Executor of the Estate: A Fiduciary Duty

As a CPA, my clients often ask me about wills. Some of the questions involve the selection of their executor, and some of the questions involve clients who unexpectedly discover that they are the executors of a will. These sets of questions are quite different; however, both involve knowing what an executor is and what should be expected from an executor.

Who is an executor?

The executor to an estate is often an average person who was a friend or trusted family member of the maker of a will. The responsibility of the executor to act with scrupulous good faith and honesty on behalf of the estate is called a fiduciary duty. One definition of a fiduciary reinforces this trust as a relationship that encompasses the idea of faith and confidence generally established only when the confidence given by one person is actually accepted by the other person.

What are the duties of an executor?

This definition brings up issues not always well-considered during the selection process. Upon your death, your will is executed and, hopefully, your wishes are carried out. Your executor assumes legal responsibility to handle your remaining financial obligations, which would typically include taking care of the disposition of property, paying bills, filing taxes, and other assorted details. These responsibilities require the executor to have immediate access to an extensive and detailed assortment of information and documents. If there is a trust involved, there would be more issues, which could be even more emotionally charged and complicated.

How is this executor selected?

Who would you consider to be the right choice as your executor? Is it your eldest child, best friend or sibling? If selected from a non-emotional point of view, is this person really your best choice?

Here are some qualities that are considered critical when choosing an individual to serve as your executor:

• Is the person trustworthy? Your executor will know more about you and your secrets than anybody. You don’t want that information shared among the family members or community. If you worry about an individual ‘spilling the beans’ if they knew they were the executor, that’s a valid signal to reconsider your choice.
• Is the person organized? Executing a will involves details, deadlines and decisions. Missing or being late in protocol can draw out the process and financially drain the estate.
• Is the person financially savvy? There will be payments to be made and investment accounts to be understood. There could be extenuating circumstances and recent changes in your finances that skew your original plans. Your executor could also be responsible for handling such tasks as filing your final tax returns to more complicated issues such as inheritance taxes on stocks.
• Where is this person located? There can be court appearances, mail to be checked, bills to be paid, and property to be maintained, to name only a few. These details must be handled routinely, and paying someone else to do it can cause additional problems, as well as becoming a financial drain on the estate.
• Is this person a good communicator? A lack of good communication skills can override organization and financial knowledge.
• Is this person compassionate? Your family will be grieving, possibly not thinking as strategically and rationally as usual. Or, to the contrary, they may be acting as irrationally as you expected.

An honor and a responsibility.

For various reasons, some people have chosen not to reveal the contents of their wills, their wishes, or the location of their bank accounts or other important documents. They may have chosen not to inform the person they have selected as their executor; the individual upon whom they are bestowing high honor and heavy responsibility. In this light, I’ve also included another question to consider before finalizing your will:

• Have your asked your chosen executor AND has that person agreed? Go back to the definition of a fiduciary  “…a relationship that encompasses the idea of faith and confidence generally established only when the confidence given by one person is actually accepted by the other person.”

An executor who is not willing and prepared by virtue of an agreement can be placed in a situation that could prove to be the perfect storm for disagreements which could lead to family dispute and legal warfare.

Now what?

On more than one occasion, a client has come to me for help because, at the time of a heartbreaking loss, they find themselves in the position of executor of the will. Being thrust into this position with no previous knowledge can be devastating to a grieving child and compromise their ability to handle the situation.

Do you have questions or need more information regarding:

• The selection of your executor
  • Have you discussed your decision with your prospective executor?
  • Do you know if or how your executor is paid?
  • Did your executor move out of state?
  • Are you willing to keep your executor up-to-date on major financial and life choice issues?
  • Have you considered other options?

• Your role as executor
  • Can or do you want to handle sibling and family rivalry?
  • Have you moved out of state
  • Can you afford a bond? Handling long-distance duties?
  • Did you choose to be the executor of the estate?
  • What happens if you decline your position as executor?
  • Are you concerned about your parent’s refusal to discuss final wishes?
  • Do you want to prepare yourself?

The bottom line:

If you’re an executor, I can help you with these questions. If you’re planning final instructions for your estate, I can help you select other options to avoid these issues and avoid probate. I’m your CPA, and this is one of the things I do for you.