Know Your Estate Plan - Executor and Trustee
This is the first article of the Know Your Estate Plan series. In this piece I will cover some of the common questions people have about the Executor and Trustee positions.
The Executor is the person or company responsible to administer the instructions contained in your Last Will and Testament. In practical terms, there are almost no requirements to qualify as an Executor other than that the person be eighteen years of age or older. The Executor can even be in a different State. In many cases, the person you nominate as Executor will be approved by the Probate Court without incident. However, anyone interested in the Estate will have an opportunity to object to the nominated Executor and may persuade the Probate Court to reject the nominated Executor if there are concerns about financial responsibility or trustworthiness.
The Executor of an Estate will be required to secure a bond in an amount determined by the Probate Court. You can excuse this requirement for bond in your Will. The bond requirement exists to provide any beneficiaries wronged by the Executor’s actions an opportunity to recover some or all of their loss.
Now that we know what an Executor is, what does an Executor do? In general terms, the Executor collects all of the Estate’s assets, pays the Estate’s debts, files the required tax returns, and then distributes the remaining assets in accordance with the terms of the Will. The Executor has significant control over the administration of the Estate. Many Wills grant the Executor broad discretion on certain matters. The Executor can exercise that discretion, although they are not permitted to substitute their own judgment for what is embodied in the Will. The Executor has a full plate, is yours up to the task?
A Trustee is responsible for many of the same duties as an Executor. One important difference is that in many cases a Trustee is not under the active supervision of the Probate Court. In this situation, it is even more important that someone you trust is in the position of Trustee.
How do you choose an Executor or Trustee? The advice I give my clients is to choose someone you trust, someone that is responsible, and someone that understands your goals. The Executor or Trustee is responsible for your property upon death or disability, it is only reasonable that you have a certain comfort level with them.
In addition to your own comfort level, consider the other beneficiaries that will be depending on the Executor. This is particularly important in second marriages where a step-parent may be in control of a step-child’s inheritance and some children may be uncomfortable with that arrangement. You may trust your second spouse entirely, but do you want to risk your children hauling your spouse into court all the time because of petty arguments when a more sensible arrangement may be available? If you can not settle on an Executor or Trustee that everyone is comfortable with, you can consider an independent fiduciary to fill those roles. It may cost more in dollars and cents, but it may also save your family a lot of headaches and argument.
Now that you know the basics of the Executor and Trustee positions, check your documents and see who you’ve put in those positions. In many cases the Executor of a Will is nominated in the very last Article or near the end. Trustee nominations can be found anywhere in a trust document, but it should be clearly identified with something to the effect of "Appointment of Trustee" as a title.
Now that you know who you have appointed to the positions of Executor and Trustee, you are already ahead of the game. Some people I meet with bring in documents for me to review and are surprised when the attorney that drafted the document appointed themselves or their law firm as a fiduciary when they don’t remember agreeing to such an arrangement. That is a big red flag to me. In other cases, people have designated parents that are no longer fit to serve as Fiduciary or other individuals that may have become estranged since the documents were originally drafted. Make sure your Executor and Trustee appointments reflect your goals today and get them updated if they do not.
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Index Tags: living trust, probate
