Trustees and Executors: 4 Valuable Tips You Need to Know

August 2nd, 2022 by Jim Allen


You have been named as a trustee or executor/conservator of a loved one’s estate due to their death or possibly some incapacity like dementia. What do you do now?

Serving as a “fiduciary” for someone’s person or finances is a very large job and carries with it a lot of responsibility, and also potential liability. Whether you are the successor trustee of a living trust, an executor of an estate, a financial power of attorney holder, or a conservator – you have a big, complex job ahead of you.

What does it mean to be a fiduciary? A fiduciary is an individual or entity (like a bank or trust company) that is designated in various documents to act in the best interests of the person being supported. For a living trust it is the beneficiaries of the trust, for a deceased person it is the person’s estate, and for a conservator it is acting as a surrogate for the person themselves. Fiduciaries are required to serve in a competent, trusted and confidential manner and must always act in the best interest of the people being supported.

Common tasks of a trustee, executor or conservator include:

  • Financial management of the assets and income
  • Opening & closing accounts
  • Paying all bills, debts and expenses
  • Filing tax returns, legal and other documents
  • Protecting and preserving the assets
  • Making health care, housing, public benefits and other decisions
  • Liquidating property & distributing assets to beneficiaries

It is very common for people to just name a friend or family member as the fiduciary in their estate documents. I don’t think they ever realize the responsibility and burden they are placing on the people they are naming. Often it boils down to naming an oldest child or the one that lives closest too them without any thought as to the ability and capacity for the person to be able to perform the role.

If you are currently serving or have been named as a fiduciary in an estate plan, here are some tips to help the process go more smoothly and make you more successful:

Make sure all the assets are correctly titled

This is something that should be in place before it is needed. One of the biggest mistakes we see in estate plans is a living trust is created but then the assets are not transferred to it. I am currently serving as trustee for a case where several bank accounts and the personal property were not retitled in the name of the trust. This means that all these assets had to be probated, which delayed the process by several months, not to mention the substantial cost of the probate fees. To avoid this, the home, other real estate, personal property, bank and investment accounts all should be retitled in the name of the trust. Once a person passes away, it is too late, as anything not in the trust becomes part of the probate estate. Beneficiary designations for life insurance, retirement plans and annuities should also be reviewed to see if they should be updated to the trust.

Outsource all duties for which you are not qualified

There are several duties of a fiduciary that may be beyond your expertise. For example, conservator or probate forms may need to be filed with the court which should be done by an estate attorney. Both an estate and a trust will need to get new tax ID numbers and will need to file tax returns, which may require a tax professional like an enrolled agent or CPA. For a conservator or power of attorney, you may need to consult with elder care attorneys or health care professionals.

Finally, the fiduciary is responsible for protecting and preserving the estate or trust which means that all investments must be “prudent” for the situation. Making inappropriate investment choices can subject the fiduciary to liability for their choices and open them up to potential lawsuit. For this reason, using a professional investment manager is well worth the cost.

Be sure to consider taxes in your financial decisions

Before selling any assets, make sure to evaluate the tax consequences of doing so. For example, say you have an elderly parent that has owned their home for 40 years and has significant capital built up. They are now terminally ill and people are telling you to sell the home now while the market is “hot.” If you take this advice, you could trigger several hundred thousand dollars of capital gains tax. However, if you hold the home until the parent passes away, the estate gets a “stepped-up cost basis” and the tax can be avoided. The situation is similar for investments like stocks and mutual funds. Don’t rush into selling things without first consulting with a tax professional about the ramifications.

Communicate and document everything

As the fiduciary, you are responsible for acting in the best interests of the beneficiaries. This is very subjective, so the best thing you can do is to constantly communicate why you are taking the actions you are – and to document everything. Keep detailed notes, make sure to keep detailed banking records and use paper copies whenever possible. Make sure you are reporting back to the beneficiaries (or the court if required), and maintain a checklist of items that need to be done so nothing falls through the cracks.

As you can see, serving as a fiduciary can be very complex and isn’t for everyone. If you are going to serve as trustee, make sure to put together your “support team” of professionals. If you feel you aren’t quite up to the task, then maybe the smart choice would be to use a professional fiduciary like Anchor Bay.

Here at Anchor Bay, we provide a full suite of fiduciary services including:

  • Serving as trustee, executor or conservator
  • Providing support services like filing returns, bill paying, tax analysis & working with your probate attorney
  • Providing fiduciary investment management services

If you would like to discuss our full fiduciary services, please contact us for a complementary, no-obligation consultation.

Jim Allen, CFP, ChFC, EA, CDFA is President and Chief Financial Planner at Anchor Bay Capital. In addition to his 35+ years of financial planning experience and his professional credentials, he holds a master’s degree in Financial Planning and is a former instructor in the CFP program at the University of California Irvine. He is also the co-author of the book “The Tools & Techniques of Charitable Planning.” Jim can be reached at [email protected]