Set Yourself up for Success

Two weeks ago, we looked at why using a trust document may be useful. Today we’ll look at what to consider when selecting a personal representative, executor, or trustee. We’ll also look at the responsibilities of these roles. 

While it’s an honor to be chosen for these positions, it’s a demanding commitment with responsibilities and potential liability exposure. For instance, an executor can be held personally liable for improperly spending estate or trust assets or for allowing insurance coverage on the assets to lapse. 

When determining who’s right for this role, here are a few factors to consider:  

Trust is key. It may be obvious, but it’s essential that your executor be someone you trust. Not only will they be held legally liable for any corrupt behavior, but you’ll also be putting your legacy intentions in their hands. They’ll be responsible for handling important legal documents, such as annual tax returns, and making distributions per your instructions. 

Time and knowledge. Your executor should be responsible and willing to commit the time to fulfill the duties of their role, as well as manage the inherent legal liabilities. For example, if an executor fails to pay taxes or file tax returns in a timely manner, it can throw a wrench in tax-minimization strategies and expose your estate to interest charges and penalties. That’s why it’s crucial to choose someone you can rely on.

Ban biases. Your first choice for an executor may be a family member or friend. Keep in mind, however, that the person you choose should be able to act in an impartial way. If the beneficiaries of your estate believe that your executor has ulterior motives and don’t consider them a neutral party, it can cause unnecessary tensions and legal battles. 

Establish realistic expectations. Once you decide on an executor, it’s important to sit down with them and explain why you consider them the best person for the position. You’ll want to relay the level of commitment involved and give them time to decide whether they can accept the responsibilities accompanying the role. You’ll also want to have a second person in mind in case your first choice is unable to accept your offer. 

Determine their digital access. It’s important that your executor has access to the digital documents they need to carry out their duties. This can include email or online bank accounts. Without the right passwords or credentials, it can be highly challenging to access digital assets. For instance, Google may provide the contents of a deceased user’s account if the family produces proof of death, but Yahoo accounts require a court order to access accounts without a password. To help prevent unnecessary headaches, you’ll want to provide your executor with the proper digital access. Fortunately, you have different options for how to store and share your information securely, such as with the help of an online tool like Everplans.

Finding one person with all the skills and traits to make them the right candidate as a personal representative is rare. If it is impartiality and expertise you’d like, a corporate personal representative might be the right choice. A corporate executor can offer guidance and experience to ensure assets are distributed according to your wishes, aim to reduce unnecessary expenses, and strive to achieve the most efficient and accurate settlement of your estate with the lowest costs possible. 

Fortunately, there are several ways to help ensure that your estate is settled properly. You could appoint both a corporation and an individual to serve as co-executors or name a corporate as agent for the personal representative to assist with this important function. 

It’s an honor to be named a personal representative, but the reason it’s often a paid position is that it’s a job unto itself. If you want to choose the best fit for the role, it’s important to understand the realities of the position and know the steps you can take to help ensure your estate ends up in the right hands. Stay focused and plan accordingly. 

The opinions expressed are those of the writer as of April 24, 2022, but not necessarily those of Raymond James and Associates, and subject to change at any time. All investments are subject to risk, including loss. Raymond James does not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. This material is provided for informational and educational purposes only. Consult your tax professional and financial advisor before making any investment decisions. The foregoing is not a recommendation to buy or sell any individual security or any combination of securities.

“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.” This article was provided by Darcie Guerin, CFP®, First Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at (239)389-1041, email darcie.guerin@raymondjames.com Website: www.raymondjames.com/Darcie.