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Executor decisions
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January 27, 1999: 10:25 a.m. ET
Executor/executrix required to handle both financial and emotional issues
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NEW YORK (CNNfn) - Naming -- or being named -- the executor to carry out the financial wishes of the deceased requires balancing both financial and emotional concerns.
An executor -- or if a woman is named, an executrix -- is basically the person you are putting in charge of settling your estate in accordance with your wishes.
Because of the obvious sensitive nature of dealing with matters after your death, the person you name should be chosen with great care.
While it might seem naming a professional, such as an attorney, would be the smartest financial move, David Brochu, president of Progressive Financial Strategies, said most individuals have the common sense needed to take over the executor/executrix duties.
In fact, friends or family members may be more qualified for certain aspects of the job.
"A function of the executor is notify all the other family members," said Brochu. "In some ways, that might actually be more important than the other financial duties."
Combustible mixture
You can pretty much choose whomever you want to be your executor, be it a spouse, adult child, attorney or other financial professional.
However, since the person will be dealing with the combustible mixture of family, grief and money, it's wise to choose someone who you feel has the sensitivity and strength to stick to your financial wishes.
Many people do indeed name their attorney to be their executor and there's nothing wrong with that, but unless the attorney has become somewhat of a trusted advisor to you on some personal level, they may not necessarily handle your mourning relatives in the way you might have hoped.
In addition, naming a family member or friend may save you money. Executors are entitled to a fee, typically 1 percent to 3 percent of your estate.
However, often a loved one will waive the executors fee, especially in the case of a small estate which requires little legal wrangling.
Also, if you name an executor who you'd like to leave money to, their executor fee will be paid before estate taxes are taken out, essentially allowing you to bequeath money to them before the government takes its bite, according to Doug Fendrick, partner at Begley, Begley & Fendrick.
"There are all sorts of games you can play with the executor fees and taxes," said Fendrick.
For example, the federal government taxes estates over $600,000 at 37 percent, while estates under $600,000 are not subject to any taxes.
If you've got an estate of $650,000, you can arrange to have your daughter paid an executor fee of $50,000, bringing your estate under the $600,000 minimum. Not only are you saving 37 percent on your overall estate, your daughter will pay a lower tax rate on the $50,000 fee.
When you draw up your will, either by yourself or with the help of an attorney, you will be asked to name the executor of your choice.
You'll want to name a secondary executor in case your primary choice is unwilling or unable to take over these responsibilities.
It's important to notify the person you want as your executor. Brochu advises bringing a copy of your completed will to them and discussing every aspect of it so the person can be fully informed when dealing with the inevitable problems that may sneak up.
Also, letting someone know you've named them avoids the delays of bringing up the secondary choice and keeps commotion at a difficult time to a minimum for your loved ones. Even financial professionals like Brochu have found themselves, unbeknownst to them, named as executors.
Your job as executor
If you're named as an executor and have been notified by the person whose estate you'll be taking over, begin immediately to gather information, which will be easier to do while the person is still alive.
"There's just a lot of paperwork," said Brochu of the challenges faced by executors.
According to the U.S. government's executor planning guide, an executor's job is detail-oriented.
First, you'll want to locate the will. If you've done your preparations, you'll already know the deceased's lawyer who will probably have a copy of it. Once located, you'll notify the beneficiaries named in the will.
You'll also apply to appear before the probate court, assuming allowances haven't been made to avoid probate.
Much of the remaining responsibilities are more mundane. You'll send notices to the deceased's various financial entities, including banks, utilities and credit card companies and file for life insurance, Social Security and other benefits.
After that, it can get a little tricky, especially if an estate is somewhat larger. You'll need to find out what debts the deceased has and assure those debtors are paid off by the estate.
Then come the taxes. In addition to Federal estate taxes -- if any -- the deceased's estate could be subject to state and local taxes as well, many of which can vary.
With taxes baffling to many of us, it can indeed be difficult to deal with these things alone. That's why you should get the proper help.
"The key is in hiring the right professionals," said Brochu. "Hire the right people and oversee their actions."
The person who named you to handle their estate will probably already have an attorney, but when it comes to the tax matters, you'll probably want to hire a tax professional.
And, warned Fendrick, don't assume all tax pros are the same. Even a certified public accountant may not have a firm grip on all the ins and outs of this situation. Instead, look for someone who specializes in estate planning and taxes.
Once you've hired the professionals, keep after them, checking in on them often until the estate is settled. If you don't ask how things are progressing, legal and tax issues can linger, costing the estate money and prolonging some of the difficulties the survivors are facing.
-- by staff writer Randall J. Schultz
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