When a family member or close friend passes away, the person named as executor often steps into the role thinking of it as an honor. In reality, it can quickly become something much more demanding.
Consider a typical situation: An individual dies with a family home, investment and retirement accounts and has named beneficiaries. The executor will need to gather financial records, coordinate with attorneys and accountants, manage or sell property, file tax returns and make decisions that directly affect what each beneficiary ultimately receives.
Add in multiple properties in different states, business interests, artwork and digital assets, and settlement of an estate can take several years.
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When choosing an executor, many people focus first on trust. While trust is essential, it is only one part of what the role requires. Choosing an executor deserves the same level of attention as creation of the estate plan itself.
Serving as executor is more than an honor — it’s a job
Acting as executor comes with a great deal of responsibility and requires a broad range of skills. The role may be filled by an individual, a professional fiduciary such as a trust company or bank or a combination of both serving as co-executors.
In practice, the responsibilities of settling an estate often include:
- Locating, collecting and safeguarding assets
- Paying debts, taxes and administration expenses
- Coordinating with attorneys, accountants and financial advisers
- Managing or selling property
- Communicating with beneficiaries
- Distributing assets according to the terms of the will
Throughout the process, the executor serves as a fiduciary, with a legal duty to act prudently, impartially and in the best interests of the estate and its beneficiaries.
But even this list captures only part of the picture. Administering an estate is often an extended process that requires ongoing judgment, coordination and attention to detail.
Choosing the right executor: What to look for
The most qualified executor is not necessarily the person closest to you. Instead, consider whether they have the qualities needed to manage what can be a lengthy and complex process.
Financial judgment is critical. Executors are often required to evaluate complex or illiquid assets, address liquidity needs and ensure obligations, such as taxes and expenses, are met without unnecessarily diminishing the value of the estate.
Additionally, they must make decisions concerning the sale, retention and investment of the estate assets.
Experience in tax matters is helpful. Executors are responsible for the preparation and filing of the decedent’s federal and state income tax returns and applicable estate and gift tax returns.
These filings can involve detailed valuation and reporting, making tax coordination one of the most demanding aspects of estate administration.
Objectivity matters, particularly in families. When an executor is also a beneficiary, decisions such as tax elections or timing of distributions can affect outcomes unevenly. The ability to act impartially is essential to avoiding unnecessary conflict.
Time and availability are often underestimated. Settling a complex estate can easily extend for several years, particularly if an audit issue arises. What begins as a defined responsibility can become an ongoing commitment. Your executor must be willing and able to commit time and energy to the task.
For these reasons, some individuals consider naming a professional fiduciary as sole or co-executor. Professional fiduciaries bring specialized expertise, continuity and established administrative resources, particularly in more complex estates.
Why it’s important to revisit your choice
Even thoughtful executor choices should be revisited over time to ensure that each named executor is up to the task.
A lot of things can change between the time an executor is named and when they serve.
- The amount and complexity of assets can change
- Individuals move and may acquire property across multiple jurisdictions, requiring coordination of different probate processes
- Digital assets and cryptocurrency have introduced new legal and practical considerations
Additionally, tax rules are always changing.
Make sure that the person named years ago is still the best fit for today’s realities.
The difference between a plan and a successful outcome
For some families, a spouse, adult child or trusted friend may be the right choice. For others, a professional fiduciary or co-executor arrangement may provide valuable expertise, continuity and objectivity.
It’s also important to remember that estate administration is often just the beginning. In many estate plans, the executor’s work lays the foundation for trusts that may continue for years, or even generations, after the estate has been settled.
Decisions made during administration can influence how efficiently assets are transferred, how taxes are managed and how effectively long-term planning objectives are achieved.
Ultimately, an estate plan is only as effective as the people responsible for carrying it out. Taking time to thoughtfully select and periodically review your executor can help ensure your wishes are fulfilled and ease the burden on the people you leave behind.