So, what is the blog title referring to? Quite simply, if the stars align (or mis-align, as it were) your executor may not be the person you picked to do the job. How can this happen? What we’re talking about is the scenario of something happening to your executor while they are in the process of administering your estate. The job then becomes their executor’s! Confused yet? Here’s an example of how it all could go wrong (read in the context that Harry’s complex estate will take several years to liquidate, resolve family issues, complete tax filings, etc.):
• Harry made his will naming his accountant Jim as his executor. Harry‘s alternate is his brother in the event Jim is unwilling or unable to act.
• Harry chose Jim as his financial affairs were complicated – rental properties, a place in the desert, and a strained blended family (Jim knows where all the skeletons are and should be able to navigate Harry’s maze).
• Jim’s will names his spouse, Linda, as his executor. His estate is simple – no children, a house in Linda’s name, personal effects and a joint stock portfolio. Jim didn’t talk to Harry about his own planning, and Harry didn’t ask.
• 5 years later, Harry passes away and Jim begins the role as Harry’s executor.
• Part way through the administration of his Harry’s estate, Jim unexpectedly passes away.
• The executor of Jim’s will – Linda – is now in line to take over the role as Harry’s executor.
Now let’s assume Linda is a retired English teacher with no formal training in financial matters. Jim, the accountant in the family, took care of their financial affairs.
As Jim’s estate is straight-forward, Linda is comfortable being her husband’s executor but given how much more complicated Harry’s estate is, it is beyond Linda’s capability and she’s not interested in taking on the responsibility. So….what now?
Harry’s brother predeceased him, so to find someone to replace her, Linda looks to Harry’s family for an agreeable alternate. Different parts of Harry’s family make different suggestions – no one is acceptable to all sides. With no agreement on an alternate executor, Harry’s estate is off to court and his financial affairs are left unattended.
Let’s step back to Harry’s financial affairs. With a deceased executor, and no one currently responsible to deal with real estate, bank accounts, etc., how will the rental properties and investments be managed, mortgage and bills paid, on an on …?
Back to court (about 6 months later). Both families argue for their own choice for Harry’s new executor to no avail. The judge, in frustration, sends them away for another 30 days to come up with an agreeable executor (if they can’t, the judge has the option of appointing the Public Guardian). Harry’s estate continues to be in limbo and the legal fees keep climbing.
How could all of this have been avoided? Simply, both Harry’s and Jim’s wills should have had alternate executors that are capable of taking on Harry’s complex estate, and it probably should have been an independent third party or a trust company. With agreement on an acceptable alternate for Harry or Jim, a simple application could be made confirming the alternate. Within a short period of time, Harry’s financial affairs would be back under control.
When choosing an alternate executor, one should consider an individual or corporate executor that:
• Is independent and free of criticism and possible court challenges from family members.
• Has the time and desire to act – unlike Linda.
• Can understand and deal with Harry’s complex financial matters.
• Lives close by to deal with the realities of assets like Harry’s multiple properties.
• And unlike Jim, will be around when needed. Individuals pass away, corporations don’t.
Harry’s situation is not isolated. It is quite common for an executor or an alternate to not want to take on the responsibility. We find that when affairs (family and financial) get complicated, no one wants the job.
CV TrustCo’s team of seasoned professionals work with you and your advisors to design and execute a tailored estate plan. CVTrustCo provides a range of fiduciary services and can act as the executor and trustee of your legacy, carrying out your estate plan as you intended.
The result: you will have a clear understanding of your options, a practical plan for your legacy, and the security and reliability of a financial institution acting as your power of attorney, executor and trustee.
Our estate planning posts consider estate planning issues at a high level. Before you commence any form of estate planning, please consult with tax and legal advisors