When creating a will one of the most important decisions to make is who to name as your executor. [Another very important decision is who to choose as a guardian for your minor children, which we will discuss in a future blog post].
Executors have many essential responsibilities including: preparing an inventory of the estate, protecting the estate property, paying taxes and valid claims, and distributing the estate property to the beneficiaries. An executor may also be responsible for representing the estate in claims against others and for investing estate funds if needed.
Because the executor is the person(s) or institution in charge of administering your estate and carrying out your final wishes, you should select your executor carefully and wisely. There are many qualities and skills that are desirable when choosing an executor. The key is to select someone who is stable, trustworthy, financially responsible, and above all else someone with good judgement and good common sense. Choose someone you believe is capable of handling the job. While having specific legal or financial expertise is a plus, expertise is only one of many important factors to balance. Other characteristics to consider include relationship, character, temperament, age, geographic location, health, and more. Cost may enter in to the equation as well.
There is some debate over whether a paid corporate executor is necessary. For large, complicated estates having an institutional fiduciary (e.g. a bank or law firm) with access to a team of tax and legal experts makes perfect sense. These organizations have the resources and experience to navigate obstacles and possible legal challenges that can come with complex situations. An institutional executor may be available to serve no matter how long you may live (i.e. an individual executor may predecease you and therefore be unable to serve as executor). On the other hand, corporate executors can be costly, impersonal, and less flexible.
Most people choose the route of asking a trusted friend or responsible family member to serve as executor. Because the issues faced by the executor of a typical estate are mostly routine and generally do not require special experience, the friend or family approach can be lower cost alternative.
While all executors are entitled to a reasonable fee for their services, a family member or friend may agree to serve for free. Such executors will often hire a CPA or lawyer to handle the preparation of tax returns and may call upon an investment advisor to help with any financial decisions, but it is their perseverance, patience, and diplomacy that will be the most beneficial traits when dealing with paperwork, bills, and the inevitable inquiries from interested family members.
Maybe a team approach is warranted? Choosing co-executors can serve to reduce the potential for family friction and help spread out the administrative burden. One recommended approach to this team concept is to choose one person with special legal or financial expertise and another who has a close relationship to the family. Of course, when selecting multiple executors you should make sure that everyone on the team will be able to get along and work together.
Whomever you select to serve as your executor(s) you should get their approval before naming them in your will and be sure to choose a replacement executor in the event that your first choice dies or is unwilling to act. Finally, don’t forget to revisit your executor choices from time to time, especially after any major life change, to make sure they are still appropriate.