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Who will your executor be? Making the right choice

Who will your executor be? Making the right choice

Synopsis
3 Minute Read

Who will be responsible for executing your will after your death? Here’s what you need to know before choosing a family member, friend, or a corporate trustee.

National Leader, Family Office Services

The topic of death is unpleasant. However, it is an essential conversation to have when planning your estate. The absence of legal documents such as a Last Will and Testament that state how your assets should be distributed can cause delays and the possible involvement of a Public Trustee after your death. Taking the time to plan now, while you still can, will save your loved ones from future stress, surprises, and conflict.

Being proactive about your will and estate planning also allows you to make a lot of important decisions with careful consideration — such as who will gets what, and who will be your executor.

Choosing an executor

An executor is the person you choose to carry out the instructions in your will. This person (or trust institution) is a legal representative who will be responsible for the administration of your estate. Most people choose close and trusted family members (spouse, child, sibling, etc.) as their executor. In cases where there is more than one child, it’s common to assign the responsibility to all or some of their adult children, so no one is left out. This decision is often based on emotional attachments to the chosen individual(s).

The duty of an executor is complicated and requires a significant amount of time and effort. All emotions and allegiances aside, this person or persons will have to be responsible and reliable enough to manage their life and your estate simultaneously.

To avoid the complications that come with choosing a family member as your executor, here are some missteps you should avoid:

  • Conflict of interest: This can occur if the person you name as your executor, for example, your spouse, child, or siblings, has personal benefits to gain from your estate. Taking on the role of an executor places them in a position where any discretionary powers they now hold may be exercised to favour them above other beneficiaries. An executor may also fail to properly account for the estate assets to the beneficiaries thus leaving them to believe that the executor is not acting in their best interest.
  • Emotional choices: Your love for your family should not get in the way of your decision-making. Complications are very likely to arise after you’ve passed on if you choose an executor with your heart and not your head. You might be considering a family member who’s very familiar with and means well for your business, but the role of an executor requires a measure of professionalism that your preferred family member may not have.
  • Family dynamics: If your family is already divided, you could be widening the rift by picking one or few family members to execute your will, especially if your choice(s) are already considered favourites. There’s a possibility that relationships will be ruined as there may be growing dislike for the executor by other family members who feel neglected or cheated.
  • Failure to discuss compensation: It is important to discuss payment when choosing your executor. Often, people ignore that aspect especially when the executor is also a beneficiary. However, the role of an executor is a full-time one that deserves a formal renumeration plan.

Professional executors are an option

An executor has a huge responsibility to fulfil, and your spouse, child, or sibling may run into legal errors that could hurt the execution of your will and its beneficiaries. To prevent these and other possible complications, the best option could be to hire a corporate trustee instead of a family member or friend. A corporate trustee is a neutral and regulated institution who takes on the responsibility of administering your will, estate, and trust.

It’s also common for people to choose a family member and still hire a corporate executor so both parties can work together to fill the professional and emotional gaps brought about by a death. In this case, we recommend you state the terms of their collaboration to avoid disagreements or conflict.

Consider the following benefits of a corporate trustee:

Expertise

A corporate trustee is trained and experienced to execute wills and estates. Hiring one diminishes the possibility of running into issues because this individual has the requisite knowledge and ability to undertake the responsibility. They’re familiar with unique assets, taxes, and litigation due to their experience and will administer the process seamlessly and effectively. Your family member who has no knowledge of these affairs may struggle and make costly mistakes.

Independence

A corporate trustee is an independent and impartial third party. Their only interest is in carrying out your wishes as outlined in your Last Will and Testament. While your family member is likely to have a vested interest and may be clouded by emotions such as sadness and ill feelings towards other family members, a professional works strictly in your best interest.

Complexities

If your family situation is complicated, it’s best to work with a neutral executor. Such complications can be from your first or second marriage, business dealings, or secret property. A corporate trustee can navigate these challenges without getting caught up in the web of dispute.

The cost of choosing a corporate trustee

A common concern among people when appointing a corporate trustee is the cost, when most family members will take on the responsibility for free. If the family members choose to apply for a fee (which is usually deserved), it is often disputed, further damaging relationships. A professional who invests their experience and expertise in carrying out your final wish will charge for their time and efforts. Each province has legislated maximum fees that can be charged (for example, British Columbia has a maximum fee of five percent of the estate’s value), but a fee negotiated in advance can often be far less than the legislated maximums.

A corporate trustee can provide piece of mind with competent, efficient, professional, and independent management of your estate.

Contact us

To learn more about how MNP can help your organization, contact Steve Ivacko, CPA, CMA, TEP, FEA.

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