Helping Clients Pick the Right Executor
Your client is nearing retirement and has created a living will, given power of attorney and written a conventional will. Great, he’s ahead of the game. There’s one more step he needs to take to ensure that everything is in order when he’s gone — and that’s to name an executor of his estate.
Who he chooses as executor can make all the difference as to whether his wishes are followed and everything is done properly. As advisors, we can help clients navigate this decision and vet the candidates they have in mind.
Simply put, an executor administers the estate and is in charge until it’s legally closed, The New York Times reports. It’s a big responsibility, and the choice should not be made lightly. (http://tinyurl.com/mtdxe7f)
No small task
When someone dies, his will must be admitted to probate. After that, The Times says, the estate has to pay creditors and taxes, and then the beneficiaries get their share of what’s left. If there is an estate tax audit or the will is contested, the executor will oversee that process, too. The job can last for a couple of years — or even more.
Practically speaking, an attorney or financial professional is a sound choice. If your client is not close to someone with those skills, using a common-sense friend or relative is a good way to go, says AARP. Although this person can perform most duties, she’ll know when she’s in over her head and ask for expert help. (http://tinyurl.com/nnloygo)
Most people, of course, put a family member — often an adult child — in charge of their estate. The advantage to that, The Times says, is that this person presumably knows your client’s intentions well and can readily find the assets that need to be inventoried.
Beware of naming several children as co-executors. It’s a recipe for disaster, and they’ll likely wind up fighting over the estate.
Line of succession
Once your client settles on your executor, there’s more work to be done. He needs to pick backup executors to step in if his first choice is unable or unwilling to perform.
If your client names an elderly relative or friend as executor, he might outlive her. If there is no line of succession, the court will appoint an executor, and there’s no guarantee this person will distribute the assets exactly as your client had planned.
A smart way to cut costs is to limit the amount that goes through probate, The Times reports. Life insurance, savings bonds, retirement accounts, real estate and jointly held bank and brokerage accounts don’t have to go through probate. And thus they don’t count in calculating an executor’s fee. Assets put into a revocable trust don’t go through probate, either.
If your client divorces, he’ll want to change his will if he named an ex-spouse as executor. If he remarries and his new spouse has kids, he won’t want an executor treating his biological children as second-class citizens, so someone neutral is a good pick. In a second marriage, AARP says, that’s probably preferred.
In short, as with many end-of-life planning, encourage your clients to revisit choices after major life changes to make sure their wishes are followed.
We hope this information was useful to you, your clients and their families. To get more information regarding this or any related topic, please visit our website www.TEPLG.com or call us at 630-871-8778.
Tags: estate planning