beneficiaries, according to the terms and conditions within the agreement. You can create a trust outside of a will, and they can have a limited term.
Executor: The authority of an executor comes from the deceased person's will. Their powers and responsibilities are conferred through the probate process, where the will is validated. The executor applies for a grant of probate and when it is given, they receive the legal authority to act on behalf of the estate.
Trustee: A trustee's authority stems from the trust agreement itself. The trust agreement outlines the trustee's specific powers, instructions, and limitations. As the assets are held within the trust and not directly owned by the deceased individual, the trustee's authority can bypass the need for probate in cases where their entire estate is put into the trust.
Executor: An executor's role begins after a death and continues until the estate administration process is complete. They handle tasks such as initiating probate, valuing the deceased’s assets, settling debts and taxes, and distributing assets to beneficiaries.
Trustee: A trustee's role can begin during the settlor’s lifetime for a living trust, or after the grantor's death for a testamentary trust created within a will. They are responsible for managing the trust assets for the duration of the trust's existence, meaning that this responsibility can last for many years in some cases.
Scope of Responsibility
Executor: An executor primarily focuses on estate administration tasks. They handle probate matters, debt settlement, inheritance payments, and asset distribution in accordance with the will's terms. While they have a certain amount of control over the estate, they cannot choose beneficiaries or make decisions about gifts at their own discretion. Their duties typically conclude once the estate administration is finalised.
Trustee: A trustee's role is broader and extends beyond asset distribution. They have an ongoing responsibility to manage and protect the trust assets, exercise prudent investment practices, file a yearly trust and estate tax return, maintain accurate records, and prioritise the best interests of the beneficiaries over the long term. They may also have the discretion to choose when and how much to gift to beneficiaries.
Executor: An executor is accountable to the probate court overseeing the estate administration. They may need to provide periodic accountings, seek court approval for certain actions, and address challenges or disputes raised by beneficiaries or creditors.
Trustee: A trustee is accountable to the trust beneficiaries. They have a fiduciary duty to act in the best interests of the beneficiaries, exercise care and skill, and avoid conflicts of interest. Trustees are typically required to provide regular accountings and maintain open communication with beneficiaries regarding trust matters.
Can the Same Person Be Named as an Executor and a Trustee?
Yes, it is possible for the same person to be named as both an executor and a trustee. In fact, it is quite common for individuals to serve in both roles simultaneously, particularly for complex estates.
However, when considering appointing someone as both an executor and a trustee, it is crucial to ensure they fully comprehend the distinct roles and responsibilities. In some cases, it may be best to appoint a professional executor and trustee, such as a solicitor. They will understand how to fulfil both roles effectively, avoid any conflict of interest, and ensure that the estate and the trust are managed in a legally compliant way.
How can Percy Hughes & Roberts help?
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At Percy Hughes & Roberts Solicitors, we have a team of dedicated wills and probate solicitors who are ready to help you resolve your query or issue relating to this area of the law as quickly and effectively as possible.
When it comes to managing assets and fulfilling specific responsibilities, the roles of an executor and a trustee may appear similar at first glance. However, understanding the nuances between these positions is essential to ensure the proper administration and distribution of assets according to a person's wishes.
If you require legal advice in relation to your estate, creating a trust, fulfilling your role as a trustee or executor, or need assistance with probate after a death, Percy Hughes & Roberts can help. If you would like to contact one of our expert wills and probate solicitors you can do so by calling 0151 666 9090 or by completing the “Get in touch” form on this site.