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Friends Don't Ask Friends to Be Executor Thumbnail

Friends Don't Ask Friends to Be Executor

Asking a close loved one or a friend to be your executor may seem like a nice thing to do.  Even an honor, that you would trust that person to handle your affairs once you've passed away.  Many people agree to be the executor for a family member or friend without thinking twice about it.  

But, the job of being an executor is a challenging one.  


    - Being an executor is a ton of work.

    - In the Book "The Canadian Guide to Will and Estate Planning", by Douglas Gray and John Budd, they include an executor checklist in the appendix

    - This list includes 80 different line items

    - In the Book "You Can't Take It With You" by Sandra E. Foster, she includes an executor checklist in the appendix with 76 individual line items in it.

    - If the estate has any level of complexity in it, it could be a massive and onerous job

    - For fun, I scanned the list of items and picked 10 items that, for sure, would take at least 10 hours of time to complete:

        ○ Locating, reviewing and discussing the will with beneficiaries

        ○ Creating a full list of all assets (household goods, furnishings, cars, boats, jewelry, etc.)

        ○ Probating the will - preparing the appropriate forms for the provincial court, submitting them

        ○ Writing to all financial institutions and notifying them of the death, and verifying information on all accounts

        ○ Reviewing and cancelling all club memberships, health insurance, subscriptions, credit cards

        ○ Providing supervision for vacant real estate

        ○ Arrange for inspection and valuation of real estate

        ○ Locate and review prior years tax returns, prepare and file final tax returns (not to mention foreign assets which may require you to file taxes in a different jurisdiction)

        ○ Review portfolio of investments and provide continuous investment management of balance of estate investments

        ○ Sell estate assets *at fair market value*

        ○ Report to beneficiaries on progress and answer questions

 Complicating factors:

        ○ Blended family - deceased had children from different marriages

        ○ Beneficiaries with unique dependency needs

        ○ Out-of-country beneficiaries or executors

        ○ Business interests

        ○ Multiple non-liquid holdings (buildings, real estate)

        ○ Complicated finances including trusts, holding companies

        ○ Outstanding tax issues that are not yet resolved


    - Often, not enough attention is paid to the fact that the executor can be held liable by beneficiaries of the estate 

    - If the executor distributes assets from the estate before getting clearance from the CRA, that executor can be on the hook for any taxes owing

    - If the executor doesn't prudently manage the investments of the deceased between death and distribution, there could be a liability there

    - If the executor doesn't get fair market value for the assets, again there can be a liability - consider a situation where deceased had a classic car, sold it to the neighbor for $2000.  The car was worth $30,000.  The executor may be in trouble there.


    - Executors are entitled to compensation

    - Maximum is generally between 4% and 5% of value of the estate

    - Beneficiaries or the court have toe approve the accounts prepared for compensation and the amount has to come from the estate

    - Executor who is also a beneficiary could be denied a fee unless the will makes it clear that the gift to the executor is in addition to, not instead of, executors fees

Good news!  There is an alternative

Corporate Executor

    - You can appoint a corporate executor the same way that you appoint an individual

    - Basically, you can "outsource" executorship to a professional executor company

    - Outside of the will, you would sign an agreement with the trust company which would outline the compensation arrangements and services they will provide

    - Most if not all of the major banks in Canada have trust companies

    - Typically an estate minimum of $1,000,000 will apply (remember RRSP's, TFSA's, and life insurance go outside of the estate…but if the deceased owned a house, that's part of the estate)

    - There is zero up-front cost with naming an executor, fees are charged when estate is settled

    - Fees range from about an average of 4.2% of a $1m estate ($42,000) to 1.4% of a $20M estate ($280,000)

    - Benefits:

        ○ Professional management

        ○ Reduced risk for family members who would-be executors

        ○ Potential to avoid family conflict

    - Negatives:

        ○ Cost


    1) If you choose a personal executor, make their job easier by keeping your estate documents fresh and your assets consolidated and simple

        a. Up-to-date documents

        b. List of your assets

        c. List of professionals

        d. Clear wording in documents if there are special provisions

    2) If you believe you may have a complicated estate, consider hiring a corporate executor

        a. Talk to your estate attorney and ask them who they recommend

        b. Talk to the trust and estate team at your local bank

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