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Selecting Trustees and Executors - Some Considerations and Ideas

Selecting an executor or trustee is often the last consideration when preparing an estate plan. When planning out a will or trust, it seems so much more important and interesting to decide how the property is to be given away! Oftentimes, the issue of who takes the reins as the executor or trustee takes a back seat to these other matters.

But the selection of trustee (or in the case of a will, the executor) is extremely important. Few issues are more important. Failing to select the correct person can, in fact, compromise every other aspect an otherwise excellent estate plan.

I was previously involved in a number of cases where the fiduciary stole money belonging to the estate (actually, both cases involved conservators rather than trustees or executors -- but the idea is the same, as all are considered "fiduciaries", or persons with control and who have a high legal obligation to a person or to an estate).

In one instance, over time, the conservator stole over $11,000 from an account he was entrusted to manage. What did he use the money for? To help pay for his daughter's medical education. In another instance, a conservator stole money from an estate account by making regular ATM withdrawals at the maximum $300 per day limit.

I never learned exactly what he did with that money.

So, what should you look for when selecting an executor or trustee? Here are some ideas:

  • Don't assume that flaky or formerly-flaky family members will or have changed their stripes. You are entitled to your skepticism: Never assume that dishonest members have suddenly become honest. Maybe they are, but that doesn't entitle them to the keys to Fort Knox.
  • Don't assume that family members will remain nice and friendly after the funeral. It's amazing what money does to people.
  • Select individuals who can and will follow directions. Although detailing the various duties of executors and trustees are outside of the scope of this article, this is essential: Documents such as court orders and trust documents must be both read and complied with. This requires some sophistication on the part of the executor or trustee.
  • If possible, avoid avoiding appointing multiple fiduciaries. In my view, appointing multiple fiduciaries is done (frequently) as a way of avoiding tough decisions at document drafting stage -- like appointing co-trustees, or co-executors. If two or three are in charge, you are inviting a fight, and perhaps costly court intervention.
  • Make sure that your estate planning documents are professionally prepared. I realize that there are many products in the electronic marketplace, but nothing (in my view) beats attorney prepared documents. A live person will be more likely to "flesh out" issues more effectively than a computer spitting out canned legal documents. That $300 or $400 you save now might not be worth it in the long run.
  • Consider a professional fiduciary or trust company. However, this option is an expensive one, and is usually only affordable to larger estates.
  • Consider this alternative: Require a bond. Your initial reaction might be to forget the bond and to save your estate the premium expense (if avoiding it is permitted by state law). But while bonds do indeed charge a premium, they are cheap insurance for the trust or probate beneficiaries.
  • Finally, consider your family situation. I realize that this sounds like a cop-out, but each family does indeed have its own dynamic. For example, unless there is a viable alternative, I would generally avoid busy or stressed out family members for selection as trustee or executor.
  • Another example: If you have a contentious family, you might need to appoint an outsider not easily influenced by the day-to-day drama. If you have a long term trust (for example) for the benefit of a child with a substance abuse problem, the trustee should have a strong personality. The trustee should be able to confidently say "no," and to act in accordance with your instructions as provided in the trust agreement, as well as in the long-term interest of the beneficiary.

Of course, this is only a partial list of considerations. In a way, there are as many considerations as families. However, following these guidelines (and they are not rules, just guidelines) may save your family money and added stress during a difficult and emotional time.

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