A Complete Guide to Selecting the Right Executor, Trustee or Agent for you

02C29763It’s hard to believe 2017 is here already. The new year marks a special time when many people both reflect on the past and plan for the future. Whether you are a planner or not the setting of New Year’s resolutions is a tradition many people observe much like eating black-eyed peas or kissing someone at midnight. The standard resolutions are getting organized or in better physical shape.   This year consider adding estate planning to your list of resolutions.  Estate planning is a task that is easy to always put off until later or next year.  Estate planning requires you to think of the unpleasant and acknowledge that we don’t know what tomorrow holds in store. You are likely to find, your estate plan will allow you to face the future knowing you have taken steps to protect, provide and plan for yourself and your loved ones lending some certainty to the uncertain future.

One of the most important decisions you’ll make is selecting who will control your assets during your incapacity or after you’re gone. That means the executor of your will, the trustee of any trusts you set up and the agent for your power of attorney. No matter how thorough your estate plan is, choosing the right person or combination of people to carry out your wishes is essential. Start by understanding the responsibilities of each role and then consider who can best fill your shoes in that situation.

Executor Responsibilities

The executor or administrator’s role is to ensure that the terms of a person’s Will are followed or if no Will exists to ensure the estate is transferred in compliance with state law. The law requires an executor or administrator because someone must be responsible for the following:

The Will can also impose duties not required by law, such as choosing beneficiaries, distributing personal property or naming guardians for minors. The executor encompasses many roles, including the overseer, manager, distributor and possible peacemaker in the execution of your estate plan. While it is crucial to select the right executor to see your plans through, they can hire professionals to help them with some matters.

Choosing an Executor

Don’t expect to Google “Who is the best executor?” and get one result. There’s no consensus, even among lawyers, on who makes the best executor. The reason there is no one size fits all answer is the job of the executor depends entirely on your circumstances. Some people choose to have a professional executor while others prefer family or friends and some find a combination of professional and non-professional to be the answer.

Appointing a professional executor is done for many reasons including no close living family members, discord between family members, to ensure there is no conflict of interest and the estate is more complicated than the abilities of the closest family members to name a few. Professionals don’t stand to gain under the Will beyond their fees. It could be a lawyer, a CPA, a bank or trust company. In some cases, this can prevent a Will being contested by disgruntled relatives who may be concerned about their family members cheating or mishandling things in some way. Another reason to choose a professional executor is if you don’t want to put the burden on family who may be incapacitated with grief or you simply don’t know of anyone that may be up for the job. Keep in mind; it could take years to carry out of all of the requirements and procedures. If you have a large or complex estate, it might be wise to hire someone, such as a professional executor.

If you don’t want or need a professional executor, family members and friends who have demonstrated they are trustworthy, mature, honest, conscientious and good with people are excellent candidates. Some people find comfort in knowing that a spouse, child or friend is managing their estate once they are gone. They feel these individuals will be more invested in making sure the probate process goes as quickly and as smoothly as possible. Remember, they can always hire some outside help if it gets too complicated. Another factor to consider is where someone lives. Many estates can be managed from a distance with no difficulty but that is not always the case.  If you believe your estate will require someone to be in the area for a prolonged period, you may want to choose a person who is local, retired or has a very flexible job.  In some cases, an executor may need to spend significant time working with the courts in the deceased’s area. Appointing someone who lives in the same city or with the ability to remain in the city may be wise. Consulting with your attorney on your selections will help ensure you have considered many of the ramifications of your choice.  This is particularly important if you plan on naming someone that lives out of state so you can consider the impact on management of your estate.

Ultimately, it is essential to choose an executor who is willing and able to do the job. It can be helpful to speak with the individuals before naming them to discuss the responsibilities involved. Be honest about the amount of work involved. A good executor can mean the difference between a complicated and drawn out probate process and a timely distribution of assets. Most importantly, selecting the right executor can provide the peace of mind that is needed during a difficult time.

Duties of a Trustee

If you create a trust, you must designate a person or institution to manage the trust that position is the trustee. A trust is merely a contract between the person who formed the trust, called the grantor (you), and the trustee. If your will leaves assets to a trust then the executor will transfer those assets to the trustee for management and distribution according to the terms of the Trust.  It is possible for the executor and trustee to be the same person.

The trustee acts as the legal owner of trust assets, and is responsible for handling any of the assets held in trust, tax filings for the trust, and distributing the assets, in accordance with the terms of the trust. They are obligated to follow your instructions and to manage the trust in a reasonable manner. Unlike an executor, (whose duties may be completed within months), a trustee’s duties can continue for generations.  This is one of the reasons why the biggest decision when designating a trustee is whether to use a family member or a professional trustee.

Naming a Trustee

Any person may serve as your trustee, provided the person is legally competent, meaning over 18 years of age and capable of managing his or her own affairs. Just like an executor, a trustee should be someone who is trustworthy, mature, honest and conscientious. In most cases, it is important to have a certain amount of financial savvy to understand the complexities of a trust.

If you don’t know anyone who meets these qualifications, you might want to consider using a professional trustee. This can be a bank or trust company, a professional trustee, an investment advisor or manager, an investment banker, an accountant or a lawyer. While it is not required to have experience in managing a trust, it may be a factor that you find important. Keep in mind, this option does come with a price tag that will be higher or that may not exist for family or friends.

It is common for people to name a family member to serve as a trustee. Typically, family members have an added personal investment to see the trust through with success. They also may be willing to work without a fee or at least a lower fee than a bank or trust company. If you don’t foresee any family conflicts and know someone who is willing to take on the responsibilities, this might be your best option. When choosing family or a friend, you’ll need to consider who the successor would be in the event that they become incapacitated or die.

There is a third, often popular choice if you are nervous putting all of the responsibilities on a family member or are uncomfortable letting a stranger manage it. Some people find benefits in combining both options. You can choose a family member and a professional trustee as co-trustees or name one as trustee and the other as trust protector.

Regardless of who you choose, it is wise to reevaluate your decision every few years to ensure your decision today is still your best option down the road. It helps to have an attorney present to help you weigh your options.

Role and Purpose of an Agent

Another important document you should consider adding to your estate plan is a Durable Power of Attorney. If you become incapacitated, you need someone to act on your behalf to make financial decisions for you. If you become incompetent or incapacitated without preparing this document, your family will not be able to make important financial decisions or pay your bills.  Perhaps more importantly, the person of your choosing might not be the person the court will choose to take action on your behalf.  The person/s given the power to act on your behalf is called the agent.

A Durable Power of Attorney appoints an agent to handle legal and financial responsibilities. It can go into effect immediately or once you become incapacitated. Once it is active, the agent makes decisions including paying your bills, collecting income, filing taxes, and any other powers granted in the document. This is a very flexible document that can be used for a single transaction or to give unlimited power over all of your financial affairs.  Without this, your loved ones will find themselves in court requesting the authority to manage your financial affairs.

The Durable Power of Attorney allows you to be prepared for an unexpected accident or illness as well as issues that come with aging causing you to have trouble handling certain aspects of life. The Durable Power of Attorney can be customized to fit the needs of your situation. Ultimately, it is up to you. This is best done with the assistance of an estate planning lawyer to ensure your wishes are made clear.

Selecting an Agent

It is always difficult to picture a time when you can’t make financial decisions for yourself. But if something unexpected were to happen, you’d want someone you can rely on taking control. When an agent acts on your behalf, they must act with care, competence and diligence. Ultimately, they must have your best interests at heart. Consider someone who shares the same religion or beliefs as you. An agent should be someone who you believe has the capacity to take on great responsibility in a possibly troubling time. Other factors to consider are maturity, trustworthiness and overall wisdom. An agent is given a great deal of power, so many factors can affect your decision. If you don’t have a family member or friend suited for the job, you can use a professional agent. A proposed agent has the right to decline to act as an agent, and a current agent has the right to resign for any reason.

A Common Thread

An executor, trustee and agent all have their unique functions in your estate plan. Each has specific roles and responsibilities that could affect you and your loved ones for many years. Their jobs are very different but one thing is clear across the board, choosing the right person for the job is essential. Now that you know what will be required of each role, you can make a more informed decision about who you know and trust to manage these important aspects of your assets or estate. With the right people in place, your wishes are more likely to be honored.

Taking the time and attention to make a plan can be the best decision you ever made. An estate planning attorney can help you with your estate planning New Year’s resolutions, and help to ensure your family’s needs and goals are met.