Choosing an Executor and Trustee for Your Estate Plan

One of the most important decisions a person must make when preparing their estate plan is who to name as the executor of their Will or trustee of their Trust. The person in charge of your estate after you have passed away will have multiple and serious responsibilities. The person or institution you choose can often determine the success or failure of your plan.

  • Minimum age 18.  At a minimum, an executor or trustee must be at least 18 years of age if you are choosing an individual for that role.
  • Nonrelative & nonresident issue.  Each of the 50 states have rules that determine if an individual who is a “nonrelative & nonresident” can serve as executor even if nominated in the decedent’s Will.  Additional bond or other assurances concerning custody of the estate’s assets may be required if a “nonrelative & nonresident” is nominated as executor.

State residency requirements for the trustee of a Revocable Living Trust are not as problematic compared to the executor of a Will since the Probate Court is typically not involved with the administration of a Revocable Living Trust.

  • Executor responsibilities.  The executor will be responsible for collecting all of the decedent’s assets, paying final debts and expenses (including estate taxes and income taxes) and distributing the assets to the beneficiaries of the Will. You will need to determine whether the person you are contemplating nominating as executor has sufficient skills to do the job. Is the person financially responsible?  Do they have any experience balancing a checkbook? Can the person nominated understand some of the basic rules concerning income taxes?  If there will be a significant amount of assets passing through probate, most state probate laws require that a precise inventory and accounting be filed with the probate court.  The inventory and accounting must be documented with bank account statements, canceled checks and receipts to prove where the assets came from and where they went.  Court deadlines must be adhered to.  Is the executor you have nominated a “detail oriented” person, capable of organizing all of this information and capable of meeting deadlines?
  • Trustee responsibilities.  Most of the same questions apply concerning the selection of the trustee to handle the administration of a Revocable Trust after the maker of the Trust has died. If the Trust contains provisions that call for long-term administration, you will want the trustee to have experience making investment decisions.  Fundamentally, is the individual able to understand the parameters you have set in the Trust Agreement for distributions to the trust beneficiaries? For example, you may have established a trust that will pay income only to a trust beneficiary. Or you may have established a trust that will pay income and principal to a trust beneficiary sufficient to pay for the beneficiary’s “health, education, maintenance and support.” Does the trustee know what this terminology means? Can the trustee be relied upon to seek professional advisors to help him or her meet these responsibilities?

If the answer to many of the questions above is “no”, then consider naming a professional or institutional executor or trustee. Most banks or trust companies assign a team of experienced and knowledgeable financial and legal professionals to handle estate and trust administration.  Ask about fees that the bank or trust company will charge for trustee services.  Especially for long-term trusts, the fees are usually worth the price.

  • Back-up.   Be sure to name at least one back-up executor in the Will and one back-up trustee in the Trust.  Recognize that the first person named may predecease you, or simply may not wish to accept nomination as executor or trustee.  After all, we live in a free country, and a person is not legally obligated to accept your nomination.  This is another reason to name a bank or trust company as a final back-up executor or trustee, just in case.
  • ILITs and QDOTs.  If you are establishing a specialized trust to hold life insurance, known as an “irrevocable life insurance trust” or “ILIT”, special IRS rules apply to the selection of the trustee.  You cannot serve as the trustee during your lifetime, and certain relatives may be prohibited from being trustee of the ILIT under IRS rules.  If you have a non-U.S. citizen spouse and are considering a “Qualified Domestic Trust” or “QDOT” as part of your plan, the trustee must be a U.S. citizen or a U.S. based bank.  Consult with an experienced estate planning attorney when deciding on who should be trustee for these specialized trusts.

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  • About the Author

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    Edward D. Bender

    Ed practices primarily in the areas of estate planning, taxation and estate & trust administration. The estate planning area commonly includes planning for business owners, and Ed counsels them on their succession planning issues as well as their general corporate matters.

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