Death isn’t something we look forward to, but when it comes to our finances, it is an important topic. If we simply do nothing [1], we can potentially leave our loved ones with less of our wealth by not taking appropriate actions.
Even if we do plan for death and leave a will, it isn’t completely smooth sailing. There is the issue of choosing an executor for our estate. I am going to walk you through a couple of things you need to keep in mind when choosing an executor for your estate.
(Photo Credit: Mister GC [2])
What is an Executor?
An executor is a person you choose who acts on your behalf after you pass away. They are the person responsible for going through your will and making sure that your wishes are followed and that the estate is settled in full.
In general, the duties of an executor can last anywhere from a couple of months to a few years, depending on the size and complexity of the estate you left behind.
Finally, an executor is entitled to a fee for managing your estate. However, most family members will waive this fee. But if you choose a professional, such as an accountant to manage your estate, they will take a fee.
If by chance you don’t create a will, or leave a will but don’t name an executor, or even if the executor you name declines the position, then the probate court will assign someone to administer your will. If this should happen, you have no say in who will manage your affairs and this person has less power than an executor. In other words, it is important to pick a qualified person to act as your executor and to make sure they are open to the position beforehand.
What are the Duties of an Executor?
The duties of an executor are important. Not only are they there to follow your wishes, but they are under the supervision of the court to ensure things are moving along as they should. In general, here are the executor’s main duties:
- Locating and probating your will
- Creating an inventory of your assets and collecting and selling them
- Paying legitimate creditor claims
- Paying any outstanding bills [3]
- Paying any taxes owed by the estate [4]
- Distributing any remaining assets to beneficiaries [1]
Choosing an Executor
It might not seem like a big deal, but you want to make sure the person you pick as your executor is competent and reliable, among other things. You really have to think it through to make sure you pick the best person to represent your estate.
There are many reasons for this. First, if you pick a family member that no one trusts, there could be serious issues along the way as they settle your estate. People might be wondering if the executor is following your final wishes.
Because of this, some people choose to have co-executors of their estate. While this is legally allowed, it can complicate things because of the need for both to sign paperwork and thus slow the entire process down.
But in general, there are some characteristics you should be considering when choosing someone to be your executor:
- Ability to serve
- Willingness to serve
- Competency
- Trustworthiness
- Appreciation of your family’s needs
- Knowledge and experience
Choosing a Family Member vs. Professional
Earlier I mentioned you could choose to have your accountant or other professional be your executor. Why might you want to go this route as opposed to a family member? Because the duties of an executor are time consuming and can be overwhelming, hiring a professional makes sense for some people. The professional has likely been an executor before and knows the process.
Also, they can be 100% objective when making decisions. No issues will arise because your Uncle Bob thinks Aunt Sally is spending all of your money or keeping some extra for herself on the side.
But the downside to having a professional as your executor is that they most likely don’t know your desires as much as a loved one would.
For example, you might just mention you want any money left over after distributing to named loved ones to be donated to charity. A close family member would know what charity or type of charity you would be happy donating to. But your accountant or investment professional might not. In this case, they might donate money on your behalf to a charity you wouldn’t have considered.
Of course, if you choose to have a family member serve as your executor, they can hire a professional to get assistance with the process of settling your estate. In other words, it is not completely one or the other.
Final Thoughts
Choosing who to manage your estate when you die is a big deal. You need to put some serious thought into making sure the person you are choosing can handle the duties and is trustworthy as well. If you choose someone unable to properly settle your affairs, it could drag out the entire process making it tougher for your loved ones to get closure.
Take the task of choosing your executor seriously. They have important duties and the easier you can make settling your estate, the more time your loved ones can dedicate to remembering and mourning you.