How to Choose Your Executor or Trustee

Transcript

Hi, I’m Stacy Singer an ACTEC Fellow from Chicago, Illinois and I’m here with my friend ACTEC Fellow Lorraine Cavataio from O’Fallon, Illinois, and we’re going to talk about choosing an executor and a trustee.

So, Lorraine, can you tell us, to start with, what does an executor and a trustee do?

Lorraine Cavataio: The executor or trustee functions to act on behalf of the estate, which would be if it’s a will, or on behalf of the trust if it’s a trust document, to administer the assets, handle any claims, and then distribute the assets as those documents state. That individual is a fiduciary and a fiduciary is an individual that is acting on behalf of someone else and in their best interest and has this standard to act for those other individuals. In this case, it would be for the beneficiaries.

Stacy Singer: Got it. So, what things should someone consider when they’re choosing an executor or a trustee?

Lorraine Cavataio: Both an executor and a trustee are a legal position, as noted, like a fiduciary. As a result, you generally want someone that understands finances, understands legal aspects or accounting or some type of business sense, and if you don’t have that person then I would suggest someone that’s what I call the “peacemaker” who communicates well with the family and the other members, because they always want to be informed about what’s going on in those situations. Also, you can select what’s called a corporate fiduciary or trust company to act in that role as well, so it doesn’t have to be an individual.

Stacy Singer: So, is it a good idea to name co-executors or co-trustees?

Lorraine Cavataio: Generally speaking, Stacy, in my experience, I do not like individual co-trustees because in almost every case I’ve had, but maybe one, it ends up being a fight between the two trustees as to how to handle something or a situation or the co-executors in this case. That increases the costs and the attorney’s fees and drives those higher; it makes it a much more difficult situation for the family and the beneficiaries. That said, if the corporate trustee is a co-trustee with an individual, that oftentimes can work because the corporate trustee is a trust company, those individuals, their job is to read the documents, interpret the documents, and they will provide the appropriate guidance and outline of the legal implications of the document to the individual that’s acting.

Stacy Singer: Okay, so when would you name a corporate trustee?

Lorraine Cavataio: Generally speaking, I would name a corporate trustee first. Most of them have a limit as far as a dollar figure of the assets that they can manage; that would be somewhere between 500 thousand to a million depending on where you are — a small community versus a large metropolitan area. Corporate trustee, however, if you don’t have an individual family member that understands any of this or there’s a lot of conflict within the family, there are some difficult situations to deal with or difficult assets, a corporate trustee is perfect in any of those situations, not to mention even just in general it may just stop the fighting amongst the children if you want to have harmony.

Stacy Singer: So, when should you name a successor trustee, or do you even need to name a successor?

Lorraine Cavataio: Definitely. You have to name a successor trustee if you have an individual trustee. And the reason for that is that that person could die before you do, become disabled, incompetent, etc. Plus, a lot of times, we have situations where the documents create an ongoing trust for the beneficiaries that could last for 20, 30, 40, or 50 years from now, and as a result, you need someone that would be there during all of that time frame like a corporate trustee. Generally, I would name individuals up to about three in line for successors, and perhaps a corporate trustee as the last one if we have individuals. I also usually consider the age range of those individuals they’re selecting. If they’re all the same age as the person who’s creating the document, then I want to push them toward either corporate or naming someone younger.

Stacy Singer: Well, Lorraine, this has been great information. Thank you so much for giving us all this information on selecting executors and trustees.

Lorraine Cavataio: Thank you, Stacy, for the opportunity.