There are three documents essential to an effective estate plan – your will, enduring power of attorney, and personal directive. Who you choose to act in the roles of estate executor and trustee, attorney, and agent are critically important for effective estate planning, and ultimately, successful estate administration.

Your executor (and trustee)

Choosing your executor is one of the most important estate planning decisions you will make and it will be instrumental in the effective and timely administration of your estate. That being said, it is an unfortunate reality that many of the people chosen to be executors are often not fully prepared or potentially lack some of the qualities necessary to successfully fulfill the role. The question then becomes—what can you do to choose the best person for the role of an executor in your estate planning?

What qualities should an ideal executor have?

Typically through the probate process, your executor is the person who is granted the legal authority and fiduciary responsibility to administer your estate, and any resulting testamentary trusts created via your will.

As for the qualities of an ideal executor, Marvin Toy and Jim Yih provide a great summary in their book, Smart Tips for Estate Planning:

• Lives in the same area as you do.
• Has experience managing money and dealing with financial institutions.
• Can deal with your relatives and beneficiaries objectively.
• Is comfortable dealing with lawyers and accountants.
• Has the time to spend settling your estate, which is a part-time job for potentially two years or more.
• Has the patience to deal with government agencies (especially tax departments).
• Is organized and willing to do a lot of paperwork.
• Is not afraid to ask for professional help, when needed.
• Has experience settling estates or is willing to read, research, and learn.

As you can imagine, the more complex your estate, the more imperative these qualities become and the longer your estate will take to administer and settle.

When there are testamentary trusts in your estate plan, your executor will, in most cases, become the trustee of those trusts. These trusts could exist for years or even decades depending on the objective of the trusts. Your executor will need to be prepared to take on a long trusteeship in this case.

It is also important that your will contains appropriate clauses, powers, and directions to enable your executor to carry out your wishes.

What if I want to name multiple executors?

Many people look to appoint multiple executors, often all of their children, possibly to retain the perception of “fairness” and “equality” between them or help distribute the responsibilities. Before this is done, it’s important to weigh all of the executor qualities listed above to ensure this is the best decision.

As the physical location of your executors is an important consideration, complications may arise if you have executors living in different jurisdictions. For example, documents may need to be couriered back and forth, which may delay the settlement of your estate. In some cases, the court may require the executor to post a bond if they reside outside of the jurisdiction to ensure that the party completes their responsibilities.

Additionally, the executor living in your jurisdiction will most likely be responsible for doing most of the work.

Perhaps the best question to ask yourself in the potential situation of multiple executors is— could the people I am considering as joint executors run a business together? The answer to that question will often help you make a decision.

What should your executor know ahead of time?

You should discuss the nature of your estate and the circumstances of your beneficiaries with a prospective executor. The executor will need to know what your estate consists of, any dynamics possibly in play with family members and other beneficiaries and how to go about dealing with the administration of your estate.

Subject to your particular circumstances, you may wish to leave your executor with an up-to-date, detailed list of all estate assets and liabilities.

You’ll also want to provide any additional instructions on out-of-the-ordinary assets (for example, rental properties, actively farmed land, commercial interests, vehicles, firearms, art, wine and any other valuable collections).

However, if you wish to maintain some degree of privacy and not fully disclose the value of your estate, you can provide a general summary of your estate. This type of “breadcrumbing” will help maintain your confidentiality, particularly if there is a possibility that you may change your executor in later years.

Regardless of what form of inventory you wish to provide your executor, they should also be provided with a list of key advisors, including the contact information of your lawyer, accountant, financial advisor and where you bank. As you review this list with a potential executor, be sure they are comfortable and capable of dealing with the scope of your estate.

Do executor’s charge fees or receive payment for their services?

All executors are entitled to charge fees for their services to the estate. This can be addressed directly in the will with reference to a fee agreement signed by you and the executor.

When a will doesn’t outline an executor’s fees, the guideline can be applied that considers the time, experience, complexity and skill the executor brought to the administration of the estate. This typically ranges between 3% and 5% of the gross value of the estate.

If you use a corporate executor, a compensation agreement will outline the form and amount of compensation. There are no fees involved if they don’t act. Additionally, as your estate value increases, the percentage fee usually declines.

Whether you appoint a corporate executor or an individual executor, you should always address executor fees in your will. It will help to set expectations around executor compensation at the beginning and help to ease any potential tensions between your beneficiaries and your executor, leading to a smoother estate administration and finalization.

A letter of wishes: Assisting your executor with their duties

A letter of wishes or letter of direction for your executors and trustees is a very useful tool that provides non-binding guidance as to how you would like them to exercise their duties, if and when circumstances arise.

These letters can be particularly helpful for family members as they provide some explanation from you for decisions, helping to resolve any disputes that could arise between them. They can be changed as circumstances require and you should keep them in the same place as you keep your other documents.

You also may want to have separate letters that would apply specifically to your will, enduring power of attorney, and personal directive. It is also a good idea to review them with the people you have chosen to fulfill the associated roles.

Reach out to the experts at ATB Wealth for more information on creating your estate plan.