In Part 1 of this two-part blog series, I explained the role of a personal representative and why it’s so critical to your estate. You can read it here.
When choosing a personal representative for your estate, your first choice is likely to be a family member, such as your eldest child. But this might not always be the best choice. All too often, choosing a relative can lead to squabbles and delays in closing the estate. This could cause your loved ones to spend estate assets to resolve family disputes, and these relationships may never be repaired.
So, whom should you choose to be your estate’s personal representative? To help you answer this question, here are a few things you should know.
What should you look for when choosing a personal representative?
Most important, your estate’s personal representative should be willing to serve in this role. As I discussed in Part 1 of this series, it’s not a walk in the park. Make sure the person you choose is not only up for the task but also has time to devote to it.
Your personal representative should also be legally able to represent you. This means they must of the appropriate age (age of majority is 18) and of sound mind, preferably live in the same region, and not be a felon.
It’s important to consider character and traits, too. You need someone who is responsible as well as adept at handling money and financial transactions. Needless to say, your personal representative should be honest! Ideally, they are also well-organized, detail-oriented, and a good communicator (for keeping beneficiaries informed).
You should also determine if your personal representative will be compensated by the estate for services rendered. If so, what does this person consider to be reasonable?
It all depends on your family dynamics. Only you will know the strengths and weaknesses of your family members. But, as I mentioned at the beginning of this article, not naming a family member as your personal representative can help to prevent painful disputes. It’s also wise to avoid naming a business partner or beneficiary, if possible. Instead, consider a trusted friend or lawyer who is NOT a beneficiary of the estate. Without a vested interest in your estate, an outside person can separate his or her personal feelings and interests from those of the other beneficiaries.
Should you choose a professional fiduciary to manage your estate?
If choosing a family member or trusted friend becomes too complicated—or if you have no one to appoint—consider a professional fiduciary. Although this person will require compensation, they can successfully manage your estate while helping to reduce family conflicts. In addition to being neutral, a professional fiduciary has advanced knowledge and expertise in estate management. Often, this person has access to all of the resources needed to manage the estate, such as investment, legal, tax, and real estate professionals, and could be a prudent investor and manager of the estate assets.
You have a few different options for a professional fiduciary:
- Trust company
- Bank or law firm
- Accountant or financial advisor
If you decide to go this route, be sure to talk to several organizations to gauge services and fees. Keep in mind that large organizations will be more corporate while local banks and lawyers may take a hands-on approach. Anyone you choose should be licensed and bonded to provide a high standard of care. (There are strict state and federal guidelines for this.)
One of the drawbacks of a professional fiduciary is that they lack the flexibility of a family member or friend, which could make it more difficult for beneficiaries. What’s more, they can be expensive—their fees can quickly add up. Sometimes, they can be slow to act, as they must report to a committee to make decisions.
What should you do after you choose a personal representative?
The first thing you should do is discuss the choice with your family members. Help them understand why you chose the person you did. Be transparent!
Next, provide copies of your estate documents (wills, trusts, lists of assets, etc.) to your personal representative, or let them know where they are. As soon as possible, sit down with your personal representative to discuss items in the will and trust, so they understand your wishes. Be sure to keep your personal representative up to date on any changes to your estate. Also, provide your personal representative with contact information for your lawyers, beneficiaries, and other key individuals.
Choosing your estate’s personal representative is one of the most consequential decisions you will make about your estate. Making a wise choice helps to ensure your wishes will be adhered to and your estate will be managed well. Most important, having the right person in the role can go a long way toward preventing painful family conflicts.
If you have questions about your options for a personal representative or would like to learn more, JAK can help. We can guide you in making the right choice for you and your family, and help you through the estate planning process. Contact us today.