Welcome to the “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.
Today’s question is about wills; specifically, how to pick an executor for your estate.
Watch the following video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.
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Got a question of your own to ask? Scroll down past the transcript.
Don’t want to watch? Here’s what I said in the video
Hello, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by Money Talks News, serving up the best in personal finance news and advice since 1991.
Today’s question comes from Cecil:
“How do I pick an executor for my will?”
Picking an executor
I’ve done stories about the importance of having a will for decades. And they pretty much all end the same way: by saying something like, “Having a will is important, and getting one is cheap and easy. Do it!”
While this is true — you should have a will, and they’re not very expensive — what you’ll learn when you start down the estate planning road is that you have a lot of decisions to make, and not all of them are simple. Exactly what do you want to go to whom? Who will take care of the kids if you die? Who will take care of them if that person dies? What about pets?
In short, you’ll be faced with lots of questions.
One of the most important decisions you’ll make is who’s going to be your executor — the person in charge of your estate. That person will likely work with an attorney, but your executor will be on the front lines when it comes to corralling all your assets, taking care of them until they’re distributed, paying the estate’s bills, dealing with debts and finally, handing out the right amounts to the right people at the right time.
Being an executor is no walk in the park. I have firsthand experience: I was the executor of my parents’ estate. Although they weren’t rich and their estate wasn’t all that complicated, dealing with an estate takes a long time and attention to detail.
So, how do you pick an executor? Short answer: carefully.
Here are some tips.
Pick the best possible person
You can easily solve the problem of whom to name as executor simply by naming a bank, accountant, lawyer or trust company to be the executor of your estate. The obvious problem? Expense. Fees are typically set by your state, but range from 1% to 5%. So, unless the estate is especially large or complicated, most people choose a younger relative or trusted family friend.
Note the word “younger.” There’s little point in naming an executor likely to die before you do. Also note that if you choose a person, you’ll have to pick a backup in case your first choice isn’t around as long as you are. You could do what many people do: Name a person, then name a bank or lawyer as backup.
If you have kids, you don’t have to name just one. For example, you could say, “Any of my children more than 25 years old shall serve as co-executors.”
Whomever you choose, you must get their permission first. Don’t just stick someone’s name in your will and hope they’ll find it a pleasant surprise. They won’t. Also, your executor needs to know where your assets and important papers are, so you need to talk to them in advance.
In an ideal world, you’ll also name someone responsible, and as knowledgeable as possible. They should also be stable. Some states require the executor to be bonded (basically, insured in case they run off with the money). That may not be possible for noncitizens, as well as those with prior bankruptcies, no credit history, felony convictions or other issues.
Picking someone who’s financially stable can also help. For example, as the executor of my parents’ estate, I could have charged fees and expenses. I didn’t, which obviously benefited their other heirs.
Still shaky on whom to name? I don’t blame you. Not many of us have a perfect, and perfectly willing, executor candidate in our families. So, when in doubt, talk to an attorney. They’ve been around this block a lot and can explain all your options.
You can also check out the National Association of Estate Planners and Councils (naepc.org) and the National Academy of Elder Law Attorneys (naela.org.) They have web directories that can help you find an executor.
Keep it as simple as possible
The simpler your estate, the less the executor will have to do. But keep the beneficiaries in mind as well.
When my father was drawing up his will after my mother passed, he named me executor, which was fine. But he also insisted on doing something that wasn’t fine. Upon his death, he had the estate hold back some of the money within a trust, because he didn’t want one of my young, less responsible (at the time) relatives to get a lump sum all at once. Instead, although it wasn’t a lot of money, he wanted my sister and I to act as trustees and dole it out as we saw fit.
While I understood the logic, this could have been a nightmare. Imagine being in charge of someone else’s inheritance and having to approve of their bank account withdrawals. Sound like fun? It wasn’t.
The point is that not all families like each other, and distributing Mom’s and Dad’s money can mean conflict, quite literally served up on a silver platter. The more drama that ensues, the harder the job of the executor.
Bottom line? Balance what you want with your executor’s potential hassle. If your desires include bequests that might start a family war, consider getting a professional and not a family member.
Hope that answers your question, Cecil!
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I founded Money Talks News in 1991. I’m a CPA, and I’ve also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.
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