Dunnan on Dollars

  Personal Finance Tips from Nancy Dunnan

Beyond the Will:
Picking The Right Executor

August 29, 2008 - There's lots of advice floating around about the importance of doing a will, what it should cover and the fact that without one, when you die your assets will be distributed according to state law. The state may or may not see to it that the people you had in mind receive your house, Harley and Haviland.

If you pick the wrong person, squabbles, unnecessary delays and excessive costs could result.

What An Executor Does

The executor is responsible for paying all the expenses of your estate. Those include any debts you leave behind, your taxes and your funeral and burial costs. These all come out of your estate.

After these expenses have been taken care of, the executor distributes all bequests as spelled out in your will. These might be to your spouse, your children and grandchildren, siblings, friends, various institutions and charities.

Carrying out the wishes you've expressed in your will obviously involves a considerable amount of paperwork including filing forms with the court overseeing probate (probate is the process of carrying out the terms of your will), and handling tax returns.

Possible Problems & Solutions

Therefore, you want an executor who can...

o Handle matters so there are no disputes. Disputes most often arise if the division of one's assets are not equal, especially among children. Disputes can also arise over the distribution of possessions, such as furniture, art work, collectibles, jewelry, cars, real estate.

o Resolve any disputes that arise.

o Is capable, mentally and physically, of working in a timely fashion to avoid unnecessary court delays.

Characteristics Of A Good Executor

The person you select should be well organized, enjoy paying attention to details, be familiar with financial matters, have a determined personality and most important, be someone you trust completely.

The executor should also have diplomatic skills, be able to get along with your beneficiaries and know how to handle conflicts.

Naming Your Spouse

Married couples often name their spouse as executor. This may or may not be the right choice.

So before doing so:

o Consider whether or not your spouse will be so upset after your death that he or she will not be able to handle the myriad of details in a timely fashion.

o Think carefully about whether or not your spouse has a good grip on financial matters.

o Answer honestly the question would he or she give in to pressures from someone in the family in a way you would not wish? In a way that defies your will?

If you anticipate that your spouse might have difficulty in the role as executor, yet you do not want to hurt his or her feelings, consider naming co-executors. This would enable your spouse to work with another person (a sibling, a grown son or daughter or an institution, such as a bank or trust company.

Note: A bank or trust company is often a good solution if no one among your family and friends has sufficient financial and diplomatic skills to carry out your wishes.

Getting Consent

Once you have settled on the right person, make an official appointment with that person, even if it's a relative. This should not be a casual conversation but rather one in which you make certain the potential executor fully understands what is involved in the assignment.

Then go over the key financial details with the executor: what your assets consists of, where your securities are held, what real estate you own how and where important documents (insurance policies, deeds, titles to property, statements, etc.) are located.

Then introduce your executor to your accountant or tax preparer and your lawyer - if not in person, at least by phone.

Telling Your Family

After your executor has agreed to serve, prepare your heirs and others mentioned in your will. Let them know who the executor (or co-executors) is. The fewer surprises upon your death, the more likely all will go smoothly.

Stay tuned: Next week we'll discuss making funeral arrangements.

- Nancy Dunnan

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If you want to suggest a column topic for Nancy, drop her a line.

Like what Nancy has to say? you might be interested in the new edition of her book:
How To Invest $50 To $5,000: The Small Investor's Step By Step Plan for Low-Risk, High-Value Investing