Articles

WHAT SHOULD I LOOK FOR IN AN EXECUTOR OR TRUSTEE?

The responsibility of a fiduciary, such as an executor or trustee, should not be underestimated. An executor is the fiduciary designated by the decedent (sometimes referred to as the “testator”) in his or her Last Will and Testament (the “Will”) to handle the administration of his or her estate. A trustee is the fiduciary designated by the drafter of a trust (sometimes referred to as the “grantor”) to administer the trust. As fiduciary of the Will and the trust, respectively, an executor and a trustee are bound by law to exercise a high degree of care when managing the property of another. Given the significance of the responsibilities of a fiduciary and the standard of conduct to which the fiduciary must subscribe, it is imperative that one carefully consider who to designate to act in such capacity.

LEGAL REQUIREMENTS

In the Commonwealth of Virginia, the legal requirements for serving as an executor or trustee are minimal. An individual may serve as an executor or trustee so long as he or she is at least eighteen years of age and is legally competent. An individual may also designate a corporation, such as a bank, as an executor or trustee, so long as such corporation is authorized to conduct such business in the Commonwealth of Virginia.

PERSONAL CONSIDERATIONS

In light of the significant responsibilities of an executor and a trustee, it is important for an individual to consider the demands of the particular position and the character and capabilities of the prospective fiduciary. In addition, an individual should consider the ability and willingness of the prospective fiduciary to serve both presently and in the future. Failing to consider these matters when designating a fiduciary increases the likelihood that one’s affairs will not be handled in the manner desired.

Personal Integrity of a Fiduciary

A fiduciary must be trusted to handle in a proper manner the affairs for which he or she will eventually be responsible. There is often little satisfactory recourse available if the acting fiduciary fails to manage affairs in the manner prescribed. A fiduciary should have undivided loyalty to the testator or grantor when it comes to the execution of his or her duties. In addition, the understanding by the executor or trustee of the intentions of the testator or grantor are an integral part of achieving the goals of the testator or grantor. Often the appointment of a close friend, relative, advisor, or someone who has maintained a longstanding relationship with the testator or grantor is a sensible choice.

Capability to Administer Affairs

A fiduciary must be capable of carrying out the wishes of the testator or grantor. Given the complex nature of the duties required of an executor and a trustee, a requisite knowledge of financial matters, business transactions, or other matters may be necessary to effectively manage the estate or the trust. As a result, the executor or trustee may need to seek legal counsel or other professional advisors to assist in carrying out his or her duties, especially in the event complicated issues arise.

Ability to Serve

A fiduciary should be able to serve whenever his or her services are required. When choosing a fiduciary, the testator or grantor should consider the age, health, geographic location, and intelligence of the prospective fiduciary to determine whether he or she feels the prospective fiduciary will be able to serve effectively. An individual in very poor health or at an advanced age may predecease the testator or grantor or be too ill to serve at such time that services are needed. An estate requiring complex administration, or a trust with an extended duration, may require a tremendous investment of time and resources on the part of the executor or trustee. Individuals who live outside of the jurisdiction or who have obligations elsewhere may be unable to serve. An individual should keep the personal situation of a prospective fiduciary in mind, so that he or she can assess any difficulty or hardship that may be imposed on such fiduciary by serving as the executor or trustee. Prior to designating a fiduciary, the testator or grantor should also determine whether the prospective fiduciary is willing to serve in the desired capacity both presently and in the future.

NAMING MULTIPLE FIDUCIARIES

The testator or grantor may designate two or more individuals (sometimes referred to as "co–executors" or “co–trustees”) to share the responsibility of administering the estate or the trust. However, an issue may arise if the co–executors or co–trustees are unable to agree with regard to estate or trust administration decisions. If multiple fiduciaries are designated to serve at the same time, the testator or grantor should include a provision for resolving disagreements or deadlocks between the fiduciaries. Alternatively, the testator or grantor could designate an initial fiduciary to serve and designate successor fiduciaries to serve if the initial fiduciary was unable to act.

COMPENSATION FOR EXECUTORS AND TRUSTEES

When selecting an executor or trustee, one should consider the amount of compensation which is customary for executors and trustees to receive for their services. For instance, an individual may wish to consider defining the amount of compensation as a fixed dollar amount rather than a certain percentage or fraction of the income earned on the assets of the estate or trust. If considering designating a professional as executor or trustee, then an individual should make sure he or she is fully aware of all compensation and/or fees which would be payable to the professional in advance of designating such professional as executor or trustee.