Is a third-party executor the best choice for you?

October 20th, 2016 Dennis Mitchell
Is a third-party executor the best choice for you?

One topic that invariably comes up during the estate planning process is the designation of an executor.

The executor is the person or persons you designate in your will to carry out your directions and to dispose of your assets as you have instructed. Generally, the role of the executor is to make sure debts and taxes are paid, and assets distributed as provided in the will. An executor’s duties include:

  1. Locating a copy of the will and filing it with the court;
  2. Providing statutory notices to creditors and heirs;
  3. Locating, maintaining, and preserving assets (which often includes real estate and other investments)
  4. Filing an inventory of the assets with the court;
  5. Accounting for all income received and expenses paid; and
  6. Serving as the representative for the estate in court proceedings.

You should name an alternate executor as a substitute in case your first choice is unable to serve. If you do not name a person who is willing and able to serve as executor, the court will appoint an executor for you. In Iowa, an executor may receive as fees up to 2% of the value of the estate.

In many situations it can be beneficial to name a bank or other corporate fiduciary as the executor or alternate. Depending on the size of the estate and the assets involved, it may be difficult or burdensome for someone not familiar with the process to serve as executor.

In addition, depending on family dynamics and politics, it may be better to have an objective third party making decisions to maintain and preserve family harmony.

It can also create challenges if the proposed executor lives out of state or a long distance away. Finally, using a bank provides protection against fraud, theft, or errors.

Let’s assume Teddy and Teresa Testator are married and have three minor children. If something happened to both Teddy and Teresa, it may be asking a lot of a relative or friend to serve as executor (in addition to potentially asking that person to serve as guardian of the children). Having an experienced professional can provide peace of mind and the assurance the estate plan will be followed for the benefit of the children.

Or let’s assume it’s later in life, and Teddy has predeceased Teresa. It could create hard feelings if Teresa chose one child to serve as executor over the others. Whether fair or true, some family members may feel the child chosen as executor is favoring his or her family. In addition, naming all of the children as co-executors doesn’t necessary resolve problems or disputes, and can create additional problems if the children cannot agree on important decisions.

Unfortunately, it is not uncommon for disputes to develop between family members, especially over personal property. This is often a difficult time when nerves and feelings are already frayed.

Using an objective third party to administer the estate will often maintain and preserve harmony among family members by eliminating one major area of stress and disagreement, and will ensure that everyone is treated fairly and in adherence with your wishes.

Our trust officers are always happy to meet with individuals to review estate plans or discuss estate planning. Please do not hesitate to contact us if we can be of assistance.

Dennis Mitchell

About the author

Dennis Mitchell is a Trust Officer at MidWestOne Bank.

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