We often hear that a person is an executor and trustee. What does that actually mean? Is there a difference? The answer is yes, there is a difference between trustee and executor. However, when we draft wills, we almost always appoint the same person as executor and trustee.
The difference is that an executor is the person who assumes the assets of the deceased on death.
We are often asked who gets paid from an estate first? The executor’s first responsibility is to deal with the deceased's liabilities. Most of the time this means paying all of the deceased’s debts including their terminal tax return. It can also mean dealing with unresolved legal matters, such as lawsuits.
Once the debts are paid or legal matters settled, the balance of the estate goes to the beneficiaries. Until the liabilities are settled however, the actual amount owed to the beneficiaries remains unknown.
Let’s now look at the role of a trustee. A trust cannot exist without the three certainties ((i) The Certainty of Intention; (ii) The Certainty of Subject Matter; and (iii) The Certainty of Objects. In this case, until liabilities are settled, we don't have the Certainty of Subject Matter. Therefore a trust cannot technically exist. The trust doesn’t form until the debts are paid and liabilities are settled at which time the certainty of subject matter crystallizes.
The executor then becomes the trustee who holds the assets, in trust, for the beneficiaries. The difference is somewhat academic, so people shouldn't concern themselves too much about this distinction.