Naming a Beneficiary as Executor or Trustee… Good or Bad?

For many, the question of who will handle their probate or trust estate after they pass away is easy to answer: it’s typically someone close to them… probably a family member, and more often than not, an adult child. However, in this scenario, the executor or trustee is almost always a beneficiary too. Isn’t that a conflict of interest? 

Technically, yes. But keep in mind that the executor or trustee has a legal obligation to administer your assets in the best interest of the beneficiaries. This means that while the executor/trustee should approach the job with sensitivity, he or she must also act in a fair and direct manner toward each beneficiary. In many situations, the interests of the executor/trustee are aligned with the beneficiaries, even if the individual sits on “both sides” of the transaction. Many of our clients’ adult children are capable of handling a probate or trust estate without letting their own personal interests getting in the way. Even with that being said, the best way to avoid an actual (if not technical) conflict is to provide as much direction as possible in your estate plan. This will provide clarity and reduce the amount of discretion that an executor or trustee might be asked to exercise. It will also provide a good roadmap, making the journey easier for the person you left in charge. 

While a lot is asked of an executor or trustee to keep emotions out of the job, being a beneficiary of an estate is inherently tied to emotions — the beneficiary has lost someone close to him or her. Even those beneficiaries who are unconcerned with the dollar part of the inheritance will likely be emotionally invested in a number of things: 1) family heirlooms and other items of tangible personal property that have sentimental value; 2) honoring mom or dad’s wishes; and 3) making sure the trust or estate doesn’t take too long to settle. Unfortunately, many family disputes are sparked when siblings can’t agree on who gets sentimental items, or if they feel as though the executor or trustee isn’t doing the job as quickly or in a way that mom or dad would have wanted.

This possibility of disputes is why adding as much instruction and information as possible to the terms of your Last Will & Testament or Trust is so important. The more you give in your plan, the lower the odds that the executor/or trustee will be tempted to take advantage of their position or get lost not knowing what to do. Making sure your family is aligned with qualified legal counsel can help in this as well. 

However, many of our clients also see the possibility (not necessarily probability) of a dispute or hard feelings on the horizon, and they enlist a disinterested party (such as an attorney, advisor, or bank) as a trustee/executor or co-trustee/co-executor, to ensure no conflict of interest or to provide checks and balances throughout the administration process. Adding an independent party to the mix also provides cover for a family member who might otherwise be making decisions alone.

Even beneficiaries currently serving in these roles have options to reduce risk, responsibility, and family tension, such as:

  • Engage a probate or trust attorney to mediate or oversee the process;
  • Involve an impartial appraiser if valuable assets are involved, such as real estate, jewelry, and collectibles;
  • Step down and hand the role over to a qualified and disinterested party, or name that party as a co-fiduciary if the Will or Trust allows.

We know that many of these decisions seem easy on the surface, but can get complicated if we dig a little deeper. Don’t make assumptions about your family dynamics. It’s not to say that naming a beneficiary as executor or trustee is wrong, but there are other planning tools we use in our estate plans to keep the peace, with clear and thoughtful instructions being the most valuable among them.

If you are concerned about naming a beneficiary as your executor or trustee and are looking for some “outside the box” solutions, we can help! Or if you’re an executor or trustee facing challenges with your family right now, there are ways that a good legal team can ease some of that burden. Just give us a call to connect with one of our attorneys. Let’s Talk!

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