This question comes up regularly in my practice. I have seen some clients who quickly write down a list without much thought, but I see many more who have to stop and think, or who ask me for advice. Some clients don’t have anyone in their life they can ask to step in, and they have no idea to proceed. This article will give some general guidelines on who to choose, and what to do if you can’t think of anyone from your circle of friends and family.
(A side note before I go further: trustee and executor are two different jobs, and each has its own duties and requirements. However, most people have no idea what the difference is, and have trouble keeping track of who is in charge of what. I generally advise clients to name the same person for both. It cuts down on the confusion and the desire for mind-numbing painkillers.)
The first thing to consider when choosing a trustee/executor is whether the person can handle money. The biggest job the trustee/executor has is to gather all your assets, get them into the trust if they’re not already in there, and send them on to wherever you have directed them to go. This is a big responsibility, and if you have a lot of money, there is a lot of temptation for the person in charge of it. This is especially true if the person does not have a lot of money of their own. There are also many opportunities for mistakes, even with well-meaning executors/trustees, if they don’t know what to do with the money between the time they take control of the estate and the time the last distribution is made. There are many lawsuits centered around accusations of the executor/trustee mismanaging assets or taking money they weren’t supposed to.
That leads to the second thing to consider: can the person be fair and impartial when dealing with the beneficiaries? If the executor/trustee is showing favoritism (or just appears to be), it can lead to resentment, distrust, and more opportunities for lawsuits.
Clients who have adult children will often choose one or more of them as executor/trustee, but sometimes this is not the best idea. The more jaded and cynical lawyers will say that it is rarely if ever a good idea. If the child doesn’t know how to manage money, the client isn’t doing anyone any favors. The bigger issue, though, is the appearance of fairness and impartiality. If one sibling is chosen over the rest, and the other siblings don’t trust that person to be fair, it can lead to a lot of issues, accusations, and bad feelings. You might be tempted to solve this problem by making all the children trustee/executor. This is actually even worse – if the children didn’t get along before they were required to work together, they won’t get along after, and forcing them to deal with each other is like dripping acid into a wound. There probably won’t be bodies on the floor by the end of the trust/estate administration, but that’s about the best that can be said when siblings who don’t get along have to work together.
For those who don’t have anyone in their life that they can trust to manage money well and distribute it fairly, there are other alternatives. Many banks will act as executor/trustee, though most require a threshold amount to be in the trust before they will take on the administration. You can talk to your local bank to see if it’s something they do, and what their minimum threshold is.
Another option that many people don’t consider is the use of a professional fiduciary. There are people who make an entire career out of managing people’s assets for them, and there are some who specialize in administering estates/trusts. Fiduciaries do charge a fee for their services, but the fee is usually much lower than the fees involved in probate, and fiduciaries are always open about their fees when talking to someone considering their services. A professional fiduciary also has a lot of experience in administering estates/trusts, making them less likely to make mistakes, and they are a neutral party that can be trusted to be fair and impartial when it’s time to distribute the assets.
If you would like to learn more about choosing an executor/trustee, or would like the names of some banks or fiduciaries in this area, please feel free to contact me at firstname.lastname@example.org.