You’ve finally decided to create an estate plan instead of taking the path of Abraham Lincoln, Bob Marley and Aretha Franklin. Congratulations! You’re well on your way to protecting your loved ones (and shaping your legacy if you include a planned gift to charity). But what about choosing an estate executor or trustee — the person who will ensure your wishes are carried out after you’re gone?
What Does an Executor Do?
The executor is responsible for protecting your assets, and paying any remaining debts and taxes from those assets. They file your will with the probate court, and supervise the transfer of the remaining assets to your beneficiaries according to the instructions in your will. They may need to do an inventory of your assets, and facilitate an appraisal of any collectibles or other valuable items.
An executor also closes any outstanding accounts, including credit cards and bank accounts; files your final tax bill; and notifies government agencies, such as the Social Security Administration, of your death. The executor may hire an attorney to assist with these tasks.
What Does a Trustee Do?
If you’ve opted to create a living trust, rather than a will, you’ll need to choose a trustee. A trustee fulfills a similar role to an executor. They must clearly understand the terms of the trust. They may hire an attorney to help. The trustee will ensure your assets are secure, and settle any outstanding bills and taxes using those assets. Then they will distribute those assets according to the trust provisions.
Depending on the terms of the trust, your trustee might also:
- Invest trust assets.
- Decide when beneficiaries may (or may not) receive payments.
- Prepare statements, tax returns, and trust records, and keep those records on file.
- Make tax decisions.
- Communicate with beneficiaries and issue account and tax statements.
- Answer questions regarding the trust.
9 Considerations When Choosing an Executor or Trustee
Choosing an executor or trustee is among the most important decisions you’ll make during the estate planning process. The actions of your executor or trustee will carry serious, far-reaching consequences for your heirs and any organizations to which you’re leaving a gift. That means it requires careful consideration; it is not a decision to rush or take lightly. Here are nine things to keep in mind during the process:
- Identifying whom to select as an executor or trustee comes down, first and foremost, to trust. You’ll also want someone who is responsible, dependable, organized, and good with finances.
- A trustee or executor must be a U.S. citizen, over 18, be of “sound mind,” and, in most states, cannot be a convicted felon.
- You should name at least one alternate, in case your chosen trustee or executor becomes ineligible or unable to serve.
- Your choice should be someone in good financial standing. This helps to avoid any temptations to misuse your assets, and also helps to ensure they’ll make good decisions regarding your assets.
- Avoid choices that could cause family turmoil—estranged relatives, people who are impatient, ill-tempered, or hold grudges against other family members.
- An attorney can help you choose a suitable executor or trustee; an attorney or other financial professional can also serve in that role (for a fee, of course).
- The trustee or executor may need to serve in that role for an extended period of time. On average, it takes about 16 months to settle an estate; some can take years. Trusts can take 12 to 18 months to settle and distribute.
- Your executor or trustee is entitled to take a fee from your estate; a family member may choose to forgo that fee. You should set a cap for the fee in your estate plan.
- Always ask your candidates if they are willing to serve! Don’t simply make a choice, and hope they’ll be willing and able to complete the task after your passing. It’s also a good idea to inform family members of your choice.
Even after you’ve selected an estate executor or trustee, you should review your choice (and your estate plan) every four or five years. Situations change, and it is a big responsibility — not something to take lightly, or put on “autopilot” once the estate plan is filed.
Don’t leave your loved ones in the lurch. Choose your executor or trustee carefully, ensure you have also picked alternates, and ensure they know where to find all your important documents after your passing. And remember that if your choice is unwilling or unable to serve, the court can step in and pick an executor for you—and it might not be someone you would have picked.