In reviewing your will, take special care in naming the executor - and think twice before appointing your spouse. Such an appointment does have the advantage of saving a professional executor's commission (usually 2 to 3% of the net estate) . Frankly, though, it can prove to be folly - unless your wife or husband is as capable as you are of managing your property and investments. The job of executor is no sinecure that should be assigned for sentimental reasons.
This rule applies even if your will provides for a trust, with a professional named to oversee your assets for the benefit of the heirs. A trustee, however skilled, must wait in the wings until the estate has been settled. And with a reasonably complex estate, settlement can take a good year or two, often longer. During this period, the executor is totally in charge. Even though there will likely be an solicitor for the estate, he will lack real authority. And a lot can happen to an investment portfolio in a two-year span.
Happily, there are some alternatives to consider. You can name the family solicitor as co-executor, alongside your spouse. This puts the solicitor in a stronger position to protect your family's best interests until the trustee takes over. And by entitling him to the executor's fee, it gives him reasonable compensation for his efforts. Or you can appoint a bank or trust company, or other investment professional, to serve as executor as well as eventual trustee. A corporate executorship, of course, can't be interrupted by death of the trustee. You can name your solicitor co-executor along with the bank, if you want - though this would mean a fee of 2 to 3% for each.
A third way to get around the problem - but one to weigh carefully - is to provide in your will that your executor should (with court approval) turn over part of the estate's assets, say 50%, to the trustee sooner than normal. This is something to work out in detail with your solicitor.
Misconceptions about an executor's duties lead to many mixups - and poor appointments. The executor has two main functions: to collect, account for, and then distribute the assets of the estate; and, at the same time, to see that all debts are paid - including taxes. This often means selling assets to meet the tax bill. Usually this involves selecting the proper stocks out of a portfolio - clearly no job for a novice. No matter whom you pick as an executor, however, he should be informed in advance - and he should agree to the appointment. In addition, he should be fully acquainted with the ins and outs of managing your investments. If he doesn't merit this full confidence, don't name him.
A guardian for your child - and a trustee, too
It isn't always enough just to name a guardian for your children in your will. Especially if you'll be leaving a substantial estate, you probably ought to consider creating a trust, with a skilled trustee, to manage the property - instead of naming a guardian for this task. You still would have a personal guardian, of course, to look after the youngsters themselves. This arrangement has at least two important advantages:
A trustee can be given as much discretion in handling investments as you see fit. A guardian of a minor's property, by contrast, is hamstrung by state laws. Among other things, he has limited financial authority - and usually can put money only into highly conservative channels.
A trustee can continue to manage the property for as long as you specify. But a guardian automatically loses his authority the day the child turns 21.
Just about the only possible drawback is the cost of professional trusteeship. With a bank or trust company handling the portfolio, however, this comes to less than 1% a year.
Of course, it's as important as ever to name a personal guardian. If you fail to do so, a court might have to appoint one. Don't assume that your executor will become guardian - unless you say so in your will - or that some unwritten understanding with a favourite relative will necessarily hold up. Other members of the family - or even the child himself, if he's 14 or over - might overturn the agreement. The guardian doesn't have to be a relative, as many people suppose. He might be a trusted friend of the family. No one can challenge your choice except by upsetting your entire will - which is most unlikely. If you need to change your will to take care of a guardianship, it can be handled by a codicil. It might be wise for you and your wife to make the change in both your wills at the same time. And remember to name an alternate guardian.
A personal guardian who has been appointed by the court has a great deal of freedom in caring for a child. When you name your own guardian, though, you can make your views clear - in your will if you wish. You can be as specific as suggesting a church, sixth form college (if there is an option), or school. These directions, however, place the guardian only under a moral obligation - not a legal one. A court isn't apt to interfere with differing decisions by a guardian - except on the question of a child's religious training.
Legal marriage of a ward under 18, incidentally, ends all aspects of personal guardianship, at least in the eyes of the law.
Before appointing a guardian, you should, of course, obtain his agreement. And if you're naming both a personal guardian and a property trustee, make sure that they, in turn, agree to cooperate.
At the same time, check on the fine print in your will - assuming you have one. Here are some points for review:
The so-called "simultaneous death clause" in a will can be important for children in the family. This applies to an accident in which both husband and wife lose their lives. In such cases, the heirs under most state laws lose the benefit of the marital deduction - which allows 50% of a man's estate to pass to his wife tax-free. There's a way to hang on to this deduction, however, even in the case of simultaneous death. Make sure your will contains a clause specifying that in a common disaster, it shall be presumed that your wife survived you.
How much money might... see: Time To Check The Clauses' In Your Will