It’s the start of a new year. Have you checked your estate plan lately? If not, there’s no time like the present — and checking your executor and trustee appointments is an important part of the review. These people are tasked with carrying out your wishes, so selecting the right people matters. Avoiding the seven common mistakes below can help you choose the best person to act as your trustee or executor.
Mistake #1: Not choosing anyone to be an executor
If you don’t name an executor in your will or don’t have a will, state law determines who takes on the job. That could be your next of kin or someone appointed by the court — so it could be a person you don’t know or wouldn’t trust to administer your estate.
Naming a trustee is part of establishing a trust, so not choosing one isn’t an option. However, you can sometimes act as trustee during your lifetime depending on the type of trust.
Some people opt to name a financial institution, trust company or attorney as their executor or trustee.
Mistake #2: Not naming a successor
For many reasons, an executor or trustee may be unable or unwilling to take on the role when you pass away, even if they agreed upfront. In those cases, state law will choose someone to take over — unless you name a successor or “back up” in your will or trust instrument. Likewise, if you named yourself as trustee during your lifetime, you should name a successor trustee to take over upon your death.
Mistake #3: Not understanding and explaining the responsibilities
Being an executor or a trustee can be a complicated, demanding and time-consuming job. Make sure both you and your chosen appointees understand what’s involved.
An executor administers your estate after your death. Responsibilities may include opening bank accounts in the estate’s name; paying bills and debts from estate assets; and filing the estate tax return. The executor may need to arrange for a financial audit, have assets valued and liquidate investments. This person may also need to provide heirs with reports and potentially petition a court to settle disputes.
A trustee holds legal title to assets within any trusts you establish and administers the trust strictly according to the terms of trust document and the applicable laws. The trustee has a fiduciary responsibility to act in the best interests of the beneficiaries, which may include making the trust property productive and acting as a prudent investor. They also have a duty to maintain impartiality, confidentiality and accurate records.
Mistake #4: Not asking critical questions
It can be tempting to name a friend or family member to these roles, but it’s important to choose people who have the experience, skills and personality to handle the responsibilities. Ask yourself if the people you appoint fit the essential criteria.
For instance, an executor or trustee usually must be at least 18 years old, of sound mind and not a convicted felon. Executors should be ready to devote potentially one year or more to their duties, while trustees may hold responsibilities for even longer.
Consider whether your appointees are trustworthy, responsible, organized and detail-oriented, preferably with good money management skills and investment knowledge. Living nearby may make some tasks easier, such as selling property or opening estate bank accounts. And you may gain peace of mind by choosing people who understand your values and are likely to make decisions the way you would.
Mistake #5: Naming someone who won’t be impartial
Estate and trust management may involve dealing with family drama or beneficiary conflict. It can be helpful to choose appointees who will be able to maintain an objective viewpoint, stay impartial during difficult discussions and adhere to the terms of the estate or trust even when challenged.
Some people choose to use a corporate executor or trustee, who may be more objective. The corporate entity can work alone, in conjunction with another appointee (such as a family member) or as a successor.
Mistake #6: Not discussing compensation
Executors and trustees are both entitled to reasonable compensation for performing their duties. Executor compensation is usually set by state law — for example, in Louisiana, it’s 2.5% of the gross estate value unless stated otherwise in the will. Trustee compensation may be stated in the trust instrument or set by the trustee subject to court approval.
Mistake #7: Never reviewing your selections
As your life changes, so can your estate, your need for trusts and your relationships. It’s advisable to review your executor and trustee appointments periodically to make sure they’re still the most appropriate people for the roles.
Your Hancock Whitney team can help you evaluate appointees, review responsibilities and explain how we can act as your corporate executor or trustee. Contact us today for a personal discussion.
The information, views, opinions, and positions expressed by the author(s), presenter(s), and/or presented in the article are those of the author or individual who made the statement and do not necessarily reflect the policies, views, opinions, and positions of Hancock Whitney Bank. Hancock Whitney makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented.
This information is general in nature and is provided for educational purposes only. Information provided and statements made should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Hancock Whitney Bank encourages you to consult a professional for advice applicable to your specific situation.
Hancock Whitney Bank offers investment products, which may include asset management accounts, as part of its Wealth Management Services. Hancock Whitney Bank is a wholly owned subsidiary of Hancock Whitney Corporation.
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