Who Do You Trust? Selecting
an Executor or Trustee - A Primer
by James V. Quillinan, Attorney at Law
The Letitia Building
70 South First Street
San Jose, California 95113-2406
Prior Approval. Before naming any fiduciary, the fiduciary shoud be shown a copy of the will or trust and asked if the fiduciary would be willing to serve. It is costly, both in terms of time and money, if the named fiduciary refuses to accept the position after the testator's (trustor's) death. Note that a fiduciary, especially a corporate one, may indicate willingness to accept the position provided you make certain changes to the document. These changes frequently relate to
- clarifying investment and distribution duties and
- including language that exculpates the fiduciary for breaches of duty that are not a result of the fiduciary's bad faith or gross negligence.
Whether to select an individual or a corporate fiduciary is one of the most important threshold decisions that you must make when designating executors and trustees. The decision involves a careful consideration of a variety of factors.
Individual Fiduciary.
Some people may be motivated to select an individual trustee, such as a family member or friend, believing that they are bestowing some sort of honor or privilege. Such is not the case. As one commentator has colorfully explained: "From the trustee's point of view, entering into a trust relationship has some disturbing parallels to acquiring a puppy: initial enthusiasm, followed first by acute awareness that the owner's life is going to be disrupted not only for two weeks of housebreaking but for the foreseeable future, and then by the recognition that the puppy soon will have large teeth and a voracious appetite for everything."
Fiduciary positions are tough and demanding jobs filled with potentially overwhelming responsibilities, duties and exposure to personal liability. The appointment of fiduciaries is a business decision, not an emotional one. An individual should be named as a fiduciary only if that person is well-suited to administering the estate or trust.
Potential benefits. One of the most significant advantages is the individual's willingness to serve without charge. In many cases, individual figuciaries are family members or friends who accept the position out of love and affection rather than to make a profit. Professional trustees such as attorneys, accountants, financial planners, and brokers typically charge a fee on an hourly basis, and corporate trustees usually base their fee on a percentage of the value of estate or trust assets. Because most individual fiduciaries are well-acquainted with the testator or settlor, they have knowledge of the family situation, the testator's or settlor's goals, and the needs and personalities of the beneficiaries. Accordingly, they are in a good position to exercise the "substituted judgment" that the testator or settlor intended.
