John Allen, Jr., AEP®, AIF®, CTFA® | Market President, Greenville, SC
One of the most important – and overlooked – decisions individuals will make in drafting their will is determining who will serve as executor (personal representative in some states) to handle the affairs of their estate. The wide range of responsibilities – from filing final tax returns to distributing assets to beneficiaries – requires keen attention that often is best left to a corporate executor experienced in estate planning rather than a family member.
One of the most common mistakes people make in their will is having a family member or friend of a friend serve as executor. On the surface, it seems like a good idea.
In general terms, an estate’s executor is named in a will, appointed by the court, and given legal responsibility to administer the estate in accordance with the deceased person’s written wishes.
Why not appoint someone known to the family? That person may have a good understanding of the family dynamic or, even, have a strong background in law or finance. And he or she may feel honored to be the executor. The feeling, however, is often short-lived because it soon becomes apparent how much time, effort and knowledge is required to fulfill the duties of an executor. Often, being a family executor creates unneeded conflict and stress with siblings or other family members.
Why appointing a corporate executor is a smart choice
For individuals owning a sizable estate, naming a corporate executor may be a better solution. A professional executor is often a trust company that designates specialists to carry out the same duties that an individual would perform.
Here are four reasons why you should consider a corporate executor:
1| Estate administration expertise: Many of the executor’s duties require a thorough understanding of estate and tax law – and a corporate executor will have experienced professionals to manage the distribution of the estate’s assets. A friend or family member who does not have an estate administration (or similar) background could easily make mistakes that could result in costly legal fines.
2| Independence and impartiality: A professional executor is bound by law to always act in the best interests of the estate and the decedent’s wishes. An executor who is a friend of the family will find it challenging to be completely objective and not improperly influenced by beneficiaries.
3| Availability and access: A corporate executor is staffed by estate administration professionals who are available to respond quickly and accurately to questions beneficiaries may have about the estate. This may be a difficult task to handle for a family member who may already have a full-time job or lack the knowledge to answer the questions.
4| Collaboration and Coordination: The corporate executor is accustomed to working effectively with other professionals assisting in the estate administration process: the attorney; the CPA; appraisers; insurance and other professionals key to an efficient estate administration.
When choosing a professional executor, look for companies who have multiple experts in estate law, taxation, and wealth management to help make sure the value of the estate’s assets is maximized and distributed in a timely manner.
Here seven tasks that your corporate executor should carry out to provide superior service:
1| Identifying all the deceased person’s assets and records: The executor is responsible for keeping assets safe until they can be properly distributed to the estate beneficiaries. This can include deciding which assets to sell or keep.
2| Collecting, valuing and safekeeping assets: This includes the contents of a safe deposit box, automobiles, bank accounts, personal property and all other assets held in the deceased’s name.
3| Setting up accounts for the estate: Executors are required to obtain a tax identification number for the estate, to keep the estate’s money separate from their own funds and to account to the beneficiaries for funds of the estate.
4| Managing estate assets: This includes professionally managing the estate’s financial securities and cash in accordance with a custom investment policy statement. It also includes management of real estate properties and any unique assets (collectibles and copyrights, for example).
5| Continuing necessary payments: The funds in the estate’s bank account can be used for making mortgage, insurance and other recurring payments that must be paid during the administration of the estate.
6| Paying debts, creditors, and administrative expenses: In general, before any person named in a will can receive any inheritance, the deceased’s creditors debts must be settled. In most states the executor must notify all creditors of the death of the individual and wait for those creditors to file claims.
7| Wrapping up the deceased’s affairs: This can include everything from canceling credit cards to notifying a bank about the death of the individual. An executor may also need to wind up a business or transfer an LLC or other closely held business assets.
Settling an estate involves overseeing multiple tasks with varying deadlines. Hiring a corporate executor may be a smart choice to help family members during an emotional time — so the family can spend less time worrying about money and more time celebrating your legacy.
Argent’s trust and estate planning experts provide customized planning and service. Our clients have peace of mind knowing their estates are well cared for. Contact us to learn how we can help you.
