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Questions to Ask When You Select a Professional Executor or Trustee

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Although most people choose friends or family members to be executors of their estates and trustees of their trusts, some opt to pay a professional—whether it’s a bank or trust company…an attorney…or another type of financial professional—to fill these roles.

If you hire a bank or trust company to serve as executor or trustee, ask…

What’s your fee? Generally, for an executor, there is a onetime fee that ranges from 2% to 5% of the value of probate assets, but this varies greatly from state to state. For trustees, 1% to 1.5% of the value of trust assets is a typical annual fee. If the answer is anything 2% or above, you likely can do better elsewhere.

How often are accounting reports provided? Quarterly is typical, and monthly is even better. Semiannually is less than ideal. If the answer is annually, choose a different bank or trust company—too much can happen between reports when they are separated by 12 months.

What’s the rate of personnel turnover among the trust officers/account managers here? You’re hiring a bank or trust company, but you and your heirs are primarily working with one individual—the trust officer or account manager assigned to you. If you’re told trust officers or account managers typically stick around less than five years, consider it a strike against this organization—the frequent turnover could be disruptive for you or your heirs. Follow up question: Who could I talk to about my trust or estate if the person assigned to my account were on vacation? You should be told that the trust officer has an assistant…or that a second trust officer will be familiar enough with your account to step in when necessary. It’s another strike against the organization if you’re told, “It’s best to wait for the person assigned to you to return.” One of the advantages of hiring a bank or trust company is supposed to be that there’s a team of people who can help you when needed.

Who will make investment decisions for my trust or estate? A large bank or trust company should have an “investment group” to handle this, and this group should be led by someone who has extensive experience as a professional investor. But at a small bank, the trust officer/account manager himself might handle the investments. If that’s the case, choose a different company—if you’re paying for professional management, your assets should be under the supervision of an experienced investment manager. Follow up question: What is the performance of your accounts? The bank or trust company should be able to cite an annualized average return for the assets under its care. Compare the five- and 10-year returns compiled by several banks or trust companies to make sure the one you select is producing competitive returns.

How much experience do you have with [name the most unusual asset or heir situation in your estate or trust]? If there’s a small business in your estate or trust, select an executor or trustee who has managed or sold small businesses before. If you have a valuable art collection that will need to be sold, select someone who has sold art collections before. If one of your heirs has special needs, select someone who has experience managing special needs trusts—this type of trust is especially complex.

If you hire an attorney, accountant, financial planner or other independent financial professional to serve as executor or trustee, ask…

Do you have errors and omissions insurance? If this person mismanages your trust or estate, having “E&O” insurance increases the odds that your heirs will be able to recover any money that’s lost. But beyond this, a financial professional who does not have E&O insurance has left himself at great financial risk—and if this person is not taking prudent steps to protect his own assets, can you really trust him to safeguard yours? Don’t work with someone who does not have this coverage.

How much experience do you have as a fiduciary? What percentage of your practice is devoted to fiduciary services? How many estate and trustee clients do you have? A financial professional who has limited experience in this role might not be your best choice. It’s best to choose someone who has been doing this for at least a decade and who has at least a handful of current estate and trust clients.

Who else do you regularly work with in the local financial community? It’s a good sign if this person lists financial professionals who are well-regarded locally. If you do not know the names he mentions, ask other local financial pros what they think of these people, and use a search engine to see if you can find anything about them online, either positive or negative.

How much do you expect your services to cost my trust or estate? Typically, financial pros charge their standard hourly rates for these services. But if they are unwilling to estimate how much that might be per year—or their estimate is well above 1.5% of assets under management per year—a bank or trust company might be your better option.

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Source: Douglas Wilson, CFP, CTFA, who counsels executors and trustees through his Honolulu-based company, Trustee Consulting, LLC. He is former senior vice president of First Hawaiian Bank’s client financial services division and author of The Everything Executor and Trustee Book.
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