Choosing Beneficiaries, Trustees, Executors, and Guardians: What They Are & Why They Matter
When it comes to planning for your family's future, many of us focus on building wealth, investing wisely, and saving for a rainy day. But there's another crucial aspect of financial planning that often gets overlooked—choosing the right people to manage and distribute your wealth when the time comes. Whether you're establishing a will, setting up a trust, or thinking about who will take care of your children if you're not around, the decisions you make today can have a lasting impact on your loved ones.
In this post, we'll break down the key roles you need to consider: beneficiaries, trustees, executors, and guardians. We'll explain what each of these roles entails, why they're important, and how they can affect your family's future.
Beneficiaries: Who Gets What?
What Is A Beneficiary?
A beneficiary is the person or entity you designate to receive assets from your estate, life insurance policy, retirement account, or trust after your death. Think of beneficiaries as the "who" in your financial plan—who will inherit your hard-earned assets?
Why It’s So Important To Keep Your Beneficiaries Up To Date
Choosing the right beneficiaries ensures that your assets are distributed according to your wishes. It helps avoid disputes among family members and ensures that your legacy is preserved in the way you intend. Keep in mind that beneficiaries can be family members, friends, charities, or even organizations that are meaningful to you.
If you don't designate beneficiaries, your assets may be distributed according to state laws, which might not align with your wishes. By selecting your beneficiaries, you maintain control over who receives your assets, potentially avoiding legal battles or unintended outcomes.
Trustees: The Managers of Your Trust
What Is A Trustee?
A trustee is the person or institution you appoint to manage and administer the assets in a trust. They are responsible for ensuring that the assets are handled according to the terms of the trust and for the benefit of the beneficiaries.
Why It’s So Important To Keep Your Trustee(s) Up To Date
The trustee plays a crucial role in the execution of your trust. They oversee the management, investment, and distribution of the trust's assets, ensuring that your beneficiaries receive their inheritance in a manner consistent with your wishes and the law.
Choosing a trustee requires careful consideration. A trustee with financial expertise can help protect and grow your assets for future generations. Additionally, a trustee may receive compensation for their services, which can be outlined in the trust document.
Executors: The Stewards of Your Estate
What Is An Executor?
An executor is the person you name in your will to carry out your final wishes. They are responsible for managing your estate, paying off any debts, and distributing your assets to your beneficiaries according to the terms of your will.
Why It’s So Important To Name An Executor
The executor ensures that your estate is settled efficiently and according to your instructions. This role involves significant responsibility, including filing necessary documents with the court, managing assets, and handling tax obligations.
Choosing an executor you trust is essential. This person will have the authority to make decisions on your behalf, so selecting someone with the capability and integrity to manage these tasks is crucial. Executors can also receive compensation for their time and effort, as allowed by state law or outlined in your will.
Important Note: The role of an estate executor is different from the role of a trustee. An estate executor manages a deceased person’s estate to distribute his or her assets according to the will. A trustee, on the other hand, is responsible for administering a trust which is a legal arrangement in which one or more trustees hold the legal title of the property for the benefit of the beneficiaries. The beneficiaries are the recipients of the trust’s assets. That said, it’s not uncommon for the same individual(s) to be named both trustee and estate executor.
Guardians: Protecting Your Loved Ones
What Is a Guardian?
A guardian is the person or person(s) you choose to care for your minor children or dependents if you are no longer able to do so. This role involves making decisions about their upbringing, education, and overall well-being.
Why It’s So Important To Name An Guardian
The decision to name a guardian is one of the most important you'll make as a parent. Naming a guardian ensures that your children are cared for by someone you trust. Without a designated guardian, the court may appoint someone on your behalf, which may not align with your preferences.
When selecting a guardian, it goes beyond just about financial care; it's about ensuring your children are raised with your values and in an environment you believe is best for them. While guardians typically do not receive financial compensation, they may have access to funds from your estate or trust to cover expenses related to caring for your children.
Why You Should Take Action Now
Planning for the future isn't just about growing your wealth—it's about protecting it and ensuring that it's used in a way that reflects your values and wishes. By carefully selecting beneficiaries, trustees, executors, and guardians, you can have confidence knowing that your legacy will be preserved and your loved ones cared for.
If you haven’t already identified the individual(s) you’d like to serve in these roles, start here. These decisions might seem daunting, but they are essential steps in securing your family's future. And remember, you're not alone in this process - a member of our Entrust Wealth Partners team is always available to help you navigate this process.
Once you have named the individual(s) who will be serving in these roles, it’s equally important to notify them of their designated responsibilities and ensure they have the appropriate contact information and details for your advisor team for when their responsibilities become active. It’s also important to revisit your named beneficiaries, trustee(s), executor, and guardian(s) regularly in case any changes or updates are needed.
Your family’s future is too important to leave to chance. Take control today, and make sure that your wishes are carried out exactly as you intend.
LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.
Entrust Wealth Partners and LPL Financial do not provide legal advice or services. Please consult your legal advisor regarding your specific situation.
