Settling an estate involves numerous duties, says Paige E. Wilbur, National Director of Estate Settlement Services for Wells Fargo Wealth Management.
Executors must notify creditors, establish the estate's value, file and pay tax obligations, and safeguard and marshal the assets before finally distributing them. The work can become complex and even costly.
"What most people don't realize is that asking a family member or friend to serve as your executor is not necessarily an honor," Wilbur says.
Your executor holds a fiduciary obligation to your beneficiaries, whether they are individuals or nonprofit organizations. "Litigation may result if everything isn't handled correctly," Wilbur says.
"People tend to overlook naming an executor as they focus on getting their estate plan in order," she continues. "But it's a very important decision to make."
Acting as executor is a responsibility, and if you view it as such, you'll make better decisions for whom to name.
Six things to avoid when choosing your executor
1. Choosing an executor based on their relationship to you, rather than the person's suitability for the work. While a child or a surviving spouse is typically named as executor, Wilbur cautions against assuming they can handle the role. "Whom you choose should depend on how difficult the estate is to handle, who the family members are, and what the family dynamics are," she says.
If you don't know whom to choose based on the specifics of your estate, get perspective from your wealth relationship team.
2. Choosing an executor who cannot handle or resolve conflicts. "Are there family members from other marriages?" Wilbur asks. "Is there potential for conflict in the family? If you name one child and have three others, how will that affect their relationships?"
Wilbur has served as an intermediary for siblings who quarreled over "a simple vase" from their father's estate, not because of its value, but because neither wanted the other to have it. It's important to be realistic about how your heirs will behave in the wake of your passing.
3. Choosing an executor who is inexperienced in the management of financial and non-financial assets. An executor is responsible for the oversight of all the decedent's assets. This may include everything from a portfolio of stocks and bonds to non-financial assets such as real estate, closely held businesses, mineral interests, or valuable collectibles.
4. Choosing someone who is disorganized. The work requires specific timeframes and much paperwork. Your appointee should be dependable and able to follow through.
5. Choosing someone who doesn't understand the process. Wilbur says, "It's a mistake to think that executors simply give the assets away right after the family member passes away. There are specific statutory probate procedures that must be followed. It's not enough that Grandma said you could have a certain piece of jewelry in a verbal conversation. The executor must follow the distribution requests stated in the estate planning documents. Also, family members cannot go in the house and take things that they want. There is a process that must be followed."
6. Choosing someone who may take advantage of other family members, especially after you are deceased. If you name co-executors, make sure they can work together. "Think hard about how cooperative their relationship will be," says Wilbur.
Because many executors are family members and will experience grief after a loved one dies, Wilbur says you may want to name an impartial agent instead of a family member. "One of the possible alternatives is to have a bank execute your estate. At Wells Fargo, we can work closely with the family while maintaining objectivity and offering a deep pool of resources. We can be impartial if a conflict emerges."
If an executor wants to retain the role but realizes that he or she needs help, Wells Fargo can assist. "The individual can hire Wells Fargo as his/her agent to handle the process but the individual still acts as the executor, and ultimately makes all the decisions," Wilbur says.