How to Choose an Executor for Your Family Trust

Should you choose a family member or a third party as an executor for your will or trustee for your family trust?

This decision is actually much more important than many people realize. Both carry important practical and legal responsibilities: after all, this person is responsible for navigating the probate process or even, in the case of a trustee, making critical financial decisions for the benefit of your heirs.

Here’s what you need to know about the role, and how to start thinking about the decision.

What’s the job?

An executor’s responsibility is to administer your estate until it’s closed. That includes:

  • Overseeing the probate, which determines the legal validity of the will
  • Managing any financial obligations, such as paying bills, servicing debts, and paying taxes owed
  • Distributing the remaining assets to heirs

If anyone contests the will, the executor is in charge of overseeing the process on behalf of the estate.

A trustee is responsible for the same set of tasks and possibly even more. A trustee might also have to:

  • Manage money on behalf of beneficiaries
  • Make regular distributions to beneficiaries from the trust, if applicable
  • File accounting reports and confer with beneficiaries about permitted withdrawals

Getting started: the basic requirements of the job

 We recommend thinking about the person’s suitability in addition to your relationship.

There are certain emotional and practical skills that can come in handy for the role, including:

  • The ability to handle conflict and make tough decisions
  • The ability to manage financial issues and decisions

Let’s take each of them in turn.

 Ability to handle conflict – and tough decisions

 Grief can do many things to families. Even close, overall happy relationships can become incredibly strained under the effects of loss: add in difficult decisions that don’t uniformly please everyone, and you could start to see once-solid relationships start fracturing.

The executor or trustee lies at the center of these potential conflicts.

Because this person is tasked with making decisions on behalf of the estate or trust, he or she will likely be the recipient of potential complaints, disputes, and of course competing financial and personal interests.

This can be an especially important issue for blended families.

In these situations, and especially where relationships between children from a previous relationship and a new spouse are tense, the balance of priorities can become even more sensitive.

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Ability to manage financial issues and decisions

Ideally, your executor or trustee will have a sense of basic financial skills. Depending on your asset base, he or she may become responsible for your bank accounts, investment portfolios, real estate, non-financial assets, and other valuables.

A basic sense of the administrative and possible financial issues involved with these assets can help to speed up and simplify the estate distribution process – and reduce the amount of stress experienced by the person responsible for it.

This includes the ability to prioritize and stay organized. For both estates in probate and trusts, there are numerous deadlines, decisions, and paperwork issues to stay on top of. Organization skills are critical.

Other important considerations

 For both executors and trustees, it’s important to remember that there is legal liability involved in the job.

In other words, while you might feel more comfortable with a spouse or family member, you should account for whether they’ll be able to keep up with their responsibilities while also managing their grief. Even if he or she retains outside help throughout the process, the ultimate legal liability lies with the executor or trustee.

 Finally, keep in mind that your state may have requirements or restrictions on who may serve in the role. For example, some states have restrictions on out-of-state executors.

Don’t forget – there doesn’t have to be a single choice 

 Your executor can decline the responsibility if he or she chooses – or may become incapacitated or otherwise unavailable. That’s why it can be helpful to have an alternate on record to take over.

You can also have more than one person act as co-executor or co-trustee. For example, in some families, it makes sense to have a financial professional and a family member share the responsibility. Just make sure you choose people who are willing and capable of working together.

It’s also possible to appoint a third-party trustee or executor. In some families this makes sense, as it keeps decision-making objective and at arms-length.

 Are you thinking about your heirs – and theirs?

 If you’re trying to plan for multiple generations-worth of financial priorities, it can sometimes feel like herding cats.

After all, you’re managing varying financial priorities and the desire to be fair and equitable to all generations. To get started, we recommend Keeping the Whole Family on Track, our free guide to multi-gen financial planning.

You’ll learn about some of the key issues, risks, and tips for getting started down the path of multi-gen planning.

Download Keeping the Whole Family on Track today!

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Let Us Help!

We can discuss this topic and more at a complimentary appointment. As a bay area retirement planning coaches, we can give you a review and make suggestions based on your retirement objectives.

Important Disclosures

The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by United Planners.

To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. Neither diversification nor asset allocation can ensure a profit or prevention of loss in times of declining values. United Planners does not render tax advice.

Securities and advisory services offered through United Planners Financial Services, member FINRA, SIPC. Pasquale Vitucci, CA Insurance Lic. # 0758212, is an Endorsed Agent of Vitucci & Associates Insurance Services CA Insurance Lic. # 0I06319. Vitucci & Associates Insurance Services and United Planners are separate and unrelated companies.
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Further Reading

American Bar Association: https://www.americanbar.org/content/dam/aba/migrated/publiced/practical/books/wills/chapter_10.authcheckdam.pdf

New York Times: https://www.nytimes.com/2011/03/03/business/retirementspecial/03EXEC.html