Tips for Choosing the Best Executor for Your Estate

One of the most important decisions you will make when drafting your estate plan is the selection of the executor of your Will. Depending on the size and complexity of your estate, you will need either an individual or a corporate executor or possibly both.

Financial Acumen

Your executor will be responsible for marshalling your assets, valuing them, and then distributing the assets to the beneficiaries of your estate. Your executor will also be responsible for paying any debts of your estate, including any bills associated with your funeral, burial, and final illness. The assets of your estate will also have to be managed and sold and/or distributed, which includes your real property, cash, stocks and bonds, brokerage accounts, and your life insurance and retirement accounts if your estate is the named beneficiary. If you named your estate as the beneficiary of your retirement plans, you need an executor who will seek professional tax advice and not immediately liquidate and distribute the plan assets upon your death. A prudent executor will consult with a professional tax advisor on how to make distributions from your retirement accounts in a fashion that incur the smallest payment of income taxes.

Importantly, an executor must responsibly and prudently manage the assets of an estate between the time when the assets are marshalled and when they are distributed to the beneficiaries of your estate. If you have a larger or more complicated estate, your executor should be comfortable being responsible for large amounts of money and know how to responsibly manage those assets. Moreover, if you own several parcels of real property or an interest in a business, your executor needs to know how to manage these properties to preserve the value for your beneficiaries. If you have a complex estate and want to appoint an individual to serve as executor, your executor should have the common sense to know when to seek the advice of professionals during the estate administration. Many executors will need to hire an attorney or accountant to prepare your final income tax returns, your estate income and death tax returns, and for assistance preparing an accounting of the estate for your beneficiaries. Furthermore, if you have a large estate or trust, your executor will likely need to retain someone to professionally manage the funds unless he or she has extensive experience managing and investing large sums of money. One benefit of a corporate executor is that it will have access to the accountants, lawyers, and other professionals necessary to aid them in managing and administering your estate and preparing the necessary tax returns each year.

Time and Availability

Regardless of the size of an estate, administering an estate requires a significant investment of time by the executor. For an estate, the first few months are the period which will require the most time from your executor. He or she will have to sort through your residence, safe deposit box, office and computers to find all documentation relating to your assets and debts and then sort through all those documents, which can be a very lengthy process. Depending on how you bequeath your personal property, your executor will also have to go through all the items in your house so that the personal property can be divided among your beneficiaries or sold and added to your residuary estate. Another task that can require significant time from your executor is paying for the expenses of your funeral, burial, and final illness and dealing with the insurance company if there are any issues regarding coverage for those final expenses. Your executor will also have to get appraisals for your real property and any personal property of significant value.

If you are considering appointing an individual as your executor, one thing to consider is whether the person who has the financial acumen to manage your estate also has the availability to devote the time required by your estate administration. Clients often express surprise at how much time they spend on the administration of an estate, even when they have retained an attorney to assist with the administration. If you have a larger estate that will require a correspondingly larger time commitment, a corporate executor or co-executor may be well worth the fees. The fees that must be paid to a corporate executor may seem too expensive compared with the fee usually paid to an individual executor. However, your corporate executor will have significantly more expertise serving as an executor than most individual executors. The corporate executor’s fees are normally balanced against the additional income received from the professional management of your assets. A corporate executor will have the resources and expertise to actively monitor and manage the assets of the estate and can make prudent and professional investment decisions as issues arise. On top of all the record keeping that the executor must do for the estate, he or she will also have to stay current on changes in the tax code and estate law. As a corporate executor is in the business of being a fiduciary you can be sure they will be up to date and your estate will be managed according to the current laws.

Emotional and Familial Issues

Your executor must be capable of making sound decisions when confronted with difficult emotional situations. For your executor, you should pick someone who you believe will be able to act on behalf of your estate in the months following your death. Dealing with the loss of your presence in his or her life can be an emotionally trying time for your loved ones and if you believe someone will be particularly debilitated by your death, that person may not be a wise choice for your executor. Not only will he or she be mourning you but he or she will also have to deal with the additional stress of administering your estate and dealing with the beneficiaries of your estate. If your spouse had relied on you during your life to manage the family finances, the administration of your estate will be particularly daunting because he or she will not be experienced in managing family finances and have to begin doing that in addition to having to administer an estate.

Depending on your family dynamic, your executor will need to have a strong constitution for dealing with the beneficiaries of your estate. Your executor will have to handle complaints from the beneficiaries about how long it is taking to administer your estate and demands for an advance and/or final distributions from the estate. Even if your estate administration is proceeding smoothly and on schedule, there will invariably be one beneficiary who will complain repeatedly about what he or she mistakenly perceives to be long delays and cause your executor additional stress. Your executor will also have to deal with disputes among the beneficiaries about who will receive certain tangible, sentimental personal property in your estate, such as sentimental articles of jewelry, or disputes about who will receive real property as his or her distribution from your estate if all the beneficiaries want a certain parcel of real property you owned.

As much as your family seems to get along while you are alive, you should be cognizant of the potential for conflict among your family members when choosing your executor. Will one of your children feel slighted if you do not choose them? Do some of your children not get along? If you plan on selecting a family member to act as executor, be sure to pick someone who gets along with all of the beneficiaries of your estate. You may think that your children get along sufficiently well that there will not be problems, but be aware that the dynamics of their relationship can change when one person is given more power than the others, when there is a large sum of money being handled by that one child or when the patriarch is no longer alive to control or check any sibling disputes. Moreover, emotions will be heightened in the period after your death and perceived slights can easily be blown of proportion.

Use of Co-Executors

If you do think there is potential for family conflict, it may be advisable to name co-executors so that the spouse or child you name does not have to deal with the brunt of the complaints and dissension among the other beneficiaries. An independent corporate or individual executor will save your spouse or other individual executor from having to deal with the stress of conflicts between the beneficiaries of your estate, because he or she can simply tell the child that it is out of his or her hands as the independent executor has vetoed the request for a certain piece of tangible property, parcel of real estate, et cetera.

Naming a corporate co-executor is another way to relieve your individual executor from the stress of administering an estate. The corporate executor will be impartial when handling disputes among the beneficiaries and when responding to requests from the beneficiaries for early distributions. The corporate executor will not have the bias or knowledge of family drama that an individual executor might be influenced by. Instead, it will make decisions based on the governing document, i.e. the will, and the status of the estate assets to be sure that the most prudent decision is made.

If you have any questions about choosing the executor of your estate, our experienced estate planning attorneys can help.