Creating an estate plan requires you to put on your decision-making cap. You’ll obviously need to make decisions about the distribution of your assets. You will also need to spend some time choosing the person (or institution) to be in charge of your assets after you’re gone: the executor of your will.
The law requires an executor because someone must be responsible for
- collecting the assets of the estate,
- protecting the estate property,
- preparing an inventory of the property,
- paying valid claims against the estate (including taxes),
- representing the estate in claims against others, and
- distributing the estate property to the beneficiaries.
These last two functions may require liquidating assets; that is, selling items like stocks, bonds, and other valuable assets in order to have enough cash to pay taxes, creditors, or beneficiaries.
In most states, you can name anyone you please as your executor, as long as he or she is over eighteen and not a convicted felon. There’s no consensus, even among lawyers, about who makes the best executor; it all depends upon your individual circumstances. It often makes sense to choose someone who is a major beneficiary under the will, because he or she is likely to do a conscientious job of managing your affairs. Many people name their spouse or adult child as an executor. However, appointing your spouse as an executor can cause problems if he or she is incapacitated by grief, illness, or disability, or has sole responsibility for any minor children. Executors may be faced with some duties that may be particularly unpleasant for family members, including the job of retrieving money or property you lent to other relatives or friends. If you think the role of executor would be too much of a burden on your spouse or adult child, you may wish to appoint a professional executor, even though it means paying a fee.
The quality most desirable in an executor is perseverance in dealing with bills (especially the hospital, Medicare, and ambulance and doctor charges incurred in a last illness). These often require a lot of paperwork, up-front payment, and subsequent reimbursement from insurance companies. Choose someone who has the time and inclination to deal with bureaucrats and forms. Also, the executor may have to cope with relatives who may be wondering why it’s taking so long to receive their inheritance or why their bequests are smaller than expected.
In most estates, no significant legal expertise is required to serve as executor; the issues are all financial. The executor will generally work with a lawyer to probate the will. Your will can direct that your executor use a lawyer’s services for court appearances, filings, and other technical matters requiring legal expertise. The lawyer handles all the court appearances and filings while the executor provides information and input. Estate fees paid to the lawyer may be set by law (some states specify an hourly rate, some a fee based on a percentage of the estate).
If you run a business or are self-employed, consider making your executor or co- executor someone knowledgeable in your field. Sometimes the specialized knowledge of accounting or tax laws applicable to your area of business is easier for a colleague than for your spouse or other relative to master.
It’s often advisable to use a lawyer or a bank as an executor for larger estates.
A complicated estate that involves temporarily running a business often demands an institutional fiduciary, such as a bank, that can call on the advice of lawyers, tax experts, accountants, investment counselors, even business administrators. It’s impartial and immortal. You might also consider hiring your lawyer as executor if you anticipate a will contest or know that the estate is going to require a lot of legal work.
Think carefully about the identity of the executor when you draft your will and talk to your lawyer about what your estate might require. You should also talk to your proposed executor to ensure he or she is willing to do the job.