By JUDD MATSUNAGA, Esq.
The COVID-19 pandemic has caused many people to start thinking about their own mortality. Making end-of-life decisions will not only give you peace of mind but will also ease the burden on your family that you leave behind. In a way, the pandemic has been the event that has turned end-of-life planning into a common part of adulthood.
As you make your estate plan, one of the most important decisions you will have to make is deciding who is going to be the executor of your will. Choosing an executor can be stressful, particularly if you have more than one child, a complicated estate (i.e., many assets or debts), or you anticipate conflict among your beneficiaries.
After your death, the executor you designate in your will files a petition in probate court together with the original copy of your will. The petition states the date of death, the beneficiaries named in the will, the heirs-at-law in the event the will is invalid, and an estimated valuation of the estate. So, the executor must make an inventory of all assets in your estate and determine what the assets are worth, getting appraisals if necessary.
The legal documents issued by the court clerk that spell out the executor’s authority over your estate are referred to as letters testamentary. They are issued immediately after the court approves the executor, and the executor files a security bond if one is needed. During the probate proceeding, the executor will be responsible for seeing that the terms of your will are carried out after your death.
The role of executor is a big job. Your executor (also sometimes called your personal representative) is responsible administering your estate. The executor’s duties include: (1) Safeguarding and managing the assets until they are distributed; (2) Selling assets if necessary to pay estate debts or distribute the estate; (3) Paying valid creditor’s claims; (4) Appearing in court on behalf of the estate if the estate is a party to a lawsuit; (5) Filing your final income tax return and paying any taxes due; and (6) Distributing the estate to the beneficiaries in accordance with the terms of the will.
Married couples generally name each other as executor. Although your spouse may be the person you trust the most, consider whether he or she will be up for the task. Your spouse may not be able to perform the requisite duties because of grief, sickness, disability, or a language barrier. Your spouse will also have personal liability for any unpaid estate taxes and fines for late filings, even if your spouse has assigned these responsibilities to an attorney.
The most common executors after spouses are children, then siblings. There’s no rule against beneficiaries of your will also being your executors. It can be beneficial to choose an individual who will get a considerable inheritance under the will. A person who is in line for an inheritance will have an incentive to see that property in the estate is cared for and managed in a timely fashion.
A trusted child can be a good choice, although sometimes choosing one child over another can cause hurt feelings. In the interest of family harmony, many parents will want to make both children “co-executors” of their will. This is possible, but not logistically practical. Both would have to show up at the bank, or both would have to sign documents, which can take longer and become more difficult to arrange.
Another reason “co-executors” may not work is that adult children may not be able to work together. You say, “My children get along.” That’s great! However, that’s often not the case. The probate courts are full of siblings battling over Mom and Dad’s estates. I usually recommend that parents pick one child to act as primary executor and name the second child as the alternate. This would also avoid costly problems if the two children disagree.
You want to make a selection that is unlikely to cause bickering among family members and will contests. Thus, exercise caution and think about the ramifications of your decision if you anticipate strife among your heirs. In this situation, a beneficiary may not be the best choice. In lieu of choosing a child or your spouse, it may be better to select a trusted friend.
A trusted friend (or relative) who will not inherit under the will may be a better option since he or she would have no conflict of interest. In so doing, you minimize the likelihood of will contests brought by dissatisfied relatives who might hurl accusations of cheating against the executor.
If you struggle to identify someone in your personal life to serve as an executor, or you possess a sizeable estate where there are likely to be more conflicts, you may want to think about designating an outside executor. You can rely on a professional like an attorney or accountant, or a trust company (or trust department at a bank). But many estate planners advise against this choice because of the impersonal nature of the service and the fees the institution will charge.
You are looking for three things in your executor. He or she must be someone (1) you trust; (2) who is capable of doing the job; and (3) who is willing to do the job. You want to choose a person who is intelligent, responsible, and well-organized. An executor is considered to be a fiduciary, this is someone who is trusted to hold high ethical standards and act in the best interest of the estate.
The principal qualities that an executor should possess are honesty, organizational skills, and the ability to communicate effectively. You want someone who is financially accountable, stable, reliable, and trustworthy. The executor has many responsibilities, some of which can be complex. Although some of the necessary tasks may be complicated (like preparing tax returns or making investment decisions), your executor can hire professionals (attorneys, accountants, investment advisors) for assistance.
One attractive quality in an executor is perseverance in handling bills, particularly those pertaining to hospitals, Medicare, ambulance, and doctors concerning a final illness. These frequently require much paperwork, payment, and reimbursement form insurance companies. The person you choose should have the time, and be willing, to deal with bureaucracy and forms.
In California, your executor must be: (1) at least 18 years old; and (2) of sound mind. (In my opinion, that’s because the California courts don’t want to waste time dealing with morons and idiots.) Many states prohibit people who have felony convictions from serving as executor. In California, however, there is no statute prohibiting you from naming an executor who has been convicted of a felony.
Unlike many other states, California does not impose special requirements on executors who live out of state. But that doesn’t mean it’s a good idea to appoint someone who lives far away. For practical reasons, it’s usually best to name an executor who lives near you. Your executor may have to handle day-to-day matters for weeks, months, or sometimes longer.
So the location of the executor is another factor to consider. It’s best to choose someone who lives in your state as some states have restrictions on out-of-state executors and someone local will find it easier to do the job. If the executor lives reasonably close to where most of the assets are situated, the executor can more easily make court appearances, check mail, and maintain your properties.
Make sure you talk with the person you wish to designate as executor or your will. Find out whether the person is willing to serve. And if so, you can inform that individual of the whereabouts of your legal documents and holdings. It’s also wise to ask the person before you finalize your will if they are willing to serve as executor.
Be mindful of the possibility that although the person you choose to be your executor agreed to fulfill that responsibility, he or she may refuse to accept the appointment when it is time to carry out the required duties. Thus, it is best to name alternate executors. If you do not designate any alternate executors, and your original executor declines the appointment, the court will select an executor for you, and the court’s choice may or may not be to your liking.
In conclusion, once you’ve made your choice, go over your financial details in your will with that person, and let him or her know where you keep all your important documents and financial information. This will make it easier on them after you’re gone. You may also want to discuss your decision with the family members you did not choose. Offering them a rational explanation for your choice may resolve their disappointment. You may even find they are relieved not to have the burden.
Finally, for the very reasons you selected your executor and alternate executor for your will, name the same people as successor trustee and alternate successor trustee of your trust. “Say what?” you ask. If you own your own home, paid for or not, you need a living trust. A simple will is not enough. A will has to be probated. A living trust avoids probate, saving your heirs both time and money.
Judd Matsunaga, Esq., is the founding partner of the Law Offices of Matsunaga & Associates, specializing in estate/Medi-Cal planning, probate, personal injury and real estate law. With offices in Torrance, Hollywood, Sherman Oaks, Pasadena and Fountain Valley, he can be reached at (800) 411-0546. Opinions expressed in this column are not necessarily those of The Rafu Shimpo.