When selecting a personal representative to carry out the terms of your will, consider the role's many responsibilities.
Selecting a personal representative for your estate, also known as an executor, is no easy task. While it's an honor to be chosen as an executor, it's also a demanding commitment consisting of more than two dozen responsibilities and liabilities. 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.
Considering the many responsibilities of an executor, it's important to take several factors into account when determining who's right for the role. If you're in the process of choosing your executor, you'll want to consider the following.
Trust is key. It might seem 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 and relying on them to handle important legal documents, such as annual tax returns, honestly and appropriately.
Responsible parties only. Your executor should be a responsible individual who is able to fulfill the time commitment and 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 harbors bias (or can't be impartial), it can cause unnecessary tensions and legal battles.
Set yourself and your executor up for success.
After choosing your executor, you'll want to take certain steps to help set them—and yourself—up for success.
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 or unwilling to accept the role.
Determine their digital access. It's important that your executor have 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.
A final note.
So, who is the most appropriate person to appoint as a personal representative? A digital sleuth with accounting acumen and the skills of a diplomat? Most of us don't have that person on speed dial. Thankfully, there are several ways to help ensure that your estate is settled properly.
If it's impartiality and expertise you're looking for, a corporate personal representative might be an appropriate choice. For instance, a corporate executor can offer their guidance and experience to help ensure assets are distributed according to your wishes, reduce unnecessary expenses, and achieve the most efficient and accurate settlement of your estate with the lowest costs possible. Alternatively, you could appoint both a corporation and an individual to serve as co-executors, or name a corporation as agent for the personal representative, offering an assist to this important role.
Being named a personal representative is an honor, but there's a reason that it's often a paid position: 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.
Raymond James and its advisors do not offer legal advice. You should discuss any legal matters with the appropriate professional. Raymond James is not affiliated with Everplans.
Article provided by Melissa Stewart, CFP®, AIF®, Senior Financial Advisor at ClearVista Advisors. Originally published by Raymond James & Associates here.