Important considerations for choosing the personal representative of your Last Will and Testament.
Important things to consider when naming your executor.
Every person, regardless of age or wealth needs a will. When you make your will, you will have to choose a personal representative.
A will becomes even more important when you consider your children and your spouse. However, at your death, someone has to be responsible to execute your wishes. How should you determine who to appoint as your executor, executrix, or personal representative?
A well-crafted and legally-binding will is an essential piece of any estate plan. (To read more about the most important pieces of your estate plan, click here.)
Wills are not only for appointing guardians for children or for the wealthy. A will transfers any asset left in your name alone at death to the designated individuals.
This means that whatever you own at death is governed by your will.
To be clear, anything that you owned during your life that has a beneficiary designation is treated as transferred before your death or by operation of law. This includes items such as houses, land, accounts, funds, policies, etc. are Those accounts and other property are not governed by your will.
Contrastingly, your will governs everything else. It governs everything from a television to a small business that isn’t in a trust or other transfer vehicle.
However, as we all know, wills cannot pay bills, sign contracts, report to the court or hire an attorney. Instead, you, the person making the will, also known as the testator, must appoint a person to make those decisions.
WHO ADMINISTERS THE WILL?
A person who administers an estate goes by many names. Some of those names are administrator, executor, executrix, personal representative, agent, estate representative… the list goes on.
Generally an administrator refers to the person in charge of an estate without a will. If you didn’t make a will, then your administrator distributes your assets according to state law.
Every state in the United States has laws of intestate succession. Laws that govern what happens to your stuff if you die without a will. You might be shocked to find that your spouse may not necessarily get to keep the house. Your state’s laws may not give your business to your kids.
So….GET A WILL. If you need more reasons to get a will, check this out.
HOW DO YOU CHOOSE A PERSONAL REPRESENTATIVE?
The person named in your will to take care of your wishes is referred to generally as an executor or a personal representative (executrix is the feminine version that has largely fallen out of fashion).
The executor or personal representative is responsible to collect, value, account for, and ultimately distribute your assets at your death. (For a personal representative’s checklist, click here.)
For the most part, each married couple I meet with chooses each other to serve as the personal representative of their estate. If Husband dies, Wife administers the Estate. If Wife dies, Husband administers her Estate.
However, I always recommend having at least one backup.
There will come a day when both of you are gone, and someone else has to pick up the slack. And, to be on the safer side, you might want to consider having 2 contingent personal representatives.
Beyond the potential death of your named personal representative, that person may become ill, injured, incapacitated, or just plain bored of being in charge. Naming two people is a safe way to ensure that your estate administration will be handled by people you trust.
WHO SHOULD I CHOOSE AS THE PERSONAL REPRESENTATIVE?
But, how do you choose someone to trust? Who do you choose to serve as the administrator of your affairs—potentially for the benefit of your most beloved family members?
Over the years I have watched many people choose who they think they are “supposed to” choose. They don’t choose the person most suited for the job.
Too often I hear people choose a personal representative because they are the most conveniently located, the oldest, or the only option.
Without regard for who will actually do the best job, many people choose someone because of obligation or perception. Eventually they call me to clean up the problem. And, I often see where a different choice would have made the process much smoother.
I RECOMMEND CONSIDERING THESE FACTORS WHEN CHOOSING A PERSONAL REPRESENTATIVE OR EXECUTOR:
1. Consider Family Dynamics
There are a plethora of estate planning options where parents can designate beneficiaries on assets and those assets will pass to their children immediately upon death.
These solutions are generally straight-forward, inexpensive, and quick. However, the outcome of beneficiary appointments is that sometimes your children will have to own an asset jointly. Will your children/beneficiaries be able to work together to own a piece of property or a business jointly?
This means that your children/beneficiaries now have to agree how to manage that asset: sign contracts, hire workers, agree to a listing agent, etc.
Could your children decide that together?
In the same way, consider whether the appointment of a particular individual will incite riot among the other beneficiaries. Sure, a court will enforce their appointment, but consider whether that person will be forced out of family Christmases by your decision.
Being in charge of an estate can create a tenuous relationships between the personal representative and the beneficiaries. If this person does not have a good relationship with the beneficiaries, then you might want to consider a different person.
Sadly, I have seen people wield their personal representative position as a position of power and control. No, your personal representative does not receive the assets of your estate unless he or she is also a beneficiary. However, he or she controls the cadence of the administration, the timing of distributions, and other matters.
Don’t choose someone who will lord it over your other children or who will suffer alienation due to the position.
2. Consider the person’s familiarity with your assets.
I always encourage elderly people to start considering pairing their assets down. Sure, buy whatever you want and spend your money, but your late 80s might not be a time to start diversifying your investments…statistically speaking.
Not everyone listens to me, and some people still stand by the old money-in-the-mattress investment solution.
The person that you name as the personal representative of your estate in your last will and testament should have a passing familiarity with what you own, where you own those assets, and how you own them.
Do you work jointly with a business partner? Have you acquired debts that are liens on your property? Do you have a favorite investment advisor.
Your personal representative should know these things or at least know where to find these things out.
Make them an emergency and death checklist and compile a death binder with all of your important information.
Name someone who knows where you hide your extra key and where you bank. A basic knowledge of your personal affairs is a good reason to choose that person as your personal representative.
Naming a personal representative who is familiar with you and your assets is an important consideration.
3. Consider the person’s personal strengths and financial knowledge
Another sad reality that I see all too frequently is that a person names a personal representative who is unable to even balance his or her own checkbook.
A personal representative MUST be savvy enough to at least track expenses and accounts. He or she must be able to balance a check book, account for assets of varying values, and keep track of the expenses associated with each one.
For a personal representative’s checklist, stay tuned here!
One of the important questions for personal representatives when applying to a court is whether that person has ever been involved in a bankruptcy. If your suggested candidate finds himself repeatedly in bankruptcy and small claims court for too many debts and unpaid bills, then he or she is unlikely to be trustworthy with the assets of your estate.
Regardless of whether that person is your own child, your favorite niece, or your most helpful neighbor, if the person can’t be trusted with his own assets, then you probably shouldn’t trust him with yours.
4. Consider the candidates’ personal life
Similarly, don’t choose a candidate who lacks the time or availability to administer your estate. If the person has 12 small children, a full time job, and is running for Congress, then he or she likely lacks the time to also take care of your stuff.
Now, to be fair, most children will make administering your affairs their number one priority. But, if you are naming someone who is already up to his nose in responsibility, then he or she might not be the right person for you.
5. Consider the candidates’ age
In the same way, consider the person’s age, wisdom, and experience. Consider whether that person has ever administered an estate before and whether or not he or she is likely to still be living at your death.
Your great uncle Herbert may have administered all of the estates of his 12 brothers and sisters, but is he likely to still be alive at the time of your death?
At the same time, if you are appointing your children, make provisions for them to have additional help and assistance with their role. Provide help for your children if they might lack maturity to deal with this sort of responsibility.
If your children are still quite young, then the loss of you coupled with the overwhelming jargon that accompanies death and estate administration might be just enough to send them over the edge.
When appointing a personal representative, be certain that you choose someone who is wise enough to ask for help when needed but young enough to still…statistically speaking…be alive at your passing!
CHOOSE YOUR PERSONAL REPRESENTATIVE OR EXECUTOR WITH CARE
One of the most difficult parts of creating your Last Will and Testament, is choosing the right person to serve as your personal representative or executor.
Don’t simply name your spouse, your child, or your sibling because they are most convenient. Instead, consider these important factors for choosing your personal representative/executor.
Further, if you are working on your Estate Plan (read more about that here), be sure to check out the death checklist here, and the death preparation binder organizer here.