Selecting an Executor or Trustee

Whether you choose a will or a living trust, you also need to select someone to administer the disposition of your estate—an executor or personal representative and, if you have a living trust, a trustee. An individual, such as a family member, a friend or a professional advisor, or an institution, such as a bank or trust company, can serve in these capacities. (See Planning Tip.) Many people name both an individual and an institution to leverage their collective expertise.

What does the executor or personal representative do? He or she serves after your death and has several major responsibilities, including:

• Administering your estate and distributing the assets to your beneficiaries,
• Making certain tax decisions,
• Paying any estate debts or expenses,
• Ensuring all life insurance and retirement plan benefits are received, and
• Filing the necessary tax returns and paying the appropriate federal and state taxes.

Whatever your choice, make sure the executor, personal representative or trustee is willing to serve, and consider paying a reasonable fee for the services. The job isn't easy, and not everyone will want or accept the responsibility. Provide for an alternate in case your first choice is unable or unwilling to perform. Naming a spouse, child or other relative to act as executor is common, and he or she certainly can hire any professional assistance needed.

Finally, make sure the executor, personal representative or trustee doesn't have a conflict of interest. For example, think twice about choosing an individual who owns part of your business, a second spouse or children from a prior marriage. A co-owner's personal goals regarding the business may differ from those of your family, and the desires of a stepparent and stepchildren may conflict.

Selecting a Guardian for Your Children

If you have minor children, perhaps the most important element of your estate plan doesn't involve your assets. Rather, it involves who will be your children's guardian. Of course, the well-being of your children is your priority, but there are some financial issues to consider:

• Will the guardian be capable of managing your children's assets?
• Will the guardian be financially strong? If not, consider compensation.
• Will the guardian's home accommodate your children?
• How will the guardian determine your children's living costs?

If you prefer, you can name separate guardians for your child and his or her assets. Taking the time to name a guardian or guardians now ensures your children will be cared for as you wish if you die while they are still minors.

Planning Tip

PROFESSIONAL VS. INDIVIDUAL EXECUTOR OR TRUSTEE

Advantages of a professional executor or trustee:

• Specialist in handling estates or trusts
• No emotional bias
• Impartiality - usually free of personal conflicts of interest with the beneficiaries
• Independence - sensitive to but not hindered by emotional considerations
• Financial expertise

Advantages of an individual executor or trustee:

• More familiarity with the family
• Potentially lower administrative fees
• Ability to hire professional advisors as needed

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice.