The executor of your estate is the person who will settle your affairs when you pass away. This person will help distribute your assets, sell your house, talk to creditors, start probate and oversee your other financial concerns, so it’s critical to choose the right person. A lot can go wrong if you don’t have a proper estate plan in place.
As a financial advisor at Rock House Financial in Utah, I’m asked estate planning questions often. The assets that make up your estate aren’t just financial instruments; they are important part of carrying out your legacy to the world. It’s important to have these matters arranged correctly, because you want to make sure that your assets are passed to the person (or people) you want to receive them. Your purpose in life can continue on after passing if you take the steps to ensure that your assets are transferred to achieve the purpose you wish. This may be charitable in nature, or it may be taking care of family that depends on you. All are important and worthy of discussion – so let’s get started!
Below are some of the key elements you should know about choosing an executor for your estate, including 5 tips on how to make the right choice, who can (and can’t) be your executor, and what to do once you’ve appointed someone. Consider these tips wise words of advice. Following them can help ensure you choose the right person to take care of your estate after you’re gone.
Tip #1: Don’t Be Peer-Pressured by Family
Your first thought may be to appoint your spouse or child as your executor, but this doesn’t have to be the case. If your spouse is in failing health or you know your child isn’t good at meeting deadlines, it’s perfectly fine to go another route.
At the end of the day, you know what’s right for your estate and who’s best equipped to handle your affairs. If that person isn’t a friend or family member, consider hiring a professional.
If your family doesn’t agree with your decision, explain that this is in their best interest. You don’t want them having to do a bunch of work while they’re simultaneously grieving your death.
Estate planning conversations can be difficult. (And they can be especially complicated for business owners who also have to consider the future of their company.) Including your family in conversations with your financial advisor can help. As a financial advisor in Utah, I not only help clients explain their decisions but also provide an outside, unbiased perspective and keep the conversation on track. You can also lean on your financial advisor to bring up some of the hard questions or get the discussion started.
Tip #2: Pick Someone Who’s Emotionally and Financially Stable
Being an executor isn’t for everyone. This person will have to make tough decisions and potentially mediate between emotional beneficiaries. It’s important to choose someone who is generally cool, calm and collected. You’ll also want to designate someone who is good at navigating challenges such as dealing with creditors, handling estate taxes and distributing your assets. These tasks require a certain level of financial prowess.
Tip #3: Consider These Questions
Once you’ve narrowed down your list of potential executors, answering these questions can help you make your final decision:
- Are they trustworthy? Remember, your executor will be responsible for distributing your estate according to your wishes.
- Will they have time to dedicate to your estate? If your beneficiary is in failing health, has a hectic work schedule or is busy with family, he or she may not have sufficient time to make the tough decisions your estate may require.
- Can they keep the peace between disgruntled family members? The person you appoint should be strong-willed, organized and good at communicating when emotions are at an all-time high.
Tip #4: Choose a Back-Up Executor
Just because you choose an executor doesn’t mean it’s a done deal. Your first choice could decide not to serve or could pass away before you do. For these reasons, it’s important to name a back-up executor who can step in if needed.
There are two primary ways to do this.
First, you could directly name a back-up executor by including language like, “If my wife can’t serve, my friend John Smith can step in.”
The second option is to put a clause in your will defining who can be executor. For example, you can include language like, “Any of my children who are 35 or older can serve as co-executors.”
If you have any doubts, it can be wise to name a corporate successor as a final back-up. A professional can step in if your first choices can’t serve.
Tip #5: Get Their Approval
The last thing you want to do is blindside someone with executor duties. Once you’ve made your selection, ask that person if he or she is willing to serve. If yes, set aside time to go over your financial details with that person, or at least let him or her know where to find the information.
Who Can Be an Executor?
An executor can be almost anyone – a trusted friend or family member, an accountant, a financial planner or even a bank.
As with anything in life, there are a few exceptions. Your executor generally can’t be someone who:
- Is a non-U.S. citizen living outside of the U.S. (you can name a non-U.S. citizen who lives in the U.S.)
- Is a minor under the age of 18
- Has filed bankruptcy or has several liens against them
Personal Executors Vs. Corporate Executors
Wondering if you should choose a close friend or family member or hire a professional? There are pros and cons to both.
Pros and Cons of Choosing a Friend or Family Member as Your Executor
One of the biggest benefits of appointing a friend or family member as your executor is that it’s cheaper than hiring a professional. Your friends and family members will likely also already be familiar with your family dynamics and communication styles.
On the other hand, a close friend or family member may not be equipped to handle the emotional and legal challenges that come with being an executor. Your executor will have to deal with grieving family members and could be legally on the hook if a mistake is made.
Choosing a friend or family member may also require more upkeep on your part. You’ll need to update your will if your executor passes away before you, is no longer up for the task, or falls out of your good graces.
Pros and Cons of Hiring a Professional as Your Executor
Corporate executors have their benefits as well. First, they’re always around. You won’t have to worry about appointing someone else unless the business closes. A professional can also serve as an unbiased third-party who isn’t swayed by grieving or upset family members. This can be especially beneficial if you suspect there will be family drama.
On the downside, corporate executors may not be familiar with your financial and family life. Talk to your financial advisor or attorney to make sure the person you choose makes financial and legal sense for your situation.
What to Do After You Appoint Your Executor
Once you choose your executor, name that person (and your back-up person) in your will. Then review your will any time a major life event happens, such as a divorce, marriage, birth of a child or death.
For example, let’s say you list your brother and sister-in-law as your executors. Five years from now, they get divorced. You’ll likely want to change the executors in your will so they’re not left co-executing your estate, especially if there’s bad blood.
Another scenario we’ve seen at Rock House Financial is outdated executors. For example, let’s say you appointed an executor when your daughter was 15, but she’s now almost 30 and has proven to be financially stable. In this case, you may want to appoint her instead.
Getting it right may mean getting some assistance
Choosing an executor is one of the most important decisions you’ll make during the estate planning process. Make sure you appoint the right person, so your assets get distributed to your heirs as quickly and painlessly as possible. Choosing the wrong person can lead to family feuds, a lengthy probate process, and legal implications. As a financial advisor in Utah, I’ve seen a lot of different scenarios.
Unless you are a legal or financial professional, estate planning and their associated financial implications may be murky waters. It’s best not to leave anything to chance.
At Rock House Financial, a fee-only financial advisor in Farmington, Utah, we are charitable giving tax mitigation specialists. We work with families, business owners, and individuals who wants to make an impact through giving.
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Disclosures
Rock House Financial (RH Advisors) throughout this website has provided links to various other websites. While the firm believes this information to be reasonably reliable, current and valuable to its clients, The firm provides these links on a strictly informational basis only and cannot be held liable for the accuracy, time sensitive nature, or viability of any information shown on these sites.
The opinions expressed herein are those of the firm and are subject to change without notice. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Any opinions, projections, or forward-looking statements expressed herein are solely those of author, may differ from the views or opinions expressed by other areas of the firm, and are only for general informational purposes as of the date indicated.
