Selecting an executor for your estate is an important decision with long-lasting implications. Naming your financial advisor as executor could make sense in some situations. In this guide, we’ll analyze the pros and cons of having your financial advisor serve as executor.
What Does an Executor Do?
An executor is the person appointed to administer and distribute your estate upon your death based on the instructions in your will. Executor duties include:
- Filing court papers to probate the will
- Handling payment of debts and taxes
- Communicating with beneficiaries
- Distributing assets per the will
- Closing accounts, canceling services, etc.
This complex financial and administrative role requires time, diligence and often professional expertise.
Why Choose a Financial Advisor as Executor?
Naming your financial advisor as executor has some potential benefits:
- Familiarity with finances – They already know your accounts, assets, liabilities, etc.
- Investment expertise – Can prudently manage portfolio or asset liquidations.
- Bill payment – Experience handling finances helps settle debts.
- Impartiality – Less emotionally invested than family.
- Efficiency – Professionals can act faster and wrap up estates quicker.
However, not all advisors may be suited or willing to serve as an executor despite these advantages.
Key Factors to Consider for Advisor as Executor
When weighing naming your financial advisor as executor, consider these key factors:
Type of Advisor
Some advisors are better positioned than others to serve effectively as an executor:
- Fee-only fiduciaries avoid commissions and legally must serve the client’s interests.
- CPAs have tax expertise that provides additional value in estate administration and filing final returns.
- Estate attorneys have specialized knowledge on probate court processes and document filings.
Fees Charged
Advisors often charge an hourly fee for executor duties on top of normal financial planning fees. Compare fee structures:
- Attorneys usually have higher hourly rates than financial advisor fees.
- Some advisors may charge a flat executor fee or percentage of estate assets.
- Get fee expectations in writing before naming an advisor as executor.
Experience as Executor
Ideally choose an advisor who has served as an executor before:
- Ask how many times they’ve been appointed executor for other clients.
- Seek advisors who highlight estate administration expertise.
- Review their track record and feedback from families they’ve served.
Availability and Workload
An advisor with a very large client base may be too busy to provide adequate attention. Seek advisors who:
- Have sufficient bandwidth and staff to take on executor duties.
- Will make the estate a priority and act urgently when needed.
Interpersonal Skills
Administering an estate often involves delicate family dynamics. Assess whether your advisor has the temperament and people skills to navigate potentially fraught situations.
Potential Problems With Advisor as Executor
While benefits exist, there are also downsides of naming an advisor as executor:
No impartiality – Advisors may have biases favoring certain beneficiaries over others.
Learning curve – Those without prior executor experience will face a steep learning curve.
Time constraints – Busy advisors may not give sufficient attention to estate settlement.
Low prioritization – An advisor’s own clients tend to get higher priority than serving as an estate executor.
Grieving family tensions – Simmering family conflicts can be exacerbated by an advisor-executor.
These risks highlight the need for thorough vetting before designating your financial advisor as executor.
Alternatives to Naming Your Advisor as Executor
If uncomfortable appointing your financial advisor as executor, common alternatives include:
- Spouse or family member – Usually knows wishes best and has vested interest.
- Attorney – Expertise in legal and court aspects of estate settlement.
- Corporate trustee – Bank trust department serves as professional fiduciary executor for a fee.
- Multiple co-executors – Combines advisor expertise with personal knowledge of family member.
Explore options to determine the best solution for administering your particular estate.
Best Practices for Advisor Serving as Executor
If you do opt to designate your financial advisor as executor, steps to take include:
- Require bonded protection against any malfeasance.
- Do periodic reviews of how they are handling the estate administration.
- Specify exact fees to be charged for executor duties upfront.
- Mandate open communication and responsiveness to all beneficiaries.
- Consider an advisor you have worked with extensively who understands your wishes.
- Provide detailed written instructions on distributing personal/sentimental property.
Exercising diligence both in selecting and overseeing an advisor executor helps ensure problems are avoided.
Financial Advisor as Executor Checklist
When weighing naming a financial advisor as your executor, consider:
- Do they have estate administration expertise and bandwidth to serve quickly?
- Have they demonstrated the ethics and temperament required?
- Is the working relationship long-standing and trusting?
- Can they impartially handle family dynamics?
- Are their fees reasonable and clearly defined?
- Does the advisor fully understand your final wishes?
Vetting advisors on these factors provides clarity on their suitability as executor.
Red Flags When Naming a Financial Advisor Executor
Be cautious naming an advisor with any of these red flags:
- Limited estate administration experience.
- Vague on exact fees to be charged as executor.
- Little existing relationship history.
- Seems distracted or overcommitted.
- Poor communication skills or impatience with questions.
- Pushes you to name them as executor without listening to your priorities.
Clear warning signs exist that an advisor may not be equipped to serve as executor.
When to Change Your Executor
After originally naming an executor in your will, you can make a change if concerns arise like:
- The designated executor passes away before you.
- A long-trusted advisor sells their practice to someone you don’t know.
- You change your opinion of the advisor’s integrity or capabilities.
- An advisor expresses unwillingness or inability to serve as executor.
- A different person demonstrates stronger qualifications.
Don’t hesitate to update your will should better executor options emerge or doubts about an advisor surface.
Advisor Executor vs. Trustee Differences
If using a living trust, naming a trustee differs somewhat from an executor. But many considerations overlap, including:
- Trustee fiduciary duty to serve beneficiaries’ interests
- Investment, tax and distribution expertise needed
- Relationship history and compatibility assessment
- Vetting fees charged and performance expectations
- Balancing impartiality with understanding wishes and family dynamics
The core vetting process for a trustee mirrors that of an executor in most respects.
Using an Advisor Executor With Family Member
Rather than choosing only your financial advisor or only a family member as executor, combining them as co-executors can provide a balance:
Benefits of a co-executor arrangement:
- Family member knows your personal wishes best
- Advisor provides professional investment and administrative expertise
- Shared responsibility reduces burden on each
- Combined impartiality and emotional connection
Challenges to address with co-executors:
- Clear delineation of who handles what duties
- Streamlined coordination and communication
- Mechanism for resolving any disputes
When structured thoughtfully, a co-executor approach can blend an advisor’s strengths with a family member’s personal knowledge.
Should You Designate Your CPA as Executor?
In addition to a financial advisor, some people consider assigning their CPA (certified public accountant) as executor. There are pros and cons:
Potential benefits of using a CPA:
- Expertise in taxes and financial filings.
- Familiarity with your financial records if they prepared your taxes.
- Ability to handle financial transactions smoothly.
Downsides and risks:
- Limited experience navigating family dynamics.
- Not trained in distributions of personal property.
- No investment management expertise.
- CPAs are not regulated as fiduciaries.
While CPAs offer some executor advantages, the limitations noted above may reduce suitability for some estates.
How to Select an Executor if Not Your Financial Advisor
If deciding against using your advisor as executor, alternatives to consider include:
- Family member – Close relative familiar with your wishes.
- Attorney – Legal expertise, especially for complex estates.
- Corporate fiduciary – Bank trust department serves as professional executor.
- Close friend – Someone you trust who can navigate family relationships.
Take time to align on the optimal executor to handle your unique situation and wishes.
Overseeing a Financial Advisor Executor
If you name an advisor as executor, you can provide oversight by:
- Requiring detailed periodic accountings of estate administration activities.
- Establishing expected timelines for closure of estate.
- Mandating open communication channels with beneficiaries.
- Auditing expense receipts for reasonableness.
- Asking direct questions if anything seems unclear or concerning.
Proactively monitoring your advisor executor helps avoid potential problems down the road.
Conclusion: Key Questions to Ask When Considering Advisor as Executor
Selecting your financial advisor as executor or co-executor is a big decision. To make the best choice:
- Carefully assess their qualifications, bandwidth, communication skills and temperament.
- Probe into any estate administration experience and client feedback.
- Clearly establish all fees to be charged.
- Discuss any family relationship dynamics the advisor may need to navigate.
- Align on handling of personal property distribution based on beneficiary sentiments.
- Set expectations for responding promptly and keeping beneficiaries informed.
Asking the right questions allows aligning your advisor’s capabilities with the specific needs of your estate and family situation. This helps ensure your assets are managed prudently following your passing according to your final wishes.
| Factor | Implications |
|---|---|
| Advisor Type | Fiduciary advisors legally obligated to serve client interests make best choice. |
| Fees | Understand all executor fees the advisor will charge. Get in writing. |
| Experience | Prior executor experience is preferred to handle process smoothly. |
| Workload | Assess if advisor has sufficient bandwidth to dedicate ample time. |
| Skills | Advisor must have strong communication skills to deal with grieving beneficiaries. |
| Impartiality | Advisor may show bias towards certain beneficiaries over others. |
| Alternatives | Consider spouse, attorney, corporate trustee, or co-executor options. |
| Best Practices | Require bonded protection, detailed accountings, clear instructions. |
| Red Flags | Limited experience, vague fees, short relationship history, unresponsive. |
| Oversight | Mandate accountings, timelines, open communication channels. |
| Key Questions | Thoroughly vet advisor’s qualifications, bandwidth, fees charged, and family rapport. |