Our last post described some of the important considerations in developing a comprehensive estate plan. Crafting a great estate plan, though, is like building a souped-up race car; the car is useless without the right driver. The “driver” for your estate plan is your personal representative (sometimes called an executor). Without the right personal representative, your estate plan almost certainly won’t meet its objectives.
Your choice of personal representative is one of the most important decisions you will make during estate planning. Serving as a personal representative can be a thankless, burdensome, and challenging job. Not everyone, no matter how well-intentioned or trustworthy, is up to the task.
That is why many, if not most, personal representatives wisely seek help from attorneys, accountants, and other professionals to help them fulfill the myriad responsibilities that come with the role, including:
- Gathering the decedent’s assets and information on beneficiaries.
- Determining debts and other claims against the estate and paying legitimate claims.
- Managing the estate assets.
- Calculating and paying all taxes.
- Distributing the estate to beneficiaries according to your established directions.
Even with plenty of help from the best professionals, the buck ultimately stops with your representative. So, they should have the characteristics – and character – needed to close out your estate legally, efficiently, and in accordance with your wishes as set forth in your plan documents. Here are several things to consider when selecting a personal representative for your estate.
Basic Legal Requirements
Maryland law sets forth the basic legal requirements for a personal representative of a Maryland estate. The representative must generally be a U.S. citizen[1] and must:
- Be at least 18 years of age and mentally competent.
- Not have been convicted of a crime that "reflects adversely on an individual's honesty, trustworthiness, or fitness to perform the duties of a personal representative."
Trust and Integrity
Trust and integrity are first among equals when it comes to the qualities that make for a good representative. This person will have access to your assets, financial records, and sensitive personal information. They should be someone you can count on to handle your assets and sensitive information as you would, who will not waiver from the fiduciary obligation to put your expressed interests and those of your beneficiaries first. A personal representative who cannot meet these threshold requirements will almost certainly lead to costly and disruptive fiduciary litigation and other problems after you're gone.
Impartiality and Fairness
Impartiality and fairness are also non-negotiable for this fiduciary role. If your estate plan involves multiple beneficiaries, especially in a blended family or when siblings have differing interests, the personal representative must be impartial. Choosing a person who can make objective decisions without favoritism is essential to maintaining harmony and fairness in executing your estate.
Time and Availability
Being a personal representative is hardly a set-it-and-forget-it job. No matter how much help they may get from attorneys and others, your representative will usually need to commit substantial time to overseeing and completing the many tasks required of their role. It can take months, sometimes years, to wrap up affairs. Someone who travels frequently, has demanding personal or professional responsibilities, or is otherwise preoccupied with other matters may not be the best choice.
Financial Responsibility and Competence
Handling an estate involves financial management, including paying off debts, filing taxes, and distributing assets to beneficiaries. Your personal representative should be financially responsible and capable of keeping accurate records. While, as noted, they can and should seek the assistance of financial professionals and, therefore, need not be a financial professional themselves, they should be organized and diligent in handling money.
Strong Communication Skills
Your personal representative will need to interact with family members, attorneys, financial institutions, and sometimes the Orphans’ court. They will need to provide accountings and updates, answer questions, and make reports. Strong communication skills are crucial, especially in explaining decisions or addressing potential conflicts among beneficiaries. Miscommunication or unresponsiveness can quickly lead to disputes that can mushroom into litigation.
Location and Accessibility
Maryland does not require a personal representative to be a resident of the state, though a non-resident must appoint a resident agent. Nevertheless, it is often more efficient, cost-effective, and advantageous to have a local representative rather than someone who must fly in to take care of their responsibilities. Certain tasks, such as managing real estate, overseeing or attending court proceedings, or meeting with financial institutions, may require their physical presence. An out-of-state representative can still serve, but proximity is often a substantial advantage.
Familiarity With Your Wishes and a Willingness to Serve
Your personal representative should be ready and willing to serve. You should discuss your estate plans and intentions with them beforehand to ensure they are willing and able to honor your wishes as you envision.
A personal representative is usually a family member or close friend but does not have to be. In fact, an entirely disinterested personal representative may avoid disputes if certain friends or family members might be offended by the selection of a different friend or family member. If you can't find a suitable candidate among your friends and family, you can select a professional executor, such as a lawyer, an accountant, or the trust department of a financial institution.
If you have questions about personal representatives or would like to discuss, prepare, or update an estate plan, please contact Brian Balenson, Dan Katz, or Michael Lentz at Tydings.
[1] A lawful permanent resident can serve as personal representative for a spouse, ancestor, descendant, or sibling.