It pays to know: choosing an executor for your will
By JUDD MATSUNAGA, Esq.
The COVID-19 pandemic has caused many people to start thinking about their own mortality. Making end-of-life decisions will not only give you peace of mind, but will also ease the burden on your family that you will be leaving behind. In a way, the pandemic was the event that made end-of-life planning a common part of adulthood.
One of the most important decisions you will have to make when developing your estate plan is who will be the executor. Choosing an executor can be stressful, especially if you have more than one child, a complicated estate (i.e. many assets or debts), or if you anticipate a conflict between your beneficiaries.
After your death, the executor you name in your will files a petition in probate court with the original copy of your will. The petition indicates the date of death, the beneficiaries named in the will, the legal heirs in the event of invalidity of the will and an estimate of the valuation of the estate. Thus, the executor must take an inventory of all the assets in your estate and determine their value, obtaining appraisals if necessary.
Legal documents issued by the clerk of the court that set out the authority of the executor over your estate are called letters of test. They are issued immediately after the court approves the executor, and the executor posts a bond if necessary. During the probate process, the executor will be responsible for ensuring that the terms of your will are executed after your death.
The role of executor is a big job. Your executor (also sometimes called your personal representative) is responsible for administering your estate. The functions of the executor include: (1) safeguarding and managing assets until distribution; (2) Sell assets if necessary to pay off estate debts or distribute the estate; (3) Pay valid claims of creditors; (4) appear in court on behalf of the estate if the estate is a party to legal action; (5) Filing of your final tax return and payment of taxes due; and (6) distribute the estate to the beneficiaries in accordance with the terms of the will.
Married couples usually appoint themselves as executor. Although your spouse is the person you trust the most, consider whether they will be ready to take on the task. Your spouse may not be able to perform the required tasks due to grief, illness, disability or language barrier. Your spouse will also be personally responsible for any unpaid estate taxes and late filing fines, even if your spouse has assigned these responsibilities to a lawyer.
The most common executors after spouses are children and then siblings. There is no rule that prohibits the beneficiaries of your will from also being your executors. It may be advantageous to choose an individual who will obtain a substantial inheritance under the will. A person awaiting an inheritance will be prompted to see that the assets of the estate are maintained and managed in a timely manner.
A trusted child can be a good choice, although sometimes choosing one child over another can cause painful feelings. In the interest of family harmony, many parents will want to make the two children “co-executors” of their will. It is possible, but not logistically practical. Both should report to the bank, or both should sign documents, which can take longer and become more difficult to organize.
Another reason why “co-executors” may not work is that adult children may not be able to work together. You say, “My children are getting along well. It’s awesome! However, this is often not the case. The estates courts are full of siblings fighting for mum and dad’s property. I generally recommend that parents choose one child to act as the primary executor and appoint the second child as the alternate. It would also avoid costly problems if the two kids don’t agree.
You want to make a selection that is not likely to cause quarrels among family members and that will be the subject of competition. So, be careful and consider the ramifications of your decision if you anticipate conflicts between your heirs. In this situation, a beneficiary may not be the best choice. Instead of choosing a child or your spouse, it may be better to choose a trusted friend.
A trusted friend (or relative) who will not inherit under the will may be a better option since they have no conflict of interest. In doing so, you minimize the likelihood of will challenges from dissatisfied parents who could lay charges of cheating against the executor.
If you are having trouble identifying someone in your personal life to serve as an executor, or if you have an important area where there will likely be more conflict, you may want to consider appointing an external executor. You can trust a professional like a lawyer or accountant, or a trust company (or a bank’s trust department). But many estate planners advise against this choice because of the impersonal nature of the service and the fees the institution will charge.
There are three things you look for in your executor. He or she must be someone (1) you trust; (2) who is capable of doing the job; and (3) who is ready to do the job. You want to choose an intelligent, responsible and well-organized person. An executor is considered a trustee, someone who is trusted to uphold high ethical standards and act in the best interests of the estate.
The main qualities that an executor should have are honesty, organizational skills, and the ability to communicate effectively. You want someone who is financially responsible, stable, reliable and trustworthy. The executor has many responsibilities, some of which can be complex. While some of the necessary tasks may be complicated (such as preparing income tax returns or making investment decisions), your executor may hire professionals (lawyers, accountants, investment advisers) for assistance.
An appealing quality in an executor is persistence in handling invoices, especially those relating to hospitals, medicare, ambulances, and doctors regarding a final illness. These often require a lot of paperwork, payment and reimbursement from insurance companies. Whoever you choose should have the time and be willing to deal with the bureaucracy and forms.
In California, your executor must be: (1) at least 18 years of age; and (2) of sound mind. (In my opinion, that’s because California courts don’t want to waste time dealing with morons and idiots.) Many states prohibit people convicted of felony from serving as executors. In California, however, there is no law that prohibits you from appointing an executor who has been convicted of a felony.
Unlike many other states, California does not place special requirements on executors who live out of state. But that doesn’t mean it’s a good idea to name someone who lives far away. For practical reasons, it is usually best to appoint an executor who lives near you. Your executor may have to deal with day-to-day affairs for weeks, months, or sometimes longer.
The location of the executor is therefore another factor to consider. It’s best to choose someone who lives in your state, as some states have restrictions on out-of-state executors and a local person will find it easier to do the job. If the executor lives reasonably close to where most of the assets are located, they can more easily appear in court, check mail, and maintain your properties.
Be sure to speak with the person you want to name as your executor or your will. Find out if the person is ready to serve. And if so, you can let that person know where your legal documents and assets are. It is also wise to ask the person before finalizing your will if they are willing to serve as executor.
Keep in mind that even if the person you choose as executor has agreed to fulfill this responsibility, they may refuse to accept the appointment when it is time to perform the duties required. Thus, it is better to appoint alternate executors. If you do not appoint a substitute executor and your initial executor refuses the appointment, the court will select an executor for you, and the choice of court may or may not be up to you.
In conclusion, once you’ve made your choice, go over your financial details in your will with that person and let them know where you keep all of your important documents and financial information. This will make it easier for them after you leave. You can also discuss your decision with family members you have not chosen. Offering them a rational explanation of your choice may resolve their disappointment. You may even find that they are relieved that they don’t have the burden.
Finally, for the same reasons that you chose your executor and your alternate executor, appoint the same people as successor trustee and alternate trustee of your trust. “Can you repeat that please?” you ask. If you own your own home, paid or unpaid, you need a living trust. A simple will is not enough. A will must be probated. A living trust avoids probate, saving your heirs time and money.
Judd Matsunaga, Esq., Is the Founding Partner of Matsunaga & Associates Law Firms, specializing in Estate Planning / Medi-Cal, Probate, Personal Injury and Real Estate Law. With offices in Torrance, Hollywood, Sherman Oaks, Pasadena and Fountain Valley, he can be reached at (800) 411-0546. The opinions expressed in this column are not necessarily those of The Rafu Shimpo.