Choose Your Fiduciaries Wisely

I recently prepared an estate plan for a client whose partner was not excited about becoming her executor or trustee. This was not for lack of devotion or concern, but because he had sufficient self-knowledge to anticipate that he would not have the ability to carry out those positions faithfully.

Accordingly, I recommended to my client that she choose one or two other trusted individuals to serve as co-executors and co-trustees with her partner so that he would not feel excluded, but would also not have to shoulder the entire responsibility on his own. My client, who is childless, ultimately chose her first cousin and a close friend (also her financial advisor) to serve in those capacities, thereby ensuring that her wishes would be accurately carried out upon her death.

A logical question to ask is "what is the function of an executor or a trustee?"

The first thing to understand is that an executor (also called personal representative) is a person or institution charged with executing the instructions in a decenden't will, while a trustee serves the same function with respect to a trust and may serve both in the event of the trustmaker's incapacity or after death.

In either case, the first requirement is that your executor or trustee (we'll call them your "delegate") must have the ability and the temperament to read, understand, and faithfully carry out your wishes exactly as they appear in your will or trust. The delegate is your fiduciary, which means that he/she/it must put your interests above and before its own, regardless of personal feelings or inclinations.

Much of the work of your delegate is administrative, meaning that they must make arrangements for your funeral, payment of your final debts (including taxes), applying for a federal employer identification number for your trust, marshaling and liquidating your assets (bank accounts, investments, IRAs, etc.)and distributing the proceeds to your named beneficiaries. This entails quite a bit of time, effort and often, aggravation, such that your delegate should be entitled to reasonable compensation. If you choose a family member for the job, they may often state in advance that they choose to waive compensation, but in all fairness, you should inform they that they are free to change their mind once the see the amount of work involved.

To recap, choosing your fiduciary wisely will ensure the successful implementation of your estate plan. There are individuals called "licensed professional fiduciaries" as well as institutions and banks who may often be a better choice than your cousin Jesse, to carry out your wishes. Although there is a cost involved, it may often be less than a bungled estate plan. Choose wisely.