One of the more important decisions you will face when it comes to creating your estate plan and deciding exactly how your money, assets and basically any element of your estate are going to be handled rests in who you choose as your power of attorney, trustee or executor. My law professor, Gerry Beyer, who inspired me to become an estate planning attorney, said, “Being an executor is like doing drugs, just say no!” Always realize the person who you pick to be your executor will work many hours with little to no appreciation for their work. Most executors are not paid. This person will ultimately be acting on your behalf. They will make the decisions for the estate; they will address relevant legal, medical and financial matters, and in the end, the proverbial buck will stop with them. You are, therefore, in essence, choosing that person you want as your voice when you pass or, in other words, that person who will dictate how, when and under what circumstances the estate gets distributed and managed. Therefore, you really want to spend some time on this decision.
This choice is compounded with the issues of a changing society. For almost all of human existence, family lived relatively close. With modern technology, we have been able to move farther apart but remain connected. Many of my clients are moving in from different locations around the country. A child may reside in California, a parent in Missouri, and a grandparent in New Jersey. This dynamic creates problems in choosing a power of attorney or an executor. How can your child really assist you with the paying of your bills? It is possible, but is it practical? What about being your medical power of attorney?
This situation can become even more complex when dealing with immigrants. I have many clients of Asian descent whose entire family resides overseas. Many desire their family be the guardians for their minor children upon their death. I often explain that a U.S. citizen child will not be allowed to leave the country if both parents have passed away. With deportation on the rise, this situation becomes even more complex because illegal immigrants have a lifetime ban from entering the country, but the children cannot be deported. Under the law, judges struggle to know what to do when a person has been deported. Does the judge send the child outside of the country to be with her parent? Is the child placed in foster care?
On another note, leading with your heart when choosing someone to handle your affairs may not necessarily be the best course of action. You may love your children, and in an affirming gesture for example, you might opt to make your oldest the executor of your estate. This is after all the traditional route in many families. The oldest child is entrusted with preserving the familial legacy, with looking out for their younger siblings, and with handling the relevant financial and legal matters attached to the parents’ wills and estates. But, the decision of naming the person to act on your behalf as agent or even as executor needs to be about more than just sentiment and it needs to be about more than what is the ‘customary’ thing to do. Another problem arises when you name co-agents. Some think they have to name all of their children in order to be fair. If you do name co-agents, then all of the agents either have to act together or they can act alone. If they must act together, simple financial transactions may end up taking weeks as not only must all agree, but they must all sign. If they can act solo, then it is possible 2 different agents pay the same bill or the bank account gets overdrawn. There may be solid reasons to name co-agents, but fairness to the children should not be the reason.
Compare naming an agent or executor to that of choosing your financial advisor. Many people will spend years looking for a financial advisor, only to be disappointed a few months later. Usually, these individuals are professionals who spend a significant portion of their lives helping individuals with their estates. A power of attorney will have more power than a financial advisor. Think about that. A power of attorney has full discretion over all of your assets, unlike a financial advisor whose discretionary authority is usually only granted over certain investments.
Here's a prime example of how choosing an executor based simply upon “expected” protocol can turn disastrous.
To the Oldest Go the Spoils
“Fortune knocks at every man's door once in a lifetime, but in a good many cases the man is in a neighboring saloon and does not hear her." – Mark Twain
Although the particular facts and circumstances vary, the result of this story is very common in my practice. Barbara had recently lost her father from a battle with colon cancer. Her older brother, the executor of the estate, was entrusted with all of the assets, finances and property. After he had received letters testamentary, there was a mandatory sixty day waiting period for a notice to creditors before any such assets could be distributed in accordance with the Texas Estate Code. The sixty days came and went. My client heard nothing from her brother and any attempts to contact him sadly went unanswered. A letter which insisted that he send over the estate’s accounting was sent, and still nothing. Knowing a bit about the probate process and how simple it is for an executor to steal money, I had my suspicions that this may be the case. Although, hoping I was wrong; tragically, however, I was not.
Thereafter, we filed a motion to have him removed as executor. Since he failed to show up for the hearing, the son was relieved of his duties and my client was then appointed executor in his stead. She took possession of her father’s bank accounts only to discover that the entirety of the estate, all of funds in his accounts, were gone. All told, approximately $500,000 was missing. The brother had gambled it away and ran off with the remainder of his family’s inheritance.
The parents in this scenario knew their son’s history; they knew that he could not handle money and that his penchant for gambling more often than not superseded his sense of fiscal responsibility. So why did they choose him? Why did they leave their estate vulnerable to the types of problems that are inevitably going to arise when entrusting large sums of money to a person with a gambling addiction? Was it because he was the oldest? Because he was the male heir? I thought about this question for quite some time, and I thought about the fact that in their haste to align with traditional expectations regarding who the power of attorney should be, they ultimately made the Winstar Casino much wealthier.
Often when I tell this story, people want to hear that the Court could punish this man for what he did. My client chose not to pursue her brother. She knew all that would happen was that he might end up in jail and he had no money to repay it. At one time, I relayed a story like this to a probate judge of 14 years. He told me at the beginning of his career situations like this made him angry and, as a result, he would punish the executor. However, as years passed, he realized that these individuals were put into a position they could not handle. He said that it almost always begins with the executor “borrowing” the money. The judge told me that the executor always intends to pay it back, but then he gets too far down the road and cannot.
In this situation, the parents hold some of the blame for not taking the time to consider the fact that their son did not possess the experience and character to be an executor.
At the forefront of the executor question must be this issue of trust. Who do you know that you can trust to handle the responsibility that comes along with managing your estate. The trust required is not trust that the person loves you, but trust in the actual ability to handle financial affairs. You may love your son or daughter with all your heart, but does this make them the best person for the job?
This begs the question then: What should you look for when choosing that executor or trustee for your estate? It is not that complicated. Look at the person, examine their history, and evaluate their current financial situation. For instance, have they had the opportunity to handle large sums of money in their life? This is an extremely important consideration. If they haven’t, and you suddenly leave them to manage hundreds of thousands of dollars, do you think that they will be qualified to carry out the job as needed? Or are you merely setting them up to fail?
Over the years at our office, we have determined that one out of four executors make a significant financial error that if charged with embezzlement under the Texas Penal Code would result in a finding of guilt. A client of mine was appointed an Executor of an estate worth well over three million dollars. His grandmother had picked him to handle her affairs. After signing the oath and wrapping up the estate, the Executor informed us that he notified the other beneficiaries and sent them their money. Two years later, the Judge over the case called me. He had found out that the money was not distributed. My client came to my office very apologetic that he lied. He had taken the money to pay for his medical procedures. After using the money for medical he justified himself in purchasing a million-dollar home, a F-350, and many other expensive items. After collecting all the assets, we had just enough to pay the other heirs what they were due. The Judge did not charge him with a crime but he was left with almost nothing. His grandmother never considered the facts that he had never handled significant assets and had a medical situation he could not afford.
Look at their income and debt. Determine if they have defaulted on any loans in their adult life. Please remember that excluding your child as a potential candidate doesn’t make you cold-hearted, nor does it mean that you love your children any less; it just means that you are watching out for your entire family as you make the best choice in terms of the preservation of your estate. Think of it as a job search. You are the CEO; you are consequently seeking the most qualified candidate to handle extremely important legal and financial matters for your organization. Would you pick the person who walks into your office with a resume hand scrawled on a sheet of paper, who comes in knowing virtually nothing about your business, but who says I am a very nice and friendly person, that’s why you should pick me. Or do you choose the candidate who comes in with an impressive portfolio, is well-versed on the nuances of your company, has questions prepared and possesses a resume that exhibits his/her repeated successes when it comes to your business sector?
Color Chart Considerations
“Once you show someone your true colors it is impossible to paint
- Matshona Dhliwayo
You may be wondering what exactly does color have to do with who you choose as your power of attorney, executor or trustee. Used frequently by corporate America, the color personality test often helps businesses gain a more comprehensive picture of character traits which in turn allows them to better facilitate working relationships, environmental interactions and the client-employee dynamic. It’s simply a way to gauge people in order to understand how they work, who they are and what types of characteristics they are apt to display in a given situation. Transfer this to the estate planning world and you have a very helpful way of looking at potential executors.
When reviewing these types of decisions with clients, I always like to refer them to the color personality test. This is by no means an all-inclusive measure of a person’s character, but it is a means of more effectively understanding their tendencies and thus, what they may be apt to do if given control of your estate.
Red Personality: The Leader of the Pack
Red personalities tend to be more aggressive than other colors. Their modus operandi is generally aligned with getting things done, taking charge of a given situation and persevering despite emotional conflict or sentimental ties. For the red personality, it’s all about energy, drive and getting down to business. Now, does this make a typically red person a good fit in terms of an executor role? In my experience, this really depends.
With the reds, it can usually go one of two ways. If that person is a red personality and an incredibly honest and forthright person, this combination may produce an executor who can well handle the matters of your estate. However, on the flip side of that coin, if the red person in question tends toward dishonesty, this could spell disaster, cause massive amounts of fighting amongst your heirs, and ultimately leave your estate in shambles. Always remember that one of the primary reasons to do posterity planning is so your children get along after you are gone.
Blue Personality: The Nice Guy/Gal
Simply put, blues are people pleasers. They thrive on being “nice” and having people perceive them as such. However, contrarily, they don’t necessarily like interacting with others. That’s not to say they dislike people in general; that’s just to say that the ultra-introverted personality of the blue person tends to compel them to keep to themselves. They are also incredibly focused when it comes to things like paperwork, bookkeeping and administrative duties.
If you happen to have a blue in mind for executor, trustee and/or agent for your financial power of attorney, I say go for it. They generally are very competent when it comes to estate related responsibilities and as they do try to stay on people’s good sides, the process often results in a highly amicable outcome. However, be aware of a blue with depression problems. Also, you do not want to put too much burden upon a person who is a constant people pleaser. Finally, a blue must have enough willpower so as not to be persuaded to act unethically in order to please another beneficiary.
Green Personality: Ready to Manage
With green personalities, you often get a bit of an enigma. Very much introverts, the greens aren’t as focused on pleasing others, but, instead, more so on getting the task at hand done. Feelings and emotions are generally pushed aside, as the green guy or girl forges ahead and tends to business.
As far as the green person’s aptitude when it comes to your estate planning needs—they usually are a great choice. Their focus is on the details, the practicalities and the responsibilities associated with the estate and its beneficiaries and not so much on placating people or tiptoeing around feelings.
Yellow Personality: Life of the Party
Here you have the quintessential extrovert of the group, (s)he who loves to get people together, to have fun, to celebrate life. This, of course, is in no way a bad trait. However, when it comes to your estate, yellow may not be the smartest choice. Because they are “live in the now” type people, their ability to focus on work and get the requisite tasks done isn’t always the best.
Naming a yellow as your trustee, executor or agent for the financial power of attorney is usually not be the smartest move. Perhaps, it’s best to leave them to cheer up those left behind and to be the flag bearers for celebrating your life and legacy.
 Gerry W. Beyer joined the faculty of the Texas Tech University School of Law in June 2005 as the first holder of the Governor Preston E. Smith Regents Professorship.