An executor is a personal representative who acts for you after your death. You nominate or designate an executor in your will to settle your estate. The person chosen will act in your place to make decisions you would have made if you were still alive. An executor's responsibilities typically last from nine months to three years (although, an estate may remain open for several years because of will contests or tax problems).
Your executor may be entitled to a fee from your estate for services rendered.
This means that he or she must act exclusively in the best interest of the estate, and exercise a high degree of care at all times. Additionally, your executor is under court supervision.
Some states require executors to post a bond, which is later paid back to the executor from the estate (though you may be able to waive this requirement through a will provision). In addition, your executor is personally responsible for ensuring that all the proper tax returns are filed and that any taxes due are paid. Finally, your executor is accountable your beneficiaries and may be required to file an Account with the court upon completion of his or her duties.
Ideally, you want someone you can trust, who has a close relationship to your family, who has some understanding of tax laws, and who has a keen sense of business (especially if you are a business owner).
Oftentimes, family members or close friends are nominated without consideration to the critical factors that should be considered in selecting an executor where a corporate executor may be a better choice.
- Ability to serve
- Willingness to serve
- Technical knowledge
You can name multiple executors to oversee different aspects of your affairs. However, co-executors may result in an increase in paperwork and a slowdown in the probate process.
Further, as a disinterested (though not uninterested!) third party, the corporate fiduciary is naturally impartial. In terms of permanence and accountability, the corporate fiduciary provides continuity of administration (important in particular for trusts that last for generations or in perpetuity) and generally carries insurance as a cost of doing business and otherwise has the financial resources to make a claimant whole. In addition, a corporate fiduciary carries with it the benefits of continuity of administration, corporate oversight, security for bank deposits and custodial investment assets held by the corporate fiduciary, protection from fraud and embezzlement, strict confidentiality standards, ability to value unusual assets, and provide post-mortem tax planning.
In addition, corporate fiduciaries often have strategic partnerships with specialists to manage real estate and closely held business interests. Because a corporate fiduciary is responsible for all of these duties, coordination is built in and, depending upon the complexity of the assets and administration, naming a corporate fiduciary may be far more efficient and less costly in the long run. There are many instances where family members tried to settle an estate or run a trust, only to decide later that things have run amok. At that point, it becomes a vastly more expensive process to right the wrong turns made by those less experienced.
Also, when most or all assets are in joint name with the surviving spouse or children, or when the surviving spouse is the sole beneficiary and no stepchildren are involved, or if the decedent's only child serves as sole fiduciary, for example, as the executor of the estate, and that child is also the sole beneficiary. Even under these circumstances, however, numerous technical issues must be considered, and the fiduciary is still personally liable for his or her actions or inactions.
If you leave no will, if you do not name an executor in your will, or if your executor refuses or fails to serve, the probate court will appoint an administrator or other type of personal representative, usually in accordance with state law that establishes an order of priority for appointment. An administrator performs many of the same functions as an executor but has much less power and authority. If this happens, you have no say about who will manage your final affairs.
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