Being named as the Executor or the Trustee on someone’s Will is an honor.

It means that your friend or relative has decided they trust you more than anyone else they can think of to carry out their wishes for the distribution of their assets.

But this is not like a lifetime achievement award where you collect a trophy, give a little speech, and go home. This is an honor that bestows a lot of work and obligation on you. It’s a big job, and often a thankless one.

Executor vs. Trustee: The Difference

What’s the difference between the two jobs?

They both have legal obligations but are responsible for different parts of an estate.

The Executor’s job is shorter and more administrative. He or she is responsible for managing the estate of someone who has died. That includes handling court proceedings, paying debts, filing the final tax returns for the deceased and their estate, and carrying out the terms set out in the Will. In general, the job of Executor can last anywhere from several months to two years.

On the other hand, the Trustee manages a trust fund for the beneficiaries. They manage and distribute the assets of the trust set up under the terms of the Will. This person only comes into play if you’ve created a trust — either during your lifetime (a “Living Trust”) or one that’s created by your Will (a “Testamentary Trust”).

Depending on the terms of the trust and the beneficiaries’ ages, the Trustees’ job can span decades, especially if minors or children with special needs are involved.

If the trust account grows, it will owe taxes, and the Trustee is responsible for filing the correct IRS forms each year. The trust itself would pay the tax and any costs incurred.

In addition to selecting an investment adviser (or the investments), the Trustee acts as a custodian and is usually expected to work with the beneficiary to prepare them to make wise decisions.

Both the Executor and the Trustee are fiduciaries, meaning they have a legal obligation to act in the best interest of the beneficiaries.

Can one person fill both roles? Yes.

What to Expect if You’re Named Executor or Trustee

The time you might need to put in often depends on the assets the decedent owned.

“The house needs to be cleaned out and put up for sale,” according to Melissa Terranova, a partner at Fox Rothschild in Princeton. “That’s a lot of work, especially if you don’t know what the person owned. Sometimes the Executor job can be easy,” she says, “sometimes it’s a tough job.”

If the decedent’s assets are complicated, it could require a significant amount of time.

You may be wondering if you get paid for that time. Executors and Trustees are entitled to statutory commissions. However, Terranova says they waive commission in many situations, often because they are working with family or friends. If they do accept commissions, the money must be reported on their 1040 as income. If they are a beneficiary of the estate, Terranova says it may be more tax advantageous for them to waive the commission.

What Can Go Wrong (and How to Reduce Risk)

Lots of stuff can go wrong. Terranova says beneficiaries can fight among themselves. Terms in the Will can be unclear and may need court involvement to resolve disputes. If the Executor did not do anything with the estate’s assets, and the market tanks, then the Trustee can be on the line for liability.

She suggests that the Trustee hire advisers from the very beginning. That provides some legal protection.

Fidelity Investments notes that the key is for the Trustee to make “prudent” investment decisions.

Your main job as Trustee is to ensure good stewardship of the inheritance.

Choosing an Executor and Trustee When Writing Your Will

When you are preparing your Will, remember that the people you select as Executor and Trustee are doing you a big favor (after you’re gone).

Do them a favor by getting organized. The best way to help the Executor is to list all your accounts, insurance policies, lawyers, financial advisers, etc. Also, make sure that the Executor knows where to find your documents, especially the original copy of your Will.

As for the Trustee, a well-written Will should provide most of the guidance they need. The Trustee needs to abide by your wishes, so be crystal clear about how and when you want your beneficiaries to receive payouts.

Part of the Trustee’s job is also to resolve any disputes that may arise among your heirs. Not everyone is well-suited to handle these duties. It’s a very real obligation, so make sure the person you choose is up to the task and willing to take it on.

Terranova notes that the Trust can outlive the Trustee, so your Will needs to set forth instructions for successor Trustees to follow as well.

If you do not have a trusted person who fits the bill to be a Trustee, you can name a bank or other institutional adviser, but they will charge fees each and every year. In New Jersey, the commission that they can charge is set by statute. In some states, it’s a percentage of assets under management, which can add up to thousands of dollars a year.

Whether you are choosing the people who will handle your estate, or you are named to do so, communication is critically important. You need to communicate your intentions to the people who will carry out your Will, and they need to communicate with your beneficiaries in a timely and effective way.

The bottom line is that Trustees play a pivotal role in carrying out your wishes and in keeping the peace among your heirs. Choose wisely!