In common estates going through a formal probate process, executor obligation may extend beyond the estate closing. Essentially, the core obligations an executor must achieve are the following:

1. Pay the debts of the estate.
2. File and pay all taxes of the estate.
3. Distribute remaining property of the decedent.

Normally, completing the core obligations is necessary to close an estate. Then again, there is always an exception to the rule. One exception is that tax filing deadlines may carry over beyond the estate closing. In essence, since the estate closed, the former executor becomes an acting executor until completing all obligations of the estate.

Executor Decisions that Affect Executor Obligation

Typically, in common estates, executors usually fulfill their obligations by the time the estate closes. However, executor decisions could extend executor obligation beyond the estate closing. In administering my Uncle’s estate, I had to make such a decision. The estate earned so much taxable income, the tax professional decided it was best to pass the tax on to the beneficiaries. In doing so, the tax would be smaller because of the lower personal tax rates of the beneficiaries. Moreover, the tax professional suggested to file the estate income tax returns in the following manner:

1. The fiscal year return would report the income earned on the estate within the fiscal year and would be due a year after the date of death.
2. The short year return would report the income earned after the fiscal year and would be due four months later than the fiscal year return. The short year returns would carry over beyond the estate closing.

After agreeing to the plan, I knew that executor obligation would keep me engaged beyond the closing of the estate. Furthermore, since the beneficiaries were paying the tax, I could still close the estate on time without additional expense beyond the estate closing. So, as conveyed in the article Estate Income Tax Returns: Review and File the Returns, the estate closed on November 26, 2013 and my obligation to file the short year returns ended on April 15, 2014. Even after reviewing and filing the short year returns, I had to remain available until the tax season ended. If the beneficiaries had any questions, I had to relay them to the tax professional, if necessary. So, my executor obligation lasted five months after the estate closing based on a decision I had made concerning taxes.

A Final Word about Executor Obligation

Executor obligation that extends beyond the closing of the estate is an inconvenience, but necessary in some cases. In my administration, extending the executor obligation saved the estate money by using the lower personal tax rates of the beneficiaries. It was the right decision to make even though it was inconvenient for me. So, if you are an executor, or will be an executor, respect the executor obligation by making the right decisions for the estate. Otherwise, you could cost the estate money and possibly create some grumbling among beneficiaries.

Do you understand why, in rare instances, an executor must remain with the estate beyond the closing of an estate? Do you have any experiences you are willing to share regarding this topic? Share your comments, experiences, or questions in the comment area. 

Recommended Reading

Executor’s Guide, The: Settling a Loved One’s Estate or Trust– The Executor’s Guide goes into more detail about the obligations of an executor.