I had a consultation this week with a couple who each had minor children from a prior relationship; they also had substantial assets. Often, the most disconcerting discussion for any couple is who should be named as Guardian of the children should something happen to both of them. However, we entered into a long and deep conversation about the proper Executor as well.
First off, know that I make things more difficult because I typically request they provide me with three persons to be named in serial order of succession. So, for instance, if something happens (e.g. death, incapacity, mere unwillingness) to the first pick, I want a successor already named. And likewise for the second.
This couple rightly considered things like financial and accounting ability, strength of resolve to do the right things, understanding of their desires and wishes.
According to Stuart C. Bear, partner, shareholder and the president of Chestnut Cambronne in Minneapolis:
Fiduciary selection “shouldn’t be as straightforward as asking the client who he or she wants to nominate as his or her fiduciaries.”
You would weigh the benefits of using a trusted person the family knows well versus a neutral third party that won’t be swayed by emotions.
Bear suggests the following points of discussion:
- The skill set necessary for each particular role (i.e., an executor should be business savvy and organized—for example, rather than merely putting a property on the market, needs to know to consult a realtor and consider best timing to list the property).
- The burden on the selected fiduciaries of fulfilling their duties.
- The fact that the main representative may not have a duty to act, and doesn’t formally have to decline to act, in certain roles (i.e., a health care agent).
- Speaking to a purported representative and seeing if he’s willing to act in the proposed role.
- Stepping outside the bounds of family construct—Clients tend to think about fairness and often default to the birth order of their children, but the logical candidate to handle matters needs to be a strong advocate.
Bear asks his clients a series of probing questions to better understand the family dynamics, including:
- Do the children get along? If they get along, how often do they see each other? (Do they have a relationship outside of family functions organized by the parents?)
- Do the children get along with each other’s spouses? Do the spouses get along?
- Are the children capable of working together?
- How would a child react if one child was chosen over the other?
- Are the children in similar financial situation?
- Do they have time and capacity to fulfill the responsibilities?
- Do they have the financial and personal skills required for the role?
- Is there a business partner or family member who children respect who might be a better fit?
