Few financial requests carry as much emotional weight as this one. Asking someone to serve as executor of your estate—or being asked to do this crucial job—implies deep affection and personal trust. But it’s also a long-term commitment with serious legal and financial responsibilities. Whether you’re choosing an executor or thinking of serving as one, you need to understand what the position entails and whether you are the best fit, says Rebecca Sterling, Director, Senior Wealth Strategist, UBS Financial Services.
In simple terms, an executor has legal responsibility for the finances of someone who has died, including accounting for all of that person’s assets, paying any debts and taxes, and distributing bequests to beneficiaries according to the wishes expressed in a will. How do you know whom to choose or whether to serve? Consider these three crucial factors:
While much depends on an estate’s size and complexity, settling it is likely to take at least a year and could last several. “This can be a second full-time job,” Sterling says. “In the beginning, it can consume hours and hours a day.” That’s especially true if the person who created the will had complicated wishes about distributing assets or if a beneficiary decides to contest the will. Consider who will be willing and able to devote time and attention to the process.
Among the biggest surprises for executors is how much they’re responsible for and that they are legally and financially liable for how well they do the job. As a fiduciary for all beneficiaries, the executor must look out for their financial interests. While there’s no obligation to grow the size of an estate, if executors make poor decisions that diminish its value, “they could have to make the estate whole out of their own pocket,” says Patti S. Spencer, a Pennsylvania trust and estate attorney and author of Your Estate Matters. Says Sterling, “You are expected to act in the highest standard.” Some wills, Sterling notes, provide for directors and officers (D&O) insurance, paid for by the estate, to shield the executor from some liability.
Finally, if you serve as executor, you’re likely to face considerable emotional challenges—especially if you are one of several siblings who may benefit from the estate. There could be disagreements about everything from whether to sell a vacation home to the proper valuation for a family business.
A Financial Advisor and attorney “can be neutral third parties, letting beneficiaries know, this is what the will says, and this is what the law says.”