The Fiduciary’s Administration Duties

If you are the executor or successor trustee, you now hold a fiduciary office with personal liability for getting it right. The duties run in a rough sequence, and rushing distributions before the debts and taxes are settled is the classic way an executor ends up paying out of pocket.

Accept the office and gather authority

An executor petitions the probate court for Letters Testamentary; a successor trustee accepts in writing and obtains a certification of trust. These documents are what banks and brokerages will demand before they speak to you.

Obtain a tax ID and open an estate account

The estate or trust is a new taxpayer. Apply for an EIN from the IRS (Form SS-4), then open a dedicated estate/trust bank account. Never commingle estate funds with your own—it is the fastest route to a breach-of-duty claim.

Inventory and value the assets

Compile a complete inventory and establish date-of-death fair market values (qualified appraisals for real estate, business interests, and unique property). These values set the basis step-up (section “Capital Gains Resets With Inheritance”) and any Form 706 figures.

Notify creditors and pay debts in priority

Give the statutory notice to known and unknown creditors (often by publication), validate claims, and pay them in the order state law mandates—taxes and administration expenses generally before general creditors, and all of them before beneficiaries. Distributing first and discovering a valid claim later is your personal problem.

Manage assets prudently in the interim

Until distribution, you are an investor under the Prudent Investor Rule: keep property insured, collect income, and avoid speculative bets.

File every required return

The decedent’s final Form 1040, the estate or trust’s Form 1041 for income earned during administration, and Form 706 if the estate is taxable or you are electing portability (section “Taxation of Estate”). Missing the 706 portability window forfeits the deceased spouse’s exemption.

Report basis to the beneficiaries

An estate required to file Form 706 for tax (a portability-only filing is exempt) must also file Form 8971, “Information Regarding Beneficiaries Acquiring Property From a Decedent” with the IRS and deliver a Schedule A to each beneficiary within 30 days of the 706 due date. Under IRC §1014(f) the reported estate-tax values are a binding ceiling on the beneficiaries’ basis; an heir who later claims a higher basis than the estate reported invites an accuracy penalty.

Distribute, document, and close

Distribute per the will or trust, obtain signed receipts and releases from beneficiaries, render a final accounting, and formally close the estate or trust. Keep the records—fiduciary liability can surface years later.