The attorneys at Nardone Limited in Columbus, Ohio routinely assist dentists and other healthcare professionals in creating and implementing an estate plan. Our firm works with dentists at various stages in their careers and we always advise them that it is never too early or too late to consider having your estate plan drafted or reworked. Whether you are a young professional, a young couple just starting a family, or someone approaching life’s final stages, you can benefit from estate planning.

Overview

One of the most important decisions you will make during the estate planning process is appointing the person (i.e., an individual or institution) to oversee your assets after you pass. Meaning, who will be the executor of your will and the trustee of your trust? These people have a fiduciary duty and are legally obligated to act in your best interest. Although many people appoint the same person to act as both the executor and the trustee, the responsibilities for each are slightly different and require different considerations.

Appointing Executors

The executor is the person appointed to carry out the terms of your will. Generally, the executor is responsible for the following: filing a copy of the will with the local probate court; notifying banks, financial institutions, and government agencies of the decedent’s death; navigating the probate process; representing the estate in court; establishing a bank account for incoming funds and paying ongoing bills; creating an inventory of the estate’s assets; maintaining the estate’s assets until they are distributed or sold; paying the estate’s debts and taxes; distributing the estate’s assets according to the will; and disposing of all other property. Although this seems like a laundry list of duties, the executor’s responsibilities usually conclude after only a few months.

Most people appoint their spouse to act as the initial executor of their estate once they pass. This makes sense because the spouse is usually the person with the best understanding of the decedent’s assets and has an interest in the quick and efficient probate of the estate.

There are many reasons why a person should consider appointing a non-spouse executor. First, the spouse may not be emotionally available to timely address the issues the executor may face. Second, the spouse may have already passed. Finally, it is generally recommended that a person appoint one, or even two, subsequent executors in the event an executor is unable or unwilling to assume the role.

When appointing an executor, there are many qualities that you should look for in a candidate. The executor must be capable of managing and processing large amounts of paperwork, including bills, notices, financial statements, and legal documents. The executor should also be a person willing and able to deal with disgruntled relatives upset about delays in receiving an inheritance or receiving a smaller than expected inheritance. It is also important that the executor is both well respected and easily accessible to the family. After all, the executor is expected to address the questions and concerns of the family members regarding the distribution of the estate.

In most cases, the will gives an executor the power to hire professionals, such as a Certified Public Accountant, financial advisor, or attorney, to help file the decedent’s final income tax return, prepare the necessary financial notices, and probate and distribute the estate.

Appointing Trustees

The trustee is the person given control over administering the trust assets according to the trust agreement. Generally, the trustee is tasked with the following: understanding key trust provisions; managing and investing the trust assets; administering trust assets to the beneficiaries; preparing necessary records, statements, and tax returns; and regularly communicating with the beneficiaries. Unlike an executor, the trustee’s responsibilities are more limited in number but can last years, decades, and even generations.

Like executors, a spouse is often appointed as the initial trustee after the decedent passes. This makes sense because the spouse is usually the initial beneficiary of the trust, thus eliminating the need for an intermediary between the trust assets and the beneficiary.

For the same reasons stated above, it is equally important that a person considers non-spouse trustees. There are also other reasons why a person would forgo appointing a spouse as trustee. In certain circumstances, a person may feel that their spouse lacks the fiscal responsibility necessary to adequately maintain the trust’s assets. However, in most cases a person is comfortable appointing their spouse as trustee.

There are many other considerations to review when selecting subsequent trustees. The trustee must manage, or oversee the management of, the trust’s assets to ensure the longevity of the distributions to the beneficiaries. The trustee must be capable of making decisions considering potential pressures from the beneficiaries. After all, it is the trustee that will discuss the frequency and the amounts of the distributions to the trust beneficiaries. This is especially important where the beneficiaries are young children, in which case the trustee must balance a child’s financial needs and desires. Finally, the trustee must be someone that the beneficiaries feel they can openly voice their concerns to.

Similar to an executor, the trustee is not necessarily expected to tackle the management of the trust assets alone. Most trust agreements give a trustee the power to hire professional advisors to manage the trust’s investments and file the required tax returns. However, it is necessary that the trustee is capable of objectively overseeing that the trust is managed according to the decedent’s intent, as provided by the trust agreement.

Institutional Trustees

In addition to appointing an individual to act as trustee, there is the option to appoint an institution. In many circumstances an individual will suffice and is even the best option, but in others it makes more sense to appoint an institution. However, it is important to understand the pros and cons involved with using an institution.

There are two main benefits to appointing an institution to act as trustee. The first is based on experience. An institution provides a trust with numerous resources and experienced professionals to provide top-rate services. Another major benefit is that institutions are immortal, meaning they do not die. As we discussed, a trustee’s duty may last generations. As a trustee ages, trust beneficiaries must take additional steps to establish the trustee succession plan. This is not an issue with an institution. Finally, institutions are completely disinterested from the beneficiaries and their families. This means that institutions are less subject to the pressures surrounding family conflicts.

One of the primary reasons a person would not use an institution is cost. The fees associated with an institution might outweigh the benefits provided to the trust depending on the services provided, especially if the trust is small. If the institution is tasked with investing the trust assets, there are disadvantages regarding the lack of control over the investment strategies used. Finally, many institutions lack the personal approach and availability that families seek in a trustee.

An institutionalized trustee is not worth the expense for many small to moderate trusts. This is especially true considering most beneficiaries have an unrestricted right to access trust principal by the age of 35 or 40 and will draw down the trust’s assets anyways. However, an institution should be considered where the trust is large and complex, or the trust is intended to span generations of beneficiaries.

Contact Nardone Limited

If you are considering planning for your future and would like to discuss establishing an estate plan, contact Nardone Limited and our professionals can guide you through the process. Or, even if you already have an estate plan in place, when was the last time you reviewed it? Who is your executor and trustee, and does it still make sense to appoint them to those roles? It is important that you regularly review the documents to see if they are still relevant. As time goes on, our lives change and changes in our finances and personal relationships occur. The attorneys at Nardone Limited are willing and able to work with you in creating a new estate plan for you or review and amend a previously created estate plan. If you would like more information on estate planning or would like to discuss preparing your estate plan, please contact Nardone Limited today.