Cautionary Tales - Picking the Right Executor and Trustee - Episode 214

Hey there, Legal Tea Listeners –This is your host, Jenny Rozelle! Today’s episode of Legal Tea is the “cautionary tales” topic. And on these “cautionary tales” episodes of Legal Tea, we normally talk about real-life cases with real-life clients that are things me or my office have worked on -or they are things that I think are generally good things to be aware of, so you don’t turn into a cautionary tale on my Legal Tea podcast one day! Today is a bit of both – we’re going to talk about how to go about choosing the right Executor or Trustee (in a Will or Trust). And along those lines, I also want to share real examples of when picking the wrong person can go wrong – even if a bank or institutional trustee is put in charge and things don’t go as planned. So, let’s dive in…

I truly believe that choosing an executor or trustee is one of those decisions that EITHER people answer “the question” too quickly without too much thought, or people will let it keep them up at night. I mean, regardless of what side you fall on – it’s a big deal. You're basically picking someone to handle everything after you're gone – whether it’s financial in nature, navigating family dynamics, or even just trudging through the legal process – so it’s not an easy gig. I want this episode to give you some practical tips on picking the right person, and then I’m going to share a story or two where the person or entity picked … did not pan out well. Alrighty, so let’s get started…

Tip#1: Start with someone you actually trust

This sounds totally obvious, but you would be surprised how many people get caught up in family politics or feel obligated to pick their oldest kid just because. The person you choose is going to have access to everything—your bank accounts, investment statements, and even that embarrassing collection you never told anyone about. (Why yes, that happens. I served as an Executor for someone, not a family member of anything, once and discovered an interesting collection, to say the least.) They also need to be someone who won't take advantage of the situation or play favorites with your beneficiaries. Think about who in your life has always been straight with you, even when it was uncomfortable. That may be a great starting point.

Beyond trustworthiness, you need someone who is not going to lose important paperwork or miss deadlines. Estate administration can be a very long project and process with the IRS and courts breathing down your neck. If your brother cannot remember to renew his driver's license on time, for example, he is probably not your guy. Look for someone who pays their bills on time, keeps decent records, and does not get overwhelmed by paperwork.

Tip #2: Watch out for red flags

Some choices are just asking for trouble. Anyone who has had serious money problems, legal issues, or addiction struggles should be off the list. This is not the time to give someone a chance to “prove themselves.” Also, if someone seems reluctant when you bring it up, listen to them. Being an Executor or Trustee is a lot of work, and you want someone who is genuinely willing to take it on. The best thing you can do is actually talk to the person before you make it official. Explain what is generally involved, ask if they are up for it and make sure they understand.

Tip #3: Location matters more than you think

Here is something most people do not consider: your executor is going to spend a lot of time running around town handling your business. They will need to visit banks, meet with lawyers, possibly deal with your house or other property. If you pick your favorite niece who lives three states away, she may rack up travel expenses (paid by your estate, by the way). That said, location is not everything either. Sometimes the best person for the job just happens to live out of state, and that's okay.

For example, my own dad served as my grandfather's executor in a neighboring state—sure, he spent time driving back and forth, dealing with the house, meeting with the attorney, but he made it work because he was the right choice. The key is being realistic about what you're asking of someone. If your out-of-state pick is organized, committed, and has the time to make multiple trips, the distance is manageable. But if they're already juggling a demanding job and young kids, adding a six-hour drive to every estate task might be too much. The bottom line is to factor in location, but don't let it override everything else.  

Tip# 4: Family vs. professionals—It depends!

A lot of people assume they should pick a family member, and a lot of time that works great. But as we know, sometimes family comes with baggage. What if your kids do not get along? What if the one you pick is going through a messy divorce when you die? Sometimes a bank or professional trustee is worth considering; sure, it comes with an extra cost, but they do not have emotional skin in the game. They're not going to get into fights with your beneficiaries or make decisions based on old family grudges. Here's the catch though: professional services, whether it is a bank or corporate fiduciary serving as Executor or Trustee, are not cheap, and they are not always available. In fact, they typically want to see estates worth a specific minimum before they will consider taking on the job—smaller estates just are not worth their time and eventual expense to the estate.

Now, to really bring some of this home, I want to share some examples of where I’ve seen “real life” things play out …. where the Executor selected was probably inappropriate or where a bank, who was appointed, ended up kind of saying, “Nah, we do not want to do this!” which is fine, but left the family in a bit of a pickle.

Here’s the first story involving selecting the likely-wrong person to serve as Executor and Trustee…

We have William here, and William thought he was being kind when he appointed his niece, Sally, as Executor and Trustee of his estate. Sally had been living in his house for over twenty years, unemployed and financially dependent on him, so he figured giving her this role … since she lived there, made sense. What William did not anticipate was how Sally would interpret "reasonable compensation." After his death, Sally's attorney explained to her how Executor and Trustee fees are typically determine. But Sally had bigger plans—she decided she deserved a large compensation, which ended up being approximately nearly four times what a professional would charge serving as an Executor and Trustee, reasoning that she'd been "caring for Uncle William" all those years and this was her payback time.

Despite her attorney's strong warnings that this compensation was excessive and legally problematic, Sally went ahead and paid herself the inflated fees. The other beneficiaries—William's other nieces and nephews—were already suspicious of Sally's financial management, and when they discovered the outrageous compensation she was taking, they hired their own lawyer and sued her for breach of fiduciary duty. The court did not just order Sally to repay the excess fees; they removed her as Executor and Trustee entirely and ordered her to cover the legal costs for both sides. What should have been a straightforward estate administration turned into a two-year legal battle that cost the estate a lot in attorney fees, all because William chose sentiment over practicality when picking his Executor and Trustee.

Now here’s the second story involving a bank…

Peggy had done everything right—she had created a solid estate plan with a friend as her primary Power of Attorney, Executor, and Trustee, and designated a major national bank as the backup. When Peggy developed dementia and moved to a nursing home, her friend, who was the primary Power of Attorney, Executor, and Trustee, unexpectedly passed away, leaving the bank next in line to take over. So, Peggy’s sister, Nancy, contacted the bank, explained the situation, and waited for them to step up. After weeks of runaround and getting transferred between different representatives, the bank finally delivered their verdict: Peggy's estate was not worth their time. The fancy words they used was that it was "not economically efficient" to serve in those roles for Peggy’s plan. The kicker? Peggy's estate was worth over $2 million. Apparently even that was not enough to make it worth the bank's while. This left the family in a terrible spot—bills were piling up unpaid, including the nursing home fees, because no one had legal authority to access Peggy's accounts. Nancy had to go through an expensive and time-consuming court process to get appointed as Peggy’s Guardian, then ask the Court to designate her also as Peggy’s Trustee, which involved multiple hearings and legal fees that came out of Peggy's assets. All of this could have been avoided if the bank had simply honored their commitment.

You know … as we start to wrap up this episode, the bottom line is that choosing an Executor and Trustee is not a decision you should make lightly or based purely on emotion. Whether you go with a family member, a friend, or a professional, you need to think practically about their abilities, availability, and willingness to actually do the job. As William's story shows, picking someone out of kindness or obligation can backfire spectacularly when they're not equipped for the responsibility. And as Peggy's situation demonstrates, even seemingly reliable institutions can leave you hanging when it doesn't suit their bottom line. The best approach is to have honest conversations with potential candidates, understand what the role actually involves, and maybe most importantly, have a solid backup plan. Getting the choice right … and making sure the choice stays current (as things change) is the name of the game, friends.

Alrighty, let’s shift to a sneak peak of next week, which we’re circling back to the “current trends” topic where we talk about things that are going on currently that impact my estate and elder law world – or maybe, things that I have stumbled upon on the news or social media that is relevant to this podcast. Next week, we are going to explore estate planning strategies for people with non-traditional family structures, which are becoming increasingly common in today's society. It covers alternative approaches to creating estate plans when you don't have children, including various beneficiary options and creative legacy planning strategies. The focus includes which professional experts to consult and how to structure plans that reflect modern family realities beyond typical inheritance patterns. So, that’s what next week will be about, Legal Tea Listeners, so until then, be well and talk soon!

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