A good estate plan can significantly reduce taxes, streamline transfers of assets after your death, sidestep costly public probate proceedings and minimize family squabbles over inheritance.
But if you don’t have the right “staffing” to execute the plan properly, you are courting disaster. Selecting strong candidates to act as executors, trustees, financial planners and advisers, accountants, lawyers and tax experts can be the difference between the success or failure of your estate plan execution.
Here are a few key considerations when selecting an executor (also referred to as a “personal representative”) for your estate, as well as an executor ’s responsibilities and positive attributes..
RESPONSIBILITIES OF AN EXECUTOR
When you choose an executor, you should choose someone who is capable and reliable enough to carry out the tasks of the job which include:
- Identifying, collecting and preserving estate assets
- Ascertaining and paying bills and obligations of the estate
- Filing income and estate tax returns and paying the taxes due
- Discovering debts owed to the estate and pursuing payment on them
- Identifying and enforcing private, contractual or intellectual property rights of the estate
- Dealing with unexpected legal and financial issues
- Distributing assets of the estate to beneficiaries
ATTRIBUTES OF A GOOD EXECUTOR
Your executor should have certain attributes that are necessary to perform the required tasks, including:
- Decision-making ability
- Business sophistication (especially important for estates involving family businesses)
- Record-keeping and reporting skills
- Perseverance in dealing with paperwork and legal process
- Sensitivity in dealing with others on matters that can be emotional and confusing
- Availability in terms of time and relevant locality
- Impartiality and lack of any conflicts of interest
Some people ask us if an executor should be an attorney. While it is not legally required, a lawyer may well prove to be your best choice for executor. Trusted family counsel often has all of the necessary attributes, as well as familiarity with some or all of your chosen beneficiaries, financial service professionals, trustees and advisers. Your estate counsel should also be experienced at identifying and dealing with potential disputes before they get out of hand.
A sophisticated family member might also be qualified to act as executor and might do so without accepting an executor’s fee. But those who have served as an executor will tell you it is a thankless job, and one that can breed distrust among family members if the executor is also a beneficiary.
SPECIAL CONSIDERATIONS FOR SOME ESTATES
You may also want your executor to have experience dealing with any special issues that may be unique to your estate. For example:
An estate involving a family business should have an executor with business management skills and relevant industry knowledge, but should not be a business partner with a potential conflict of interest.
The estate of a writer, musician or artist should have an executor who is able to deal with licensing agreements, copyrights and other intellectual property rights.
An estate with extensive real estate holdings should have an executor with the ability to oversee management, maintenance and conveyance of properties.
LEGAL REQUIREMENTS RELATED TO EXECUTOR SELECTION
Some states impose legal restrictions on who can serve as an executor. Also, some states require that the executor be bonded with a corporate surety. Your attorney can help you with this and other aspects of your executor selection process.