Your Questions, Answered: Naming a Trustee or an Executor

November 19, 2020

On this week’s episode of Your Questions, Answered Chris Bixby and Brian Leitner discuss considerations for naming an executor, and answer the following question:

“I’m ready to draft my estate plan. What should I consider when naming a trustee and an executor?”

Do you have questions you’d like answered? Email them to QA@marinerwealthadvisors.com, and we’ll provide answers.

Transcripts:

Brian Leitner: You have questions. We have answers. Back with another quick clip. Chris, a question that came in that I hope you can help us out with was this individual, they have been putting off doing their estate plan for a period of time, and they’re finally ready to draft their documents. And they need to name a trustee as well as an executor. And they’d like some help in terms of our thoughts. What should we be thinking about as we name these folks in our documents? So, I thought where we might start is what’s the difference between a trustee and an executor, maybe start there? 

Chris Bixby: Well, the executor is the person who executes, hence the term executor, the terms of the will. Which is a document that comes into effect at the time of death and does the initial distribution of the assets from the person who has passed away. A trustee is different in that sometimes a will, or even a trust, is created before death that actually provides for assets to be retained and then distributed over time to the beneficiaries. So, if you have a distribution that happens over a period of years, then you’re going to have a trustee administering those distributions. 

Brian: So, both of these roles sound like they come with a great deal of responsibility. What are your thoughts as it relates to naming these individuals? What should people be thinking about? 

Chris: A lot of times when people think about naming their executor or their trustee, they think about naming their oldest child or all of their children, or a close friend or relative of the family, because they feel like it’s an honor to name that person. And while it is an honor, certainly just that you feel that highly of that person, the truth is it does come with a lot of responsibilities. 

There’s a lot of filing deadlines that have to be met. There are notices to beneficiaries. There’s some potential personal liability in certain cases. So, a lot of times, tongue in cheek, we’ll say the person you want to name as your trustee is actually the person who you absolutely trust, but really can’t stand. Because you’re giving them so much responsibility and such a burden that really, you might not be doing them an honor by making them your executor or trustee. 

Brian: What can be done as it relates to, say the trustee perspective, to make sure that this individual or this family member is not overwhelmed and is given the right expertise and guidance to fulfill this role or requirement? 

Chris: Well, there is something called a corporate trustee or co-trustee and this person really is someone who is in the industry. They are used to dealing with the filing deadlines and the taxes. They are absolutely an independent party. So, imagine the discomfort if my dad passes away and makes me the trustee and my brother has to come to me to ask for money. That’s just not a good family dynamic. So, a corporate co-trustee actually sits beside the trustee of the trust, or the family member per se, and actually is the one who does the filing work, who does the tax returns, who does the notices to the beneficiary, who receives the request for funds. And so that really takes a lot of that administrative burden off of the family especially in an emotional period of time.  

Now it may sound a little scary to have some corporate co-trustee. A lot of times it’s an advisor friend of the family or a company that the family has a relationship with. And we always want to make sure that we grant the powers to the other beneficiaries or to the other trustee that actually allows them to replace the corporate co-trustee. And that way, if there are any issues of communication or anything like that, you can replace that corporate trustee to the benefit of the beneficiaries. But again, the purpose of the corporate co-trustee is to be that partner to deal with the financial and tax and legal obligations that arise from being a trustee. So that burden is not completely on that individual you named?  

Brian: Sure. That makes a lot of sense. Chris, greatly appreciate your time. Thanks for being here. 

Chris: Thank you, Brian. 

Brian: And if you or anyone else has questions they’d like answers to, feel free to email us at QA@marinerwealthadvisors.com. Thanks for watching. 

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