Dear Stefanie:
I’ve heard that an Executor or Trustee can be personally responsible if things “go south.”
I am nervous to name my daughter as Executor because she is terrible at tracking expenses. Any thoughts?
– Penny Counting on Pippin
Penny Counting on Pippin:
Yes, serving as Trustee or Executor comes with personal liability. Honesty AND diligence are two important characteristics of a fiduciary. It is ideal if the person nominated has both.
I am working on the probate of a Will now and every little expense has to be accounted for, to the penny, for the court’s review. This is standard.
With a Trust, the document often requires the Trustee to account for all funds. If the Trustee is honest, but a terrible bookkeeper, problems can arise. The Trustee could be accused of malfeasance (and found personally liable) if they can’t account for expenses.
Even honest people can be sloppy with receipts and tracking, thinking it will “all work out.” But, when things go south among beneficiaries, being without an accounting is like going into stormy waters without a life jacket. Having safeguards in place from the beginning (i.e.: good bookkeeping) can prevent the horrible task of scrambling to put together an accounting for funds, often years after the money has been spent and memories have faded.
In this video I talk about “Where Is My Money? Accounting Is Important“.
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