An executor/trustee has a wide range of obligations and responsibilities to fulfill. When doing your estate planning and choosing an executor/trustee, you have a number of important considerations to keep in mind.
In a nutshell, the choices available are: Corporate trustee (like a bank or trust company), a family member/friend (or more than one, named as co-trustees), or another willing professional you know, such as your accountant or lawyer. (A bank, trust company, accountant and lawyer are referred to hereafter simply as ‘professional trustee.’)
The first thing you should do, if you are in the process of making such important decisions, is to contact an estate planning lawyer to discuss the various issues involved.
A good estate planning lawyer is worth more than the documents they create. Your answers to the questions asked by your estate planning lawyer, and your decision-making process triggered by those questions, documented by a careful lawyer, will make all the difference in the world to your actual written plan. The planning behind the documents is what gets you the results you desire.
The entity you choose to fill this role will have a big job to do. If it is a professional trustee, you will meet with them to go through your estate and sign compensation agreements. If you are choosing a family member/friend, it is a very good idea to make them aware that you have chosen them and ensure that they are willing, comfortable and able to fill that role.
Whether you are choosing an inexperienced family member/friend or a professional trustee, that person will be working with your beneficiaries for a significant amount of time (sometimes well over a year) as they administer your estate and deal with your assets. It is very important that you consider the myriad of issues when deciding who your executor/trustee will be, a few of which are as follows:
• Is the job of looking after your Estate going to be very hard on a loved one who has just lost YOU? This can be overwhelming to deal with, coupled with grieving, even though they may feel duty bound when you ask them to take on that role;
• What about compensation? Compensating a loved one to do this job is often frowned upon by other beneficiaries who are not privy to what the role involves. They simply sit back and wait for their inheritance to come through. Considering the level of responsibility that an Executor/Trustee takes on, shouldn’t your loved one be compensated? It is highly likely that the role of Executor/Trustee will take away from the usual way your loved one makes a living. I have seen family members take on this role, only to fight with their siblings over the details, grow weary of trying to maintain family harmony, grow tired of trying to sustain their own family life/job while serving your Estate, yet deny themselves compensation. They eventually grow irritated, bitter and resentful over the thankless hours they have spent accounting and documenting and gathering your assets, that they end up losing their sibling (or other) relationships. Family harmony is extremely difficult to maintain without an objective perspective;
• If you don’t want to burden family members/friends with this job, or you simply don’t feel that you have anyone appropriate to appoint, and your estate is of a certain value to warrant hiring a professional trustee, then a professional trustee is a very good option for you. Their experience and objectiveness is of huge value to Estates. Each professional trustee will have a fee structure that you should carefully review. Their fees may be charged monthly, quarterly or annually based upon the value and type of the assets they are managing in a trust or estate. Some professional trustees also charge hourly fees or flat fees for certain activities or situations. It is very important to closely review the professional trustee’s fee schedule so that you understand how and what fees will be charged to your estate. If the assets in your estate do not warrant the level of fees to be charged, then obviously this is not a good option for you.
All of the above should be discussed with your estate planning lawyer as you embark on the estate planning process. Their guidance on the above will be invaluable to your estate, and your beneficiaries, who will ultimately be the ones left behind and thus dealing with your choice of executor/trustee.
