Choosing an executor or trustee for your estate plan is a critical decision that can have significant implications for the distribution of your wealth and the legacy you leave behind.
Indeed, your choice of executor plays a key role in implementing your end-of-life wishes and maintaining harmony among your beneficiaries beyond your lifetime. Meanwhile, the right trustee can help preserve and grow your wealth so that it supports your loved ones for generations to come.
Designating the right person or entity to act on your behalf when you’re no longer here can be a daunting task. However, by understanding the key differences between these roles and carefully considering your estate planning objectives, you can appoint an executor and trustee you trust to carry out your wishes and honor your legacy after you’re gone.
Roles and Responsibilities of an Executor and Trustee
While the terms executor and trustee often surface in conversations around estate planning, each role has distinct responsibilities.
What Does an Executor Do?
An executor, whom you appoint in your will, settles your estate after your death. Their role is generally short-term and tied to the duration of the probate process, which might last months to several years for complicated estates.
This person is responsible for a range of duties, from collecting, inventorying, and appraising your assets, to paying off debts, handling taxes, and covering funeral expenses. An executor also distributes remaining assets to your beneficiaries per the terms of your will and represents your estate in any legal proceedings, if necessary.
What Does a Trustee Do?
In contrast, a trustee manages assets you place in a trust. Their responsibilities include investing trust assets, making distributions to beneficiaries according to the trust’s terms, and maintaining accurate records.
A trustee is also responsible for filing taxes for the trust and reporting to your beneficiaries. Unlike an executor’s temporary role, trustees often serve for many years—sometimes even decades—per the trust’s terms.
Should You Appoint an Executor, a Trustee, or Both?
Depending on your estate plan, you may need an executor, a trustee, or both.
If your estate plan primarily consists of a will, you’ll need an executor to carry out your wishes. Meanwhile, if you’ve created a living trust, which many people use to avoid probate, manage assets during your lifetime, or after death, you’ll need a trustee.
In situations where you have both a will and a trust, you’ll likely need both an executor and a trustee. In some cases, the same person can serve in both roles, but this depends on the complexity of your estate and potential conflicts of interest.
Factors to Consider When Choosing an Executor and Trustee
Choosing an executor or trustee requires careful consideration of multiple factors, including:
- Trustworthiness and Reliability. Above all, your executor or trustee must be reliable and trustworthy. They’ll manage your assets and carry out your last wishes, demanding a high level of integrity.
- Organizational Skills and Financial Acumen. The person or people you appoint should have strong organizational skills and some degree of financial know-how. While they don’t need to be financial professionals, they should be able to work effectively with accountants, attorneys, and other professionals.
- Availability and Willingness. You’ll want to ensure the executor or trustee you choose is willing and able to take on the role. Unfortunately, this isn’t always a given. In fact, 46% of executors report being unaware of a will, according to SeniorLiving.org. Therefore, it’s best to discuss your intentions with them beforehand to avoid any surprises.
- Impartiality. Selecting a neutral executor or trustee can be beneficial, especially if you have complex family dynamics. An unbiased third party can help manage potential conflicts and settle disputes among your beneficiaries.
Additional Tips and Best Practices
If your estate is complex or if there are no suitable individuals for you to designate, consider appointing a professional executor or trustee, such as a bank or trust company. Although they can be expensive, they also bring professionalism, expertise, and experience, to the table.
In addition, it’s a good idea to name successor executors or trustees in case your first choice is unable or unwilling to serve. As your personal circumstances and family dynamics change, be sure to review and update your choices for executor or trustee regularly.
Also, keep in mind that serving as an executor or trustee can be a time-consuming and demanding responsibility It’s standard, and fair, to provide compensation for their work.
Lastly, estate planning can be complex, with laws varying by region and changing over time. Consider consulting with a fee-only financial planner and estate planning attorney to ensure your estate plan is legal and accurately reflects your wishes.
Chladek Wealth Management Can Help
Choosing the right executor and trustee for your estate is a decision that requires serious thought and planning. By understanding their roles and considering their trustworthiness, skills, availability, and impartiality, you’ll be better prepared to appoint the best representatives for your estate planning goals.
While estate planning can be complicated and emotionally charged in some cases, you don’t have to navigate the process alone. In addition to working with an experienced estate planning attorney, a fee-only financial planner like Chladek Wealth Management can help ensure your estate plan reflects your financial and legacy planning goals.
To begin your financial planning journey, we encourage you to schedule a Free Financial Assessment today.