Importance of Choosing the Right Executor (Personal Representative)
A New York Times article a couple of days ago provides a reminder of how important it is to carefully choose the fiduciaries who will be responsible for administering your estate plan in the event of your incapacity and at your death. "Choosing the Right Executor for Your Estate" notes that not only is the responsibility as an executor, successor trustee, or any other fiduciary, a time consuming job, but it is an increasingly complex affair. There are many duties that a successor trustee of a living trust or the personal representative (executor) of a probate estate must fulfill.
One of the considerations in selection a fiduciary is the new responsibility that fiduciaries, whether executors or successor trustees, have with regard to making certain tax elections under the tax bill passed in December.
The new tax law provision involving "portability" that became effective January 1, 2011, continues through 2012, and is included in the President's budget proposal for post 2012 as well. The law allows widows and widowers the opportunity to carry over any part of the deceased spouse's unused estate tax exclusion. The exclusion amount for 2011 and 2012 is $5 million, which means each individual can transfer $5 million during their lifetime or after their death, without incurring gift or estate taxes on the assets transferred.
The provision for "portability" allows the surviving spouse to utilized any part of the deceased spouse's $5 million that was not used by the deceased spouse. The portability is allowed only if there is an estate tax return filed for the deceased spouse, within nine months of the date of death. If the executor/successor trustee fails to file that return within the required time period, the surviving spouse loses the right to portability. For estates that can take advantage of the portability feature, the loss could be as much as $1.65 million dollars in additional gift or estate taxes.
Now, the selection of your fiduciary should take into consideration the level of responsibility necessary to ensure that the estate tax return is filed, and filed timely. Resorting to family members may not be the best choice. There are many factors to consider when choosing a fiduciary, whether executor or successor trustee.
While some family members may be qualified to serve as your personal representative or successor trustee, you will want to consider whether those individuals are the most appropriate, or may create a situation of disharmony, or ill will. Quite often, with the desire to not offend one or more children, the parent will name all of the children as "co-" executors or successor trustees. More often than not, this compromise solution creates rather than solves problems.
As the size of your estate increases, it may become increasingly important for you to consider a professional executor or successor trustee. Professionals may include attorneys, CPAs, other friends who are responsible and trustworthy, or a bank or trust company. Not only can the objectivity and professionalism of such an executor or trustee be beneficial, professional trustees typically have insurance coverage if mistakes are made, intentionally or unintentionally. With smaller estates, it may be difficult to find an bank or trust company willing to serve as your fiduciary, so the selection of the right individual is even more important.
Given all the mergers and take-overs in the financial services industry, rather than name a specific bank or trust company, consider naming a trusted friend or advisor to select an appropriate professional executor or trustee, whether individual or institutional.
Choosing your fiduciary is one of the most important steps in any estate planning process. Take the time to consider the options most appropriate for your own circumstances. The easiest choice may not be the best choice.
One of the considerations in selection a fiduciary is the new responsibility that fiduciaries, whether executors or successor trustees, have with regard to making certain tax elections under the tax bill passed in December.
The new tax law provision involving "portability" that became effective January 1, 2011, continues through 2012, and is included in the President's budget proposal for post 2012 as well. The law allows widows and widowers the opportunity to carry over any part of the deceased spouse's unused estate tax exclusion. The exclusion amount for 2011 and 2012 is $5 million, which means each individual can transfer $5 million during their lifetime or after their death, without incurring gift or estate taxes on the assets transferred.
The provision for "portability" allows the surviving spouse to utilized any part of the deceased spouse's $5 million that was not used by the deceased spouse. The portability is allowed only if there is an estate tax return filed for the deceased spouse, within nine months of the date of death. If the executor/successor trustee fails to file that return within the required time period, the surviving spouse loses the right to portability. For estates that can take advantage of the portability feature, the loss could be as much as $1.65 million dollars in additional gift or estate taxes.
Now, the selection of your fiduciary should take into consideration the level of responsibility necessary to ensure that the estate tax return is filed, and filed timely. Resorting to family members may not be the best choice. There are many factors to consider when choosing a fiduciary, whether executor or successor trustee.
While some family members may be qualified to serve as your personal representative or successor trustee, you will want to consider whether those individuals are the most appropriate, or may create a situation of disharmony, or ill will. Quite often, with the desire to not offend one or more children, the parent will name all of the children as "co-" executors or successor trustees. More often than not, this compromise solution creates rather than solves problems.
As the size of your estate increases, it may become increasingly important for you to consider a professional executor or successor trustee. Professionals may include attorneys, CPAs, other friends who are responsible and trustworthy, or a bank or trust company. Not only can the objectivity and professionalism of such an executor or trustee be beneficial, professional trustees typically have insurance coverage if mistakes are made, intentionally or unintentionally. With smaller estates, it may be difficult to find an bank or trust company willing to serve as your fiduciary, so the selection of the right individual is even more important.
Given all the mergers and take-overs in the financial services industry, rather than name a specific bank or trust company, consider naming a trusted friend or advisor to select an appropriate professional executor or trustee, whether individual or institutional.
Choosing your fiduciary is one of the most important steps in any estate planning process. Take the time to consider the options most appropriate for your own circumstances. The easiest choice may not be the best choice.
Posted by Randy Coleman at 3/7/2011 8:58 AM 
Categories: Personal Representative, Trustee, estate planning, estate taxes, Trust Administration, Probate, Executor, Wills and Probate
Tags: fiduciary duty Florida probate Jacksonville probate attorney living trusts probate probate administration probate a will in Florida probate attorney probate estate revocable living trust personal representative executor trustee
Categories: Personal Representative, Trustee, estate planning, estate taxes, Trust Administration, Probate, Executor, Wills and Probate
Tags: fiduciary duty Florida probate Jacksonville probate attorney living trusts probate probate administration probate a will in Florida probate attorney probate estate revocable living trust personal representative executor trustee
Comments