By Pat Curry • Bankrate.com contributor
Posted Nov. 11, 2002
If you've ever wondered how to get back at someone who's made your life a pain, you might consider making him or her the executor of your will.
Too often, people view being asked to serve as executor as something akin to being a godparent, a largely ceremonial position that is considered an honor. It is anything but, and estate-planning experts say most people who serve as an executor have no idea what they're getting into.
At the very least, it will involve 12 to 18 intensive months of tending to duties that require dealing with heirs, courts and the IRS. At its very worst, it could get you sued.
"I won't do it," says Howard Zaritsky, a former estate attorney and author of Tax Planning for Family Wealth Transfer.
Neither will many financial services professionals because money just brings out the worst in people. Families that have gotten along famously for years suddenly are at each other's throats over dining tables and paintings.
Zaritsky remembers a phone call he once got from a client. The FBI was at his door. Seems his brother was unhappy about something he took home from their parents' house and reported him for crossing state lines with stolen property.
Sherry McGillicuddy, executive vice president for Frost National Bank's financial management group, works as a trust officer and has served as an executor for many estates in her job. She has politely declined several requests from family members to serve as their executor.
"The pure liability of it scares the tar out of me as an individual," says McGillicuddy. "It's a lot of responsibility with lots of places you can make mistakes. You're considered a fiduciary. You can be sued personally if any family member doesn't like what you did. It jeopardizes my own children's inheritance of anything I might have."
If you have been asked, or are considering asking a friend or relative to take on the job, here are some of the tasks that will need to be performed:
Of course, executors do get paid. The fee often is set by state law, but the industry standard is in the neighborhood of 3 percent of the value of the estate.
"Believe me, if you're dealing with a disputed estate, they're earning every penny," Zaritsky says. "And they earn the same amount whether it's disputed or not. No one gets paid enough if it's disputed. People yell and scream, they call you in the middle of the night and on the weekend. You never know someone until you divide an estate with them."
If you're seriously considering taking on this responsibility -- and the experts are unanimous in their advice to hire a professional to do it unless you have a financial, legal and tax background and tons of time to devote to it -- you should do the one thing that hardly anyone does before saying yes. Ask to see the will.
"Well over 90 percent of my clients have not seen the document before the person died," says Jon Gallo, senior partner in estate planning for the law firm of Greenberg, Glusker, Fields, Clayman, Machtinger and Kinsella in Los Angeles. "Even more rarely have they seen a financial statement. They don't know what they're getting into."
Taking a look at the will gives you critical insights, such as whether the person plans to "disinherit" anyone (a lawsuit in the making), if he plans to donate everything to a charity (several lawsuits from unhappy heirs), or if there are substantial assets to manage, such as a business or investment property.
Zaritsky says that just asking to look at the will should tell you a lot about the person, who usually is thinking that by asking a friend or family member, they're going to save a lot of money.
"Say, 'Fine, let's sit down with your attorney and go over it,'" he says. "They'll understand what they're asking you to do, and they'll think, 'Oh hell, they're already spending my money.'"
It also will tell you if the estate is large enough for a bank's trust department to mess with it, or if you're going to get stuck doing it all yourself (after you hire an accountant to file the taxes and an attorney to handle the probate court filings). Some banks won't act as executor of small estates; McGillicuddy's bank charges a flat fee of $3,500 to serve as executor of an estate of less than $500,000. She recommends visiting two or three trust departments to see what they charge.
While you're there, make sure you ask to see their form letters, Zaritsky says. Most disputes relate to heirs who claim they weren't kept informed. Good form letters will take care of that.
If your heart is telling you to say yes, but your head is begging you to run in the other direction, agree to be a co-executor with a bank or a trust company. That way, the bank handles the legwork and you provide guidance on how the deceased would or wouldn't have liked his assets disbursed or his investments managed. For instance, a co-executor could nix an investment in a casino if he knew the deceased strongly opposed gambling.
When everything is said and done, it just makes more sense to tell Cousin Fred to hire a professional who has the right background, is adequately bonded (your state may require it), and can be sued if there's any negligence or funny business.
"People need to look at this as a business and a professional duty, not as an honor," McGillicuddy says. "When money is involved, people go nuts. I've seen the closest knit families get into rifts over small amounts of money. When it's large amounts of money, they just go crazy."
-- Posted: Nov. 11, 2002