By: Michael Hudock

What’s the first thing that comes to mind when I say the words, “important financial decisions”? 

For most people, it’s probably about what kind of house or car they drive and what the payments will be.  Or maybe how much they choose to save each month. 

Others might go a little deeper and think about the investments they own, the tax credits they claim, or even when to take Social Security benefits. 

None of these answers are wrong!  But there’s another “important financial decision” that many people do not think much about.  A decision that can have a major impact on both your finances and your family. 

I’m referring, of course, to choosing an executor. 

An executor is someone appointed to administer a person’s last will and testament after they pass away. An executor’s job is to distribute assets, communicate with beneficiaries, keep records, mediate disputes, ensure the deceased’s funeral wishes are carried out, and more.

Everyone should choose an executor when they begin their estate planning, but the choice should not be made lightly.  Here’s why:

1. Being an executor is a big job. It’s also a highly detail-oriented job.  Not everyone is cut out for it. 
2. If the wrong person is chosen to be an executor, they may make mistakes, miss out on important details, or be simply untrustworthy. When any of these things happen, it’s your family who will have to bear the consequences.  In my career, I’ve seen family members fight and loved ones have to pay more in taxes then planned.
3. Some family members may be upset that they weren’t chosen unless they truly understand the ins and outs of your decision.

The good news is that, while choosing an executor is important, it doesn’t have to be difficult.  You simply need to know what steps to take, what questions to ask, and what order to do it all in. 

What are those steps, you ask?  Well, I just so happen to have all eight of them right here!  By following these simple actions — preferably well in advance, long before you think you actually need to — you can ensure the right person is chosen as your executor, making your family’s financial future significantly more secure. 

Step #1: Make a Master List of Your Assets

Before you even begin thinking about who your executor will be, think instead about what your executor will actually be responsible for.  To do that, I recommend meeting with your attorney to make a list of all your assets.  Determine how they are titled, where they are located, and what you want to happen with each.  This master list is what your executor will eventually be tasked with distributing, so you can think of it as a kind of blueprint for your estate that they can work off of. 

Step #2: Have Your First Family Conversation

Have a chat with your loved ones about what you are doing.  Then, give them a rundown of the assets on your list and your plans for each.  Are there any that you want to go to charity?  To a foundation?  Should they be used to help future generations go to college?  This is still your money, and you get to decide what every single penny of it will be used for.  By bringing your family into the conversation now, you can be transparent and forthright about your wishes, minimizing any chance of confusion or hurt feelings down the road. 

Step #3: Assemble a Preliminary List of Candidates

Next, begin thinking about who could potentially serve as your executor.  Don’t think too hard about each name yet; that can come later.  This is simply a blue sky/brainstorming exercise, so the list can be as long as you want it to be.  That said, even at this stage, you should start asking yourself the following questions:

• Who can I trust to serve as my executor?
• Who do I think is responsible enough?

Step #4: Begin Whittling Your List

A few days later, sit down and review each name on your list.  This still isn’t the time to formally select someone.  What you’re really doing is crossing names off. 

As you go through this process of elimination, ask yourself these questions:

• Who might actually want the position?
• Who has time to do it?
• Who could do it but may not want to do it?
• Who do I know that has great organizational skills, communication skills, and attention to detail?
• Who will the rest of my family respect?

With every name, if you have any doubts at all, cross them out and move on.  When you make your eventual choice, you’ll want to feel 100% sure of your decision. 

Step #5: Ask Your Final Candidate(s) if They Will Serve as Your Executor

My suggestion?  Invite your top choice to breakfast or lunch.  Explain the role thoroughly, including what will be required of them.  Show them the list of assets.  If they agree, you can then officially designate them as your executor.  If they don’t, move on to your second choice, or begin the whole process again starting with Step #3. 

Step #6: Discuss Your Choice With Your Family

Particularly, your siblings and adult children.  Explain why you chose the person you did.  Give them the big-picture view of your overall estate plan and what you need and expect from them.  This way, everyone will be on the same page. 

Step #7: Create, Update, and Share Your “Record Locator”

This is a special document that shows where all your assets are located and who is the point of contact for each.  For example, the attorney who holds a copy of your will.  The financial advisor who manages your portfolio.  Your insurance agent.  Your contact at the bank.  You get the idea. 

This is a centralized document, almost like the list of phone numbers you’d leave for the babysitter in the case of an emergency.  Review and update it at least once per year, and then provide a copy to your executor.  It will enable them to know where every asset is and who they should talk to about each, ensuring that nothing falls through the cracks.

IMPORTANT TIP: Some people don’t take the time to create a record locator document.  They think it’s annoying, or that it’s just a piece of paper, or that the executor can just do it later on their own.  This is a mistake.  Not only will this document make it much easier for your executor to do their job, it will prevent you from forgetting things that you want to happen. 

Here’s an example of what I mean.  Go into your kitchen and put a blindfold on.  In ninety seconds, try to name every object in your kitchen that’s a certain color, size, or shape.  Then open your eyes.  I bet you will be surprised at how many things you missed — and this is in a room you spend significant time in every single day.  But don’t feel bad.  Kitchens are big and hold a lot of stuff.  It’s easy to forget a few things, right? 

The totality of your financial life is much, much bigger than even the largest kitchen.  So, if you don’t take the time to write things down and update them regularly, you will forget them.  And that can cause major problems for your estate, your executor, and your family. 

Step #8: Review Your Choice of Executor Every Three Years

As time passes, it’s possible that whomever you selected is no longer the best choice.  At least once every three years, sit down with your executor and make sure they still have the capability of acting on your behalf after you pass away.  If they don’t, better to know now than when it’s too late.

And…that’s it!  As you can see, none of these steps are particularly difficult or complex.  They just require diligence and deep thought.  If you start doing them now, can get this important financial decision out of the way with time to spare…and sleep sounder knowing that whatever the future holds, your wishes and your legacy will be taken care of. 

Which makes it more likely that your family will be taken care of, too. 

As always, if you have any questions, or need any help at all, please feel free to contact us.  Here at Hudock Capital, we help all our clients with every aspect of their estate planning, and we’re always available to help you, too.

Have a great month!

— Michael Hudock

P.S. One common question I often get is, “Can I name more than one person to be my executor?”  Yes, you can!  But the real question is, “Should you?”  The answer to that is, only if there is a compelling logistical reason to do so.  For example, maybe one person alone simply won’t have time, so you need two to share the burden.  Or you have family and assets in two different parts of the country, so you choose an executor for each half.

If you do choose more than one executor, make sure you determine whether both executors need to sign off on everything, or whether they each have their own domain they are responsible for.  Also, be sure to tell them both about each other!  You may also want to consider naming an odd number of executors so you have a “tiebreaker” vote in the event of disagreements. 

When appropriate, you can also name a successor OR alternate executor in your plan.

In most cases, however, I recommend only naming one executor.  It just keeps things simpler. 

There are lots of ways to do this, the only right decision is the one that works best for you and your family. — MH