Choosing an executor is a decision that carries significant importance and responsibility. Your executor will handle your estate, ensuring your assets are distributed according to your wishes, and that any outstanding debts or taxes are settled. Given the legal, financial, and emotional weight of this role, it’s essential to select someone who is both capable and trustworthy. Here’s a guide on how to pick an executor and what qualities to consider for this critical role.
Understand the Role of an Executor
An executor’s responsibilities go beyond simply distributing assets. They must:
- Manage your estate, including securing and inventorying your assets.
- Handle all legal and tax obligations associated with the estate. For Americans in Canada this will include filing of the final Canadian tax return in addition to US filings such as US estate tax filings.
- Work with beneficiaries to ensure your instructions are followed.
- Manage estate-related expenses, including any debts or taxes owed.
- Communicate effectively with family members and professionals involved in the process, like attorneys or accountants.
The role requires not just trustworthiness but also an understanding of financial and legal matters or the willingness to seek professional advice when needed.
Consider Trustworthiness and Responsibility
At the top of the list should be an individual with a strong sense of integrity and responsibility. This person will manage your estate’s finances and, in many cases, deal with sensitive family matters. Choose someone who:
- Can make objective, unbiased decisions.
- Will follow through on their duties and honor your wishes.
- Has a history of handling responsibilities effectively, as this will likely carry over to their duties as an executor.
It can be tempting to choose a family member or friend to fulfill the role of executor, however give the demand and responsibility required this may not be a great option. More on this below.
Assess Their Financial and Legal Acumen
While executors do not need to be financial experts, having some understanding of financial matters is a bonus. For instance, an executor will likely need to:
- Interpret your will and any complex provisions it contains.
- Work with tax and legal documents.
- Budget for expenses associated with probate and administration.
Selecting someone with experience or knowledge in these areas can streamline the process, particularly if you anticipate your estate will require a more hands-on approach to financial or legal matters. For those with cross-border tax and investment complexities choosing someone with the required amount of experience is key.
Evaluate Their Availability and Proximity
Administering an estate is often a lengthy process, sometimes taking months or even years. The executor you choose should be someone who:
- Has the time and willingness to commit to the process.
- Lives in the same region as your estate or is able to travel if necessary.
While technology makes remote management easier, proximity can still be a significant factor, especially when handling physical assets or dealing with local court systems.
Think About Potential Conflicts of Interest
When picking an executor, consider whether any personal or financial conflicts could arise. For example, a family member who is also a beneficiary may face challenges if other beneficiaries feel their interests aren’t being handled fairly. To minimize potential friction, some people opt for a neutral third party, like a trusted friend or professional, to avoid family conflicts.
Consider Multiple Executors
In some cases, naming co-executors can be beneficial. You might choose two individuals with complementary skills — one with financial knowledge and the other with a strong understanding of family dynamics. However, it’s essential to ensure these individuals can work well together. Having multiple executors who don’t agree can lead to delays or disputes that could otherwise be avoided. I’ve worked with many estates that had co-executors and it’s not always as easy to get consensus on decisions. Consider appointing one professional as executor to avoid this potential issue.
Evaluate the Benefits of a Professional Executor
If your estate is complex or you foresee potential conflicts among heirs, consider a professional executor, such as a cross-border CPA or wealth manager. A professional executor provides:
- Expertise in estate administration and legal requirements.
- An impartial approach, which can be helpful if family relationships are strained.
- The ability to efficiently handle estates with intricate financial structures or real estate holdings in multiple jurisdictions.
Professional executors do come at a cost, typically a percentage of the estate’s value, but the peace of mind and expertise they provide can be worth the investment.
Reconsider Choosing a Family Member as Executor
While many people instinctively choose a close family member as their executor, it’s important to carefully consider this decision. Opting for a family member may seem like the natural choice, but it can also introduce challenges that have long-term impacts on relationships. Family dynamics are often complex, and adding the responsibility of executing an estate can sometimes lead to:
- Potential Conflicts of Interest: Family members who are also beneficiaries may face challenges in balancing their personal interests with their duties as executor. Even if they are dedicated to being fair, other beneficiaries may perceive decisions as biased, which can strain family relationships.
- Risk of Family Infighting: Disputes over estate decisions can create divisions that last for years, affecting communication and relationships across generations. Family members who may not agree with how the estate is being handled might challenge the executor’s decisions, leading to prolonged legal disputes.
- Emotional Toll: Being an executor is a time-intensive responsibility that can be particularly overwhelming for someone dealing with their grief. An executor who is also a grieving family member might feel burdened by the role, making it challenging to remain objective and focused.
For families with complicated dynamics, considering a neutral third-party executor or co-executor may help reduce potential conflicts, protect relationships, and ensure an impartial approach to estate management.
Need Help with Estate Planning? Let’s Talk
Crafting a comprehensive estate plan involves many layers, from creating a will to deciding on the right executor. At Beacon Hill Wealth Management, we understand the importance of having a plan in place that reflects your wishes and takes the complexities of family relationships and legal requirements into account. Whether you’re considering professional executor services, developing a tax-efficient estate strategy, or simply need guidance on next steps, we’re here to help.
If you’d like to discuss your estate planning strategy, including executor services and cross-border estate issue, please reach out to us for a consultation. Together, we’ll help ensure that your plan is both practical and aligned with your goals.Contact us today to take the first step toward peace of mind for you and your loved ones.
