INSIGHTS

Selecting an Executorfor Your Estate

Acting as executor of an estate comes

with a great deal of responsibility and

requires a broad range of skills. It can

be time consuming and often requires

working with a number of professionals

including lawyers, accountants and

investment professionals.

Executor’s Role Executors are responsible for settling

estates. An executor may either be an

individual or a fi nancial institution; or,

a trust company or bank may serve as

co-executor with an individual such as

the decedent’s spouse, child, advisor

or other person.

When settling an estate, an executor

performs fi ve basic functions:

• Locates, collects and has respon-

sibility for the estate’s assets

until they are distributed to the

benefi ciaries

• Determines and raises the cash

needs for the estate

• Pays the decedent’s funeral

expenses, debts and estate

administration expenses

• Handles tax matters

– Prepares the decedent’s fi nal

income and gift tax returns

– Pays the estate’s income and

estate taxes

– Coordinates tax planning for the

estate and the benefi ciaries

• Distributes the remaining assets in

accordance with the terms of the will

Six Qualities to Consider When Selecting Your Estate’s ExecutorIn many cases, executors provide

a broad range of services. To ensure

your executor is equipped to handle

this important role, look for the follow-

ing attributes:

Integrity

When selecting an executor, a primary

consideration should be the honesty

and integrity of the individual or fi nan-

cial institution.

Knowledge of Financial Matters

Ideally, an executor should have a broad

understanding of fi nancial matters.

Executors are responsible for locating,

collecting, and if necessary, taking

physical possession of assets owned by

the decedent. They must also secure,

insure and appraise those assets.

When necessary, executors must also

raise the cash required to pay debts,

taxes and administration expenses.

To carry out these fi nancial responsi-

bilities, executors must fi rst make an

investment analysis of all assets in the

estate and determine which assets to

retain, which to sell and how the estate’s

cash needs will be met. A professional

wealth manager will have an experienced

staff with the knowledge needed to

perform these tasks in a timely and

effi cient manner. Usually, this staff of

experts will include an investment advi-

sor who can make recommendations

concerning the sale, retention or rein-

vestment of the assets.

This Insights explains the executor’s role and covers key qualities to consider when choosing an executor for your estate.

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2 Selecting an Executor for Your Estate fiduciarytrust.com

Experience with Tax Matters

Executors should be experienced in tax

matters, because they prepare and file

the decedent’s final federal and state

personal income tax returns. Executors

must also prepare and file income tax

returns for prior years and when appro-

priate, gift tax returns, if those returns

were not filed.

For estates of decedents with assets

exceeding $5.49 million (nearly

$11 million per couple) in 2017,

an executor is responsible for filing

a federal estate tax return and,

depending upon the jurisdiction,

a state estate or inheritance tax

return. The federal estate tax return

is a complex and comprehensive

return, due nine months after the

date of death. Since the estate is

a separate taxpayer, an executor is

also required to prepare and file

annual income tax returns for the

estate. A knowledgeable executor will

also propose a comprehensive tax plan

to minimize the income taxes paid by

the estate and its beneficiaries.

Impartiality

Naming a family member or friend as

your executor may place that individual

in an uncomfortable position, and could

even cause a conflict of interest, par-

ticularly when the executor is also

a beneficiary of the estate. Certain

decisions the executor must make, such

as tax elections, may have a direct

financial impact on each beneficiary.

For example, depending on the nature

and value of the assets, the form of

ownership and the relevant provisions

of the will or trust agreement, the

executor may be faced with a multitude

of decisions, referred to as “elections,”

on the federal and state estate tax

returns. The exercise or non-exercise

of these elections determines the

amount of taxes paid, the source

of payment of those taxes and the

amount of taxes deferred until the

death of another individual or other

specified event.

Therefore, a family member or friend

who acts as your executor must be

able to make these decisions impar-

tially, without favoring one beneficiary

over another.

Availability

Settling an estate can take more than

24 months. Your executor must be

willing and able to commit time and

energy to the task. Delays can arise

when, for example, a valuation issue

on the federal estate tax return prompts

an audit by the Internal Revenue Service.

The audit process can easily extend

the settlement of the estate for an

additional 6 to 12 months.

A professional wealth manager has

experienced staff to:

• Resolve issues concerning an audit;

• Handle the day-to-day tasks during

the course of the estate’s adminis-

tration; and

• Provide continuity during the entire

settlement period.

Your Executor Should be Knowledgeable and ExperiencedHere are some of the many responsibilities your executor will be required to perform:

• Locating, appraising, insuring and safeguarding assets

• Determining and raising cash needs

• Paying bills

• Performing financial analysis and managing assets

• Tax planning and tax return preparation

• Managing real estate and property

• Recordkeeping

• Regularly communicating with beneficiaries

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fiduciarytrust.com F IDUCIARY TRUST COMPANY INTERNAT IONAL 3

An individual executor may not always

be available to perform these tasks

due to personal or business commit-

ments, illness, infirmity or death.

If trusts are created under a will or

trust agreement, availability is also

an important factor to consider when

selecting a trustee. With today’s

sophisticated estate planning

techniques, the appointment of

a trust company or bank as a trustee

or co-trustee provides the added

benefit of continuity for an

individual’s estate plan.

The information gathered and the rela-

tionships developed during the estate

settlement process can be carried

over to the administration of the trust.

Since a typical estate plan may pro-

vide for the creation of a trust or trusts

Consider the Many Benefits Offered by a Professional Executor

Selecting the best possible candidate to act as executor for your estate

should not be made solely on the basis of a family relationship or years

of friendship. Carefully consider the full spectrum of qualities an executor

should possess to ensure your intentions are properly carried out.

which can last for 70 years or longer,

an established trust company or bank

can provide uninterrupted services to

a family for several generations.

Financial Responsibility

The final major consideration is the

accountability and financial respon-

sibility of the individual or entity

selected to be the executor. The set-

tlement of an estate is a full-time job

for the estate administration depart-

ment in a trust company or bank. By

comparison, it is usually a one-time,

part-time job for an individual. A trust

company or bank is regulated by state

and federal laws. It is also subject to

both internal and external audits.

An individual is not subject to these

regulations and audit procedures. What

occurs if the executor makes or fails to

make a decision that results in a sub-

stantial loss to the value of the estate’s

assets? For example, the executor may

make the wrong decision concerning

one or more of the many tax elections

that may arise during the estate’s

administration. An individual may not

have the same financial resources to

cover the resulting loss that a trust

company or bank would have.

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This communication is intended solely to provide general information. The information and opinions stated are as of June 2017, unless otherwise noted, and may change without notice. The information and opinions do not represent a complete analysis of every material fact. Statements of fact have been obtained from sources deemed reliable, but no representation is made as to their completeness or accuracy. The opinions expressed are not intended as individual investment, tax or estate planning advice or as a recommendation of any particular security, strategy or investment product. Please consult your personal advisor to determine whether this information may be appropriate for you. This information is provided solely for insight into our general management philosophy and process. Historical performance does not guarantee future results and results may differ over future time periods.

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Franklin Templeton Investments, serving high net-worth individuals, families, endowments, foundations and

other institutions. Fiduciary Trust provides the following services to clients throughout the world:

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FTCI INEX 06/17

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