One of the first things a will does is to nominate an executor. This individual, also known as the personal representative, will be charged with handling and settling your estate after you have passed away. In many cases the executor is a close family member, such as a spouse or adult child, but it’s not uncommon to see a friend or trusted advisor take the responsibility. Due to the prevalence of having a family member do the job, however, roles frequently overlap so that a beneficiary listed in the will also serves as the executor.
While this may introduce a conflict of interest, most states permit it. In fact, if a situation necessitates that a probate judge appoint a personal representative—either because the will failed to name one, or because someone disputed the person named in the will—the probate court will frequently select the spouse or an adult child for the personal representative position, even if they are a beneficiary.
While a professional, third-party executor typically charges for the work they do on your estate’s behalf, a beneficiary may be willing to do the job for free. Often, a family member serving as the executor will waive payment because they stand to receive a portion of your estate through an inheritance. This can speed up the probate process and potentially save you money, since a portion of your final estate is usually set aside to cover the probate administration costs.
If you trust the beneficiary serving as your estate’s executor, you can also waive the requirement for them to post bond. Most states require this unless it’s expressly waived in your will, so the directive will need to be included in your final will. Like the first example, this can also save time and money.
The primary disadvantage of nominating a beneficiary to serve as your estate’s executor is the potential conflict of interest. Before the executor can distribute funds to the beneficiaries, all final bills, debts, and taxes need to be paid. If the executor stands to inherit a portion of your estate, and especially if the size of that inheritance hinges on how much is left over when the liabilities are covered, they may be inclined to act selfishly, rejecting valid claims and complicating the probate proceedings. They may also be inclined to be dishonest and manipulate your estate in a way that increases their inheritance.
In the case your estate is small or possibly insolvent (meaning there are more liabilities than assets), the executor may need to alter the final disbursement to beneficiaries, going against the wishes laid out in your will. Not only does this place the executor in an uncomfortable situation, it may lead to disputes amongst the other beneficiaries.
If you’d like to name a beneficiary as your executor, consider also nominating a co-executor in your will. This individual can provide a second opinion if any disputes arise, and they can take over the position if the court dismisses your primary executor (which usually happens if one of the beneficiaries contests their competency or honesty). It’s best to nominate a third-party, non-beneficiary as co-executor, so that their opinion and guidance—if needed—is neutral and unbiased. Professionals are usually willing to fill such a role for a fee, and the great part is you’d only have to pay them if the situation warrants their intervention.
Also, keep in mind that the executor’s activities will be ultimately approved by the probate court. Even with informal probate where there is limited supervision, the court will look everything over before closing probate and allowing the distribution of your assets.
Finally, unless you explicitly waive the requirement for the executor to post probate bond, they will be required to do so. Dishonesty, fraud, and forgery on their part will open the door for your other beneficiaries to make a claim against the probate bond.
With that understanding, let’s briefly discuss who you can nominate to be an executor in your will.
The surviving spouse is often the logical choice to handle your estate. This is someone you trusted greatly while you were alive, so it makes sense to appoint them as the personal representative. Depending on how your estate is structured, most (if not all) of your assets may transfer to them as the sole primary beneficiary. If you’re unsure about the stability of your marriage, keep in mind that wills can be altered at any time before your death; so, if there is a divorce or separation down the road, you won’t be required to keep your former spouse as executor.
If your spouse is ailing, or if you don’t wish to burden them with the complexities of probate, the next logical choice is to nominate one of your children as executor. Many people list all of their adult children as co-executors to avoid disputes; others will nominate the eldest child for the position, and list the other children as successor executors in case the primary executor is unfit or unwilling to serve in the capacity. The only requirement is that they’ll need to be over the age of 18 to be an executor.
When the possibility of family disputes and infighting is higher, it may be best to nominate someone outside of the family. A good friend should be trusted to provide fair and unbiased administration, and while it would be poor form not to compensate your friend for their time in behalf of your estate, their bill should be significantly less than hiring a professional to do the job instead.
Estate planning professional
In situations involving complex estates with sizeable assets, hiring a professional to serve as executor may be wise. Managing and consolidating diversified assets is a complicated process that may be too much for a friend or family member to handle. While hiring a professional will cost the estate more and subsequently decrease the amount left over for your beneficiaries, it will ensure that the probate process is done quickly and efficiently, so that there are no mistakes when the final estate is distributed to your beneficiaries.
For long-term peace of mind, contact us to set up a consultation today. We look forward to helping with your will and other estate planning needs.
Call our Arizona Estate Planning team at (480)467-4325 to discuss your case today.