The fiduciary of an estate is the person legally authorized to manage a deceased person’s property, pay their debts, and distribute what remains to the rightful heirs. If the deceased left a will, that person is usually called the executor. If there was no will, a court appoints someone called an administrator or personal representative. Either way, the fiduciary steps into the deceased’s financial shoes and owes a legal duty to put the estate’s interests ahead of their own.
Executor or Administrator
The label depends on whether there is a valid will. An executor is the person a will names to handle the estate, and courts generally honor that choice unless there is a good reason not to. The executor doesn’t gain authority from the will itself, though. They still need court approval before they can act.
When someone dies without a will, the court selects an administrator using a priority order set by state law. The surviving spouse almost always gets first priority, followed by adult children, then parents, then siblings and more distant relatives. If no family member is willing or able to serve, the court can appoint a public administrator or another qualified person.
Sometimes the named executor can’t serve. They may have died, become incapacitated, or simply don’t want the job. A well-drafted will names an alternate for exactly this situation. If the will names no backup, the court must appoint a replacement through a separate proceeding.
Who Can Serve
Not everyone can serve as a fiduciary, even if the will names them. The specifics vary by state, but the baseline requirements are consistent. The individual must be at least 18 years old and mentally competent to handle financial decisions. A felony conviction disqualifies a person in many states, though some limit this to convictions involving dishonesty or fraud.
Residency can also matter. A number of states require out-of-state executors to appoint a local agent who can accept legal documents on their behalf. Others require non-resident fiduciaries to post a bond.
Fiduciary Bonds
A fiduciary bond is essentially an insurance policy that protects the estate’s beneficiaries if the fiduciary mismanages assets or acts dishonestly. The will can waive the bond requirement, and many do. When no waiver exists, courts decide based on the size and complexity of the estate. Creditors can also request that the court require a bond to ensure debts get paid.
The bond amount is based on the value of assets the fiduciary will control, and the premium typically runs between 0.5% and 3% of the bond amount annually. On a $300,000 bond, that might cost anywhere from $1,500 to $9,000. The estate usually reimburses the fiduciary for this expense.
How Someone Becomes the Fiduciary
Before approaching the court, a prospective fiduciary gathers the original will (if one exists), multiple certified copies of the death certificate, a list of all heirs and beneficiaries with current addresses, and an estimate of what the estate owns: bank balances, real estate values, investment accounts, vehicles, and personal property.
With that information, you file a petition with the probate court in the county where the deceased lived. The court charges a filing fee, which varies by jurisdiction but typically falls in the range of a few hundred dollars. Once filed, the court requires you to notify all heirs, beneficiaries, and known creditors so they have an opportunity to object. If no valid objections are raised, the court issues official credentials: Letters Testamentary for an executor, or Letters of Administration for an administrator. These documents are proof of authority. Banks, title companies, and government agencies won’t deal with you without them.
What the Fiduciary Actually Does
Receiving your letters is where the real work begins. The responsibilities unfold in a specific order, and skipping steps creates serious legal exposure.
Securing and Inventorying Assets
The first job is to locate, secure, and inventory everything the deceased owned. That means checking bank statements, brokerage accounts, safe deposit boxes, real estate records, insurance policies, and digital assets. Real property needs to be appraised, and financial accounts need current market values as of the date of death. The inventory gets filed with the court and serves as the baseline for everything that follows.
Opening an Estate Bank Account
Estate funds cannot be mixed with personal money. The fiduciary needs a dedicated estate bank account, and to open one, they first need an Employer Identification Number from the IRS. Apply online at IRS.gov/EIN, and the number is typically issued immediately.1Internal Revenue Service. Publication 559 (2025), Survivors, Executors, and Administrators Every dollar of estate income, every expense, and every distribution flows through this account and needs to be traceable in the final accounting.
Notifying the IRS
The fiduciary files Form 56 to formally establish the fiduciary relationship with the IRS.2Office of the Law Revision Counsel. 26 US Code 6903 – Notice of Fiduciary Relationship This signals that they are the person authorized to handle the deceased’s tax matters. Once filed, tax correspondence that would have gone to the deceased comes to the fiduciary, along with responsibility for filing the deceased’s final returns.3Internal Revenue Service. Instructions for Form 56
Notifying Creditors and Paying Debts
The fiduciary must publish a notice to creditors, usually in a local newspaper, giving them a window to file claims. The deadline is set by state law, generally in the range of three to six months. A creditor who misses the deadline is typically barred from collecting.
When the estate doesn’t have enough money to pay everyone, debts get paid in a priority order set by state law. The sequence varies slightly, but generally follows this pattern:
- Administrative costs: court fees, attorney fees, and fiduciary compensation
- Funeral and burial expenses
- Taxes: federal and state income taxes, estate taxes, and property taxes
- Secured debts: mortgages, car loans, and other debts tied to specific assets
- Unsecured debts: credit cards, medical bills, and personal loans
Beneficiaries receive their inheritance only after all higher-priority obligations are satisfied. If the estate is insolvent, lower-priority creditors and heirs may receive nothing regardless of what the will says.
Handling the Tax Returns
The fiduciary is responsible for the deceased’s final individual income tax return (Form 1040), covering January 1 of the year of death through the date of death. Income earned after the date of death belongs to the estate, not the decedent.
If the estate itself earns $600 or more in gross income during administration, the fiduciary must file Form 1041, the estate income tax return.4Office of the Law Revision Counsel. 26 US Code 6012 – Persons Required to Make Returns of Income That $600 threshold is a fixed statutory amount and doesn’t change with inflation. Bank interest, rental income, dividends, and business income all count. Income that passes through to beneficiaries gets reported on Schedule K-1.5Internal Revenue Service. 2025 Instructions for Form 1041 and Schedules A, B, G, J, and K-1
A federal estate tax return (Form 706) is only required for estates exceeding the basic exclusion amount, which for 2026 is $15,000,000 under Public Law 119-21.6Internal Revenue Service. What’s New – Estate and Gift Tax Most estates fall well below that line, but the fiduciary still needs to calculate the gross estate value to confirm no filing is required. Some states impose their own estate or inheritance taxes at much lower thresholds.
Distributing What’s Left and Closing the Estate
Once all debts and taxes are paid, the fiduciary distributes the remaining property according to the will or, if there’s no will, according to state intestacy law. The final step is submitting a detailed accounting to the court showing every asset collected, every expense paid, and every distribution made. Once the court approves it, the fiduciary is formally discharged.
The Legal Standard the Fiduciary Is Held To
A fiduciary isn’t just following instructions. The law imposes strict standards, and violating them can result in personal financial liability, removal, or both.
Duty of Loyalty
Every decision must benefit the estate and its beneficiaries, not the fiduciary. Self-dealing is prohibited. You cannot buy estate property for yourself, lend estate money to yourself, or steer business to companies you have an interest in. Even transactions that might be perfectly fair on the merits are suspect if the fiduciary stands on both sides, and the fiduciary bears the burden of proving the transaction was proper.
Duty of Care
The duty of care requires managing estate assets with the same prudence a reasonable person would apply to their own finances. For investments, most states have adopted some version of the prudent investor standard, which emphasizes diversification and overall portfolio risk rather than judging each investment in isolation. A fiduciary who parks all estate funds in a single speculative stock will have a hard time defending that choice, even if the stock happens to go up.
Personal Liability
Beneficiaries who suffer losses from a breach of duty can petition the court for a surcharge, a court order requiring the fiduciary to personally repay the estate. Courts can also reduce or eliminate the fiduciary’s compensation.
The sharpest personal risk is distributing assets to beneficiaries before all debts and taxes are settled. Once estate funds are in the hands of heirs, recovering them is difficult. Under 31 U.S.C. ยง 3713, a fiduciary who pays any debt before satisfying the government’s claims is personally liable to the extent of that payment.7Office of the Law Revision Counsel. 31 US Code 3713 – Priority of Government Claims If you distribute the residue and a federal tax bill surfaces later, you could owe that money out of your own pocket. The practical rule: don’t make final distributions until all required tax returns are filed, any necessary clearances are received, and a reasonable reserve is set aside for unexpected claims.
Getting Paid for the Work
Serving as a fiduciary is real work, and the law provides for compensation. About 15 states set executor fees by statute using percentage-based schedules, often on a sliding scale where the rate decreases as the estate value increases. A common structure might allow 5% on the first portion of the estate and lower percentages above that. The remaining states use a reasonable compensation standard, with the court determining an appropriate fee based on the estate’s size, the complexity of the work, time involved, and the fiduciary’s skill level.
If the will specifies a fee, that amount controls unless the fiduciary petitions for more. A fiduciary can also waive compensation entirely, which sometimes makes sense when the fiduciary is also a major beneficiary and wants to avoid the income tax that applies to executor fees.
Separately, the fiduciary is entitled to reimbursement for legitimate out-of-pocket expenses: appraisal fees, court costs, postage, accountant fees, and insurance premiums. Keep receipts for everything.
When a Full Fiduciary Isn’t Needed
Not every estate requires a full probate proceeding. Every state offers some form of simplified process for smaller estates, though thresholds vary dramatically, from as low as $10,000 to as high as $275,000. The most common shortcut is a small estate affidavit, a sworn document that lets a successor collect the deceased’s assets directly from banks and other holders without opening probate.
These simplified procedures typically require a waiting period of 30 to 45 days after the date of death and are limited to estates below the state’s value threshold. Some states exclude real estate from the affidavit process entirely, allowing it only for personal property and financial accounts. If the estate may qualify, your state’s probate court website is the fastest place to find the current threshold and the required forms.