How to Choose the Appropriate Trustee or Executor 

After you have made the important decision to prepare an Estate Plan, the next critical step is to decide who is the right person to carry out your plan after your death.

One of the most important decisions clients must make when preparing an Estate Plan is to choose appropriate fiduciaries. A fiduciary is a person legally obligated to act in another person’s best interest. Trustees and Executors are both fiduciaries; they are individuals or institutions who must act in the best interest of you and your beneficiaries when administering your Estate Plan after your death.

After your death, your Trustee or Executor will be responsible for paying your estate debts and expenses, preparing an inventory of your assets, properly accounting to all beneficiaries, and ultimately distributing your assets to the beneficiaries you have named in your Trust or Will. Your Trustee may also have the task of prudently investing trust assets, managing any business interest or real estate held in the trust, and administering on-going trusts, such as trusts created for children or for individuals with special needs. Your Executor will also be responsible for administering your assets through the probate process. In addition to being trustworthy, your Trustee or Executor should possess the following characteristics:

• Strong organizational skills
• Strong record-keeping skills
• Financial Aptitude
• Impartiality
• Even temperament
• Strong communication skills
• Good relationship with your beneficiaries

Family Members or Friends as Fiduciaries

Most people name their spouse, their children, other family members, or close friends as their Trustee or Executor, since those are the individuals whom they trust the most. However, in some cases, family members or friends may not be the best choice. When choosing a family member or friend as your Trustee or Executor, you should consider the following:

• Does the family member or friend have adequate time to administer your estate? If your estate is complex or your trust contains ongoing trusts, such as for your children, your grandchildren, or a beneficiary with special needs, a considerable amount of work and time may be necessary to administer the estate properly.

• How old is the family member or friend? If your trust contains ongoing trusts, it is also important to consider how long your trustee will be able to competently serve as your trustee. Additionally, if your estate includes complex investments, business interests, or real estate holdings, you should consider whether an elderly family member will be up to the task of properly managing those assets.

• Where does the family member or friend live? Administering an out-of-state trust or estate may be overly burdensome on the fiduciary.

• Does the family member or friend get along well with your beneficiaries? Your fiduciary needs to be impartial and able to communicate well with all of your beneficiaries. A family member, in particular, may not be the best choice if there is any conflict between your fiduciary and any of your other family members who are beneficiaries.

• Does the family member or friend have adequate financial skills to properly administer your estate? If your estate includes business interests, real estate holdings, or large or complex investment portfolios, you should consider whether the family member has the financial aptitude to manage those assets properly.

Professional Fiduciary

If your estate is complex, or if there is significant potential for conflict among the beneficiaries, or if you do not have a family member or friend well-suited for the role of your Trustee or Executor, a professional fiduciary may be the best choice for your Estate Plan. A professional fiduciary is typically a bank, trust company, lawyer, or accountant who is experienced in estate settlement and trust administration. In addition to being experienced, professional fiduciaries are impartial, and are generally knowledgeable in areas of taxation and investment. The disadvantage of naming a professional fiduciary is that they generally charge an annual administration fee for their services, typically between 1.0% to 2.0% of the value of the trust assets. However, this fee may be well worth ensuring that your estate is administered properly, efficiently, and without added conflict among family members.

Your estate planning attorney can help you choose the best fiduciary for your Estate Plan based on your particular family situation, the complexity of your estate, and your specific distribution plan. No matter whether you choose a family member, friend, or professional to act as your fiduciary, it is important that you review your Estate Plan every three to five years, or earlier if there has been any significant change in your family situation or in your relationship with your fiduciary, to ensure that the person or institution that you have chosen is still the best fit for the role.

If you would like to discuss choosing an appropriate fiduciary for your Estate Plan, changing a fiduciary that you have already named in your Estate Plan, or any other Estate Planning issues, please call me at (847) 705-7555, or email me at: jluthringshausen@lavellelaw.com.