by Chris Bixby, CFP®, EA
Senior Vice President
Portfolio and Wealth Management
Your wishes. Your legacy. Your plan. Your estate planning documents, whether a will or a trust, reflect your values and wishes relating to the distribution of your assets. While you, and your attorney, have carefully drafted language that reflects distribution wishes congruent with your goals, it is still left up to someone else to execute your plan.
This person or entity will be called an executor and/ or a trustee, with some important distinctions between the two. An executor, sometimes known as a personal representative, is named in a will and helps shepherd the estate through the probate process. Depending on the planning done, this may be a very simple process with various legal filings and tax reporting deadlines. All of these steps must be done in a timely manner or risk potential penalties to the executor and/or estate. The role of the executor ends when the will is probated, the assets are distributed and the final tax return has been filed.
In contrast, a trustee is named via a trust. A trustee will have annual notices to beneficiaries and distributions to administer as well as tax returns to file. The role of the trustee may last for years, even generations, until all the assets are fully distributed to the heirs.
When most people consider who to choose as their executor or trustee, they typically think of bestowing the honor upon someone close to the family, such as a best friend or a close relative. Many times, one or more children are named. While all of these are logical choices, there are several questions that should be considered before making a decision:
Is the person(s) I’m naming capable of handling the administrative, legal and tax work that is involved?
Will the person(s) I name be able to separate their legal responsibility as executor/trustee from the personal emotions that might arise?
Will the person(s) be able to work with the beneficiaries and their unique needs/wants?
Will my choice negatively impact family dynamics?
Someone once said that you should choose an executor or trustee whom you implicitly trust but absolutely hate! This is said in jest but carries some truth. The role is a very difficult one. It requires precision and organization, tact and negotiation, and thick skin. While it may be considered an honor to name someone, it can also be a burden. When naming an individual as a successor trustee, it is important they have access to a solid professional team including an attorney, CPA and wealth manager. This team can significantly reduce the administrative workload and also help ensure all the right processes are followed.
Another option to consider may be the naming of a professional executor or trustee. This could be at a bank, an independent trust company, attorney or sometimes your accountant. This person or organization will likely have significant experience in dealing with beneficiaries and the various legal and tax deadlines. For a modest fee, they will generally handle all the burdensome administration in a professional manner, allowing the beneficiaries to focus on rebuilding their life after the loss of a loved one.
For those that may have concerns about choosing a professional trustee, there is also the option to name a professional as co-trustee, or to give the beneficiaries the power to remove and replace a professional trustee. A professional co-trustee could work together with the family, taking charge of the administrative tasks while still getting input from the family. This may help your heirs feel involved, while relieving them of much of the burden and protecting them from any unexpected changes in the administration of your estate or an overly restrictive trustee.
The appointment of an executor or trustee is an extremely important decision. We invite you to contact your portfolio manager and wealth management team to further discuss how your decision might affect the implementation of your estate plan.
Ferguson Wellman, Octavia Group and West Bearing do not provide tax, legal, insurance or medical advice. This material has been prepared for general educational and informational purposes only and not as a substitute for qualified counsel. You should consult qualified professionals to understand how this information may, or may not, apply specifically to you.