Most of the 70-some percent of North Americans who have never written a will think of it as a document for outlining what they want done with their basic assets. But in many cases, if this was all, instructions could be written in just one or two sentences.
Possessions can generally be considered with less emotion than personal relationships. And one very personal relationship is always formalized in a will: the appointment of an executor. A will is also used to formalize the appointment of guardians when there are children who need protecting.
Naturally, a great deal of consideration goes into the appointment of guardians. It would be a careless person who would not get an okay in advance from prospective guardians. After all, we’re leaving them, totally and irreversibly, in control of our kids.
Why is it, then, that so many executors don’t learn of their appointment until after the death of the person for whom they are supposed to act? Why are so many ill-prepared, confused and utterly stressed? Could it be that most of us have only a vague idea of the role of executor? And, consequently, many merely look for someone who is inexpensive (read spouse?) and completely trustworthy (read spouse again, maybe)?
If cheap and honest were the only criteria, selection could be quite simple in most cases. But an executor also needs to be highly organized and efficient; be able to take charge – but with compassion; be bright enough to absorb a wealth of detail accurately and quickly; and be comfortable with financial dealings (knowledgeable would be better) at all levels appropriate to the estate.
Your executor has total control of your finances the moment you die and, as a result, almost total influence over your family’s financial well-being until your estate is settled. He or she needs to get the job done quickly and accurately so your family can get on with their lives.
For many of us, our executor is our spouse, and I suppose most of us feel our spouse will not do anything to harm the family. Why else curse a husband or wife with such a thankless task? But the truth is that if the many administrative details are not looked after quickly, properly, and kept on top of, there might be no cash for groceries no matter how much money is in your bank account.
Does your executor have the right qualifications?
If you have never been an executor yourself, you may not realize how tough a job it is. Let’s take a quick look at some of the things your executor must do. This may help you to decide who should have the job, or if professional help (perhaps in the form of a co-executor) will be needed.
- Prepare your final tax returns. Your executor will have the ability and the authority to hire tax advisers and to pay them from the estate.
- Get approval from the Revenuers to distribute assets. This may not be given until the final tax bill has been paid. Protect those who look to you for support by having at least some of your cash in a joint account. It will be immediately available to them when you die.
- Arrange your funeral as stipulated in your will. (Your executor should know your wishes in advance; your will may not be opened until after the funeral.)
- Find all the bits, pieces, documents, insurance policies and “stuff” that are part of the tangible evidence of your life and preserve them for those you wish to be their new caretakers.
- Pay all outstanding bills. Have a single place for keeping them, known to your executor and immediate family. Let there not be any surprises.
- Make partial distributions or arrange loans so immediate family can get by until the estate is distributed.
- Buy or sell estate assets, including investments. Though there are generally legal restrictions on the types of investments that can be made, you may wish to stipulate further limits in your will. Readily-cashable, short-term, government-backed interest-bearing investments are usually most suitable for the short term.
- Hire professional help, such as lawyers and accountants.
- Act as trustee for young beneficiaries. The executor may make decisions, for instance, that influence how much money (if any) is available for education.
- Probate your estate. A money-saving tip: jointly-held assets such as property or bank accounts do not go through probate, avoiding probate fees.
An executor rarely has an easy task even when your affairs are well-organized; it can be near-hopeless when they’re a mess. For all this work they are entitled to compensation, usually in the range of 3% to 5%. The higher amount – up to $12,500 — usually applies to estates valued at $250,000 or less.
Given the complexity of the job, and the potential grief a poor job can bring to beneficiaries, it is amazing that two-thirds of the people who appoint executors do not prepare those executors for the job they have to do.
Your life and the welfare of your family is not a game show in which contestants are barred from knowing the answers in advance. Talk with the person you want to appoint as executor. See if they are comfortable taking on the job. Then prepare them as much as you possibly can.
Think of it this way: your executor is like the coupling between a railway car and the locomotive. Without that coupling, strong and effective, the car ain’t goin’ no place no matter how hard the engine pulls.
Choose carefully, then prepare well.
This is just one of dozens of helpful ideas presented in The Estate Manual and its electronic counterpart, THEMES™ – estate planning’s missing link. The manual organizes the human side of estate planning. This area is often overlooked, but it makes a huge (and obvious) difference to survivors. It is an easy-to-use system for making sure nothing is left out of your planning. Learn more at http://www.estatemanual.com.
Sydney Tremayne
