In the case of choosing a trustee or executor, who should get the job, what are the fees and what should you expect? There are a few things to consider when answering these questions.
There are a number of decisions to be reached when planning for your estate; not least among them is the choice of your financial decision makers for the time when you will no longer be able to manage your property (whether due to incapacity or death). A poor choice of a trustee or executor can topple even the best laid of estate plans. Indeed, Reuters offers one unfortunate beneficiary’s troubles in a recent article on the topic and offers some solid suggestions to consider.
The beneficiary was Stephanie Stephens, who, in the end, was surprised to find that the estate she received had shrunk by $129,000, something she angrily blames on the executor of her relative’s will. Apparently, the estate had incurred a $104,000 loss when the executor failed to pull the assets from the flames of the 2008 financial meltdown and, adding insult to injury, the executor was then entitled to an executor’s fee of another $25,000. Needless to say, Stephanie wasn’t happy. Whether or not the executor was to blame for such a dramatic decrease in the size of the estate may be debatable, (it was the beginning of the recession, after all) but the problems were compounded in Stephanie’s situation. She had not met the executor of the estate until after her relative passed away and had no reason to trust the executor’s judgment. Further, she was surprised to learn of the executor’s fees and felt they were excessive.
In this case, the beneficiary was, at best surprised (and at worst, victimized) by a situation she did not understand due to lack of communication. Her case offers an example of a disconnect that can all-too-easily arise between executor, estate, and beneficiary.
Reuter’s offers three general principles to bear in mind when choosing trustees and executors:
Know the estate. Choosing the right trustee or executor has a lot to do with the nature of your estate. Is it complex or simple? Are there a lot of moving parts and assets that may be at risk? A family member can likely carry out a simple estate but a professional might be necessary for those more difficult ones.
Know the person. Just because someone is a “good person” does not mean they should be doing business for you. You need to know that they are well-intentioned and interested in carrying out the tasks, but above and beyond that you must also know that they have the proper skills and business mindset to carry out your plans and take care of your assets in your absence.
Let your family know - communicate. It is a difficult conversation to have but it is important to relate your plans directly so that your family members know your decisions. Further, you want to be sure they are aware of the cost of the trustee or executor, if any, so it isn’t the surprise for your family members that it was in Stephanie’s case (in fact, you yourself may want to be sure you are aware of the costs, too).
You can learn more about Probate and Estate Administration on the Probate and Trust Administration section of our website.
Reference: Reuters (June 16, 2011) “Help! Our executor cost us $129,000”