A simple estate plan includes a will with contingent trusts, and medical and financial powers of attorney. The executor and trustee under the will, like the agents under powers of attorney, are your fiduciaries, the people you entrust with your money and your health.
Most people name their spouse first and children as alternates. If children are young, friends or family are typical alternates. Regardless, it’s common to see the same people, in the same order, as executor, trustee, financial agent, and medical agent.
Sometimes that’s a mistake. People are different and fiduciaries have distinct duties. The medical and financial agents care for you during disability. The executor administers the estate following death. The trustee holds the inheritance for incapacitated or minor heirs, hopefully saying no to excessive requests.
Fortunately, there is great flexibility in the assumption of these duties. No one is required to serve. Anyone named may always decline in favor of the next alternate. Some, not all, financial powers of attorney let agents pick their successor. The best wills give trustees that authority. The Estates Code lets family pick alternate administrators if the named executors are unable to serve. It is less important that the perfect person be at the top of the list than an adequate person be somewhere on the list.
Fiduciaries may quit and will if you leave them a thankless job. Think twice about naming your best friend as executor, then leaving all the money to charity.
Corporate fiduciaries may serve as executor or trustee. You can name a corporate fiduciary as a second or third alternate, or even as co-executor or co-trustee. A corporate fiduciary is a great help for people who are honest but bad with numbers.
Foreigners are allowed to serve as fiduciaries, but the IRS may characterize the estate or trust as foreign, an expensive complication. That problem may or may not be avoided by naming a U.S. person to serve with them.
Note: This article was not intended or written to be used, and it cannot be used by the taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer.
