When setting up an estate plan, one of the most important decisions that you need to make is who will manage your affairs following your death. This will be your Executor (named in your Will to handle your probate estate, as well as some other matters, such as tax filings) and your Successor Trustee (named in your Revocable Living Trust, to administer your trust property).
Many of our clients feel that this job is an “honor” for someone, and choose to name a spouse, sibling, an adult child, or perhaps a close friend. Some of the reasons clients give for choosing a particular person are:
- “they’re good with numbers”;
- “they live close to me”;
- “I trust her”;
- “I should name him because he’s my oldest child”; or (a personal favorite),
- “he’s a lawyer”.
Executors, Trustees and Family Dynamics
While these may all be good reasons, the reality is that serving as an Executor or Trustee for someone is anything but an honor in many cases, and, even if the person named has the best intentions and is actually qualified to do the job, it can be a daunting task for someone who has a busy life of their own. It is particularly challenging for an Executor or Trustee where there are family dynamics in play because of unequal distributions or maybe a beneficiary feels that they should receive their inheritance immediately, rather than having it held back in a trust for them.
Estate and trust administration must be done in accordance with statutory requirements, as well as with the provisions set forth in the Will or trust document. This includes maintaining detailed and accurate inventories and accountings of all estate/trust assets and providing these to the beneficiaries, filing all required tax returns, determining which claims against the estate or trust are valid and paying creditors in the proper order, liquidating property, and finally making distributions to the beneficiaries.
The Executor or Trustee owes fiduciary duties to all the estate or trust beneficiaries and can be held personally liable if he or she breaches this duty or fails to properly administer the estate or trust.
Threats and Lawsuits
We are seeing more and more beneficiaries suing, or threatening to sue, Executors and Trustees for breaching their duty to the estate, trust, or beneficiaries. Unfortunately, in many cases, the Executor or Trustee has not been doing the job correctly, often just because they didn’t know what they were supposed to do, and the beneficiaries end up winning, or at least obtaining some sort of monetary settlement against the executor or trustee.
These disputes end up costing the family a lot of money and often result in family members no longer speaking to one another.
The Case for a Professional Executor/Trustee
For this reason, we recommend that our clients consider naming a professional Executor/Trustee in their estate planning documents. Unlike a family member or friend, a professional fiduciary has all the resources and knowledge necessary to properly administer the estate or trust, and will not be affected by biases, family history, pushy or angry beneficiaries, or other outside influences, in administering the estate or trust in accordance with the provisions set forth in the Will or trust document.
Further, because this is what they do all day, the administration process will usually be more timely and efficient than when being handled by and individual fiduciary who has a day job and family obligations and is trying to do everything on lunch hours, weekends or evenings.
Thus, by naming a professional Executor or Trustee (i.e., a bank or trust company or other professional trustee), you could actually save your family a lot of heartache and, despite the administration fees that may be charged by the professional Trustee, a lot of money in the long run. We urge you to consider the use of professional fiduciaries in your estate planning and would be happy to discuss this with you. Because we are very active in estate planning and other professional organizations, we are able to provide options to our clients so that they can find the best fiduciary for their own personal situation.