Thinking about mortality probably isn’t something most parents enjoy doing, especially when they’re still raising little ones at home. But knowing that your financial house will be in order if you meet an untimely end will help you sleep a little easier at night. After all, you want to make sure your kids are protected after you’re gone.
Choosing the right person to manage your estate is key. The executor — or “personal representative,” as they’re commonly called — will have a lot on his shoulders, from cataloging your assets and handling any unpaid bills to distributing leftover money to your heirs. Bungling those jobs can lead to a lot of unnecessary heartache, not to mention hefty attorney fees to sort out the mess.
You can avoid those problems by selecting someone who’s up to the task. That’s certainly easier said than done. But when you’re searching, here are some of the factors you’ll want to consider when choosing an executor.
Trust is Key
When you pass, the executor named in your will has access to your checkbook to pay down any outstanding debts. So choosing your spacey sibling can be a mistake, even if he’s your only sibling. “You want someone who’s honest, trustworthy, and responsible,” says Micah Bonaviri, an estate-planning attorney with the Rockville, Md.-based law firm Stein Sperling.
Even if your will isn’t all that complicated, the personal representative will have a lot on his plate, such as transferring bank accounts to the name of the estate and making sure any outstanding loans and taxes get paid. And it all has to be done in a timely fashion.
You don’t need to be a financial genius to get the job done, but you do have to be reliable. “In most states, it’s not difficult,” says Bonaviri. “It’s just a lot of work.”
Take Age Into Consideration
People don’t always update their wills on a regular basis, so you don’t know if the person you name as executor will be willing and able to take the reins when you pass on. Therefore, it’s a good idea to pick at least two backup representatives in addition to the primary executor.
Should you live to a ripe old age, you’ll want to know that at least one of those folks will still be around to handle your financial affairs. To make sure that happens, Bonaviri says a couple of the names should be people who are your age or younger.
Put One Person in Charge of the Will
Some parents will list two or more primary executors, or “co-agents,” especially if they have multiple siblings or adult children. But that can be a recipe for in-fighting.
Bonaviri says you’re usually better off naming one primary representative to manage the estate. And if you name co-agents, you’ll want to specify who has the tie-breaking vote.
A lot of times, individuals choose more than one executor to protect their loved ones’ feelings. Bonaviri cautions his clients against that line of thinking. “You’re paying someone else’s bills and taking on those hassles in addition to whatever else you’re doing in your daily life,” he says. “You’re not really rewarding someone by giving them that role.”
The reality is that a lot of banks don’t allow co-executors anyway, so it’s hard to always flag checks that need two signatures. Often, they’ll only give the individuals check-writing capabilities if either of them can act as a representative.
Learn the Residency Rules Where You Live
In most parts of the country, Bonaviri says, the personal representative doesn’t need to live in the same state you did in order to manage your estate. But there are some places that put limitations on non-residents, so it’s important to know the local laws.
In Virginia, for example, non-residents have to either post a bond — resulting in an extra cost to the estate — or name a Virginia resident as co-executor. If that’s the case where you live, you’ll have to decide if the extra hassle involved is worth it, or if it makes sense to simply choose a state resident as your personal representative.
Know When a Trust Makes Sense
Picking an executor is an obvious decision for some people — for others, it’s nearly impossible. Perhaps you’re an only child or you don’t want to put any more on your loved ones’ already overloaded plate.
In that case, you have an alternative: appointing a bank or other financial institution to serve as a trustee. “Sometimes that makes sense when there’s no one else you can name,” says Bonaviri.
There are drawbacks, however, of which cost is perhaps the biggest. Most corporate fiduciaries will charge a fee of between one and two percent of your assets, says Bonaviri. And they may bill even more if they’re investing assets on behalf of the estate. As such, banks are really the last resort for those who don’t have a better option.