Naming an estate executor is a weighty task. Choose carefully. These guidelines can help.

One of the most important parts of the estate planning process is naming an executor for your estate. Your executor will be responsible for managing your financial affairs after you die, including gathering all of your assets and making distributions to heirs based on the terms of your last will and testament and existing trust documents.

“Your choice of an executor is absolutely critical,” says Rita Bishop, Cadence Bank Senior Vice President and Trust & Estates Officer. “This is the person who will be responsible for making sure that your wishes are fulfilled when it comes to distributing your assets to heirs. So you want to choose very carefully.”

Pros & cons of an individual vs. corporate executor

There are two main types of executors: individual executors (usually a close family member) and corporate executors, which are usually representatives from a bank or trust company. Each option has its pros and cons.

Pro of choosing a family member. “The biggest benefit of choosing an individual executor is that this person probably knows you well and may have a very good idea of your intentions with regard to distribution of your assets,” says Bishop.

However, choosing an individual executor can lead to unforeseen problems.

Cons of choosing a family member. Disagreements sometimes arise between family members when one of them is chosen as the executor. “These can end up doing irreparable harm to family relationships and even lead to lawsuits in some situations,” says Bishop.

Another potential drawback of choosing an individual executor is the complexity that is sometimes involved in fulfilling the executor’s responsibilities. “These duties might sound simple, but they can end up being very complicated," says Bishop. For example, the executor may need to:

• File final tax returns
• Pay any outstanding taxes
• Manage trust assets on behalf of beneficiaries
• Handle unresolved asset purchases or sales, such as real estate

Not everyone is equipped to handle such responsibilities. If you decide to choose a family member as your executor, look for someone who is well-organized, dependable, and deadline- and detail-oriented, as well as someone who is financially savvy.

Pros of a corporate executor. Perhaps you don’t have anyone in your family who would make a good individual executor. Or, it may be you would rather avoid the risks that come when you pick a family member as executor. In these cases, it's wise to designate a corporate executor.

Choosing a corporate executor might also be preferable if you have a large estate with complicated trust arrangements. “Designating a corporate executor lessens the chance of disagreements among family members and heirs about estate settlement,” says Bishop. “A corporate executor will make decisions based strictly on the terms of the last will and testament and other estate documents. They serve as an objective outsider, someone who won’t be influenced by emotions like family members might be.”

There are a number of other potential benefits of choosing a corporate executor:

• Corporate executors are subject to strict federal and state regulations and must act in the fiduciary interests of the deceased
• Corporate executors can usually tap an extensive network of other financial and estate planning professionals as needed, including insurance agents, CPAs and attorneys
• Perhaps most importantly, corporate executors are highly experienced in settling complex estates, and they may be able to generate higher investment returns on assets held in trust. “Estates are often settled more quickly and efficiently with a corporate executor than with an inexperienced family member serving as an individual executor,” says Bishop.

(Possible) cons of a corporate executor. There is a fee associated with choosing a corporate executor. Bishop says that for estates worth $1 million or more, the fee is usually justified. “For estates worth less than $1 million, you should talk to an estate planning professional about whether or not it makes sense to name a corporate executor,” says Bishop.

If your estate is small and relatively simple, an individual executor may be able to handle the duties without too much trouble. “Keep in mind that individual executors might also choose to charge a fee for serving as executor,” says Bishop.

One more option: Designate co-executors

There is one more option; you could designate both an individual executor and a corporate executor who will work together as co-executors in settling your estate. The co-executors would then divvy up the various estate settlement responsibilities. For example, the corporate executor could assume day-to-day trust administration duties and handle investment management, while the individual executor manages simpler tasks like paying outstanding taxes and bills. 

Get in touch

For more information on estate planning, you may also contact Cadence Asset Management and Trust with any questions you have about estate planning.

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.