Estate planning is a challenging process. The work itself requires answering detailed questions about how we want our financial activities to be managed by someone else in the future. Then, there are the emotional elements – conversation about family, money, and one’s own mortality – topics that make the list of the most difficult to discuss among human beings. The fact is most people don’t want to think about bringing a close to their own financial life— roughly 64% to be specific. Yet the task is an essential element of financial responsibility to our loved ones.
If getting anchored in working through the estate planning process is the first step, a close second is identifying who we choose to take on the responsibility for stewarding our financial affairs – an executor. Before jumping ahead and choosing your current best friend at work, or a neighbor you have fun with on the weekends, consider what is involved in fulfilling this request.
The executor assures your estate plan is carried out as you intend. They hold a fiduciary duty, meaning they must hold your best interest ahead of their own. Executors have a legal responsibility for validating your last will & testament, gathering and prudently managing assets, paying off any debts, filing tax returns and distributing any inheritance to your heirs according to your wishes.
Formal qualifications to serve as an executor are few. The candidate must be at least 18 years old and have no felony convictions. Some states in the U.S. include a requirement that the executor reside in the same state as the decedent unless she or he is a relative. Beyond these basics, a more important question is: what matters most to you in selecting an executor for your estate?
Here are five important considerations when choosing and executor:
- Trustworthy - An executor must always operate in the estate’s best interest, even if they are a beneficiary – someone in line to receive an inheritance. Similarly, they must be impartial to all beneficiaries – no favorites. The executor has a fiduciary and legal obligation to remain impartial in their decision making and avoid any actual or perceived conflicts of interest. The estate settlement process includes time-sensitive and materially important tasks. To be effective in their role, it's essential that the executor sustains a high level of responsibility through the completion of the entire process.
- Financial Acumen – The executor needs to have integrity, prudent judgement, and a solid knowledge of financial endeavors. They will create and maintain records, work with your financial institutions, insurers, and advisors, pay bills, manage investments and property, and eventually sell or distribute personal and financial assets. If you own a business, or complex assets (illiquid, lock-up periods, difficult to sell), financial acumen of the executor must be greater.
- Emotional Intelligence – Under the best circumstances, navigating family dynamics can draw upon one’s patience, diplomacy skills and relationship savvy. Following the passing of a loved one, emotions elevate, grief is experienced and stress stemming from planning and managing the funeral, travel, logistics and family activities can heighten. An effective executor is one who knows when to step-up their emotional intelligence to help bring stability in a time of transition. In particular, managing through the estate settlement process can surface difficult-to-address, or previously confidential aspects of one’s financial life. Empathy, diplomacy, and transparency are essential elements of emotional intelligence and are valued characteristics of an effective executor.
- Conflict management – A common movie scene presents the deceased’s family and beneficiaries sitting together in a lawyer’s office immediately after a funeral. The lawyer reads the will, hands out checks, and everyone is happy. It would be wonderful if there was no drama associated with estate settlement. In reality, the combination of family dynamics, expectations, grieving and money creates a powerful field for disagreement and conflict. Beneficiaries can have differing views about disposition of personal property and financial assets, or the length of time it takes to settle the estate (often, 12-18 months). With this backdrop, the person you choose as your executor should be comfortable mediating disputes, with your will as true north defining your intentions for estate settlement.
- Tenacity – Fulfilling duties of an executor can take a year or longer, depending on size and complexity of the estate. The list of tasks is long and multifaceted, so the ability to sustain focus and remain organized over the long-term is essential.
It is common to name your spouse, adult child, a sibling, another family member, or a close friend with intimate knowledge of your personal and financial life as executor. Another option is to choose an institutional or corporate executor - a bank or trust company - to serve as executor or as a backup in the event the first person selected predeceases you, or is unable to serve when the time comes.
Taking these ideas into consideration will help you make the best choice in selecting an executor who can complete your estate plan as intended.