The decision of who will be an estate executor is an important part of any estate plan. An estate executor is a time consuming position because the executor will administer an estate until it is legally closed, which can take years.
To legally close an estate, a will has to be admitted into court and go through a process called probate. During a probate, a court determines whether the will is a valid document and resolves any claims against the estate, such as the claims of creditors and taxes.
Unexpected estate tax audits and will contests can prolong the probate process. Changes in tax law will also require extra planning for executors and probate lawyers, the New York Time reports. A new tax law allows the $5 million-per-person federal estate tax exclusion to be transferred between spouses. This transferability, called portability, means that a surviving spouse can use a portion of the deceased spouse's unused exclusion.
This federal estate tax exclusion can be used to make lifetime gifts or to protect the surviving spouse's estate, but there is a requirement that an estate tax return must be filed when the spouse dies. If the executor fails to file a return within the 9 month period then the spouse will lose the right to portability, the New York Times reports. This is why it is important to carefully chose an executor because the executor's neglect can result in major consequences.
There are many considerations that go into picking an executor. Some of these considerations include:
- Relationships. Should the executor be a family member or an outsider such as a trust company? Family members can feel burdened by the responsibility of being an executor but may understand a family's needs better than an outsider.
- The number of executors. Naming multiple executors may help adult children feel like equals, but might also breed fights or resentment.
- Cost. Will the executor pocket a hefty percentage of the estate or will they be paid an hourly rate?
The executor is just one part of a balanced estate plan, and individuals considering appointing an executor or building an estate plan should consult with an experienced estate planner.
Source: New York Times, "Choosing the Right Executor for Your Estate," Deborah L. Jacobs, 3/3/11