An executor decision
Choosing an executor is one of the most important decisions you need to make when writing a will. After all, this person will wind up your affairs, distribute your assets and make sure that your loved ones receive their entitlements.
For that reason, many people choose a close family member or friend. However, such a person is not always the best choice. “Although you might think it’s a great honour to be an executor, anyone who’s done it once can normally attest to the fact that there’s a great deal of work and a lot of time involved,” says Mark Standerwick, a partner in the law firm Campbell, Froh, May and Rice in Richmond, B.C. “You want to make sure that the executor is up for the task.”
Narrow down your list
The ideal executor has some legal or accounting expertise, combined with an intimate knowledge of your personal affairs. Since it may be hard to find such a person, some people appoint co-executors: one person to handle the business side of things and the other to do jobs such as going through your papers and possessions.
You can appoint just about anyone: a spouse, sibling, adult child, parent, colleague or friend. However, the are a few caveats you should keep in mind.
First, it’s wise to choose someone who lives in the same province. In some provinces, an executor who lives outside the jurisdiction must get a bond from a bonding company. The value of the bond is based on the value of the estate. The executor will pay a premium to the bonding company, which will usually be refunded from the estate, along with all of the executor’s other expenses. The bonding company will generally investigate the executor’s background — for instance, it may check that the executor doesn’t have a criminal record. Some provinces require bonds because, if an executor commits a crime or fraud, it is more time-consuming to bring the executor to justice if he or she lives in a separate jurisdiction. Also, in terms of costs, if the executor has to travel frequently while administering your estate, he or she will bill travel expenses to your estate, reducing the assets available for your heirs.
Second, think carefully about the age and abilities of your proposed executor. While anyone over 18 can serve as an executor, your 19-year-old child may not have the experience or maturity for the job. And a parent you appointed years ago may now be in poor health. Review your choice of executor every few years to make sure it’s still a good one.
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Third, consider the way the person you appoint will interact with your family and other beneficiaries. If you have several children who don’t get along, for instance, it can be disastrous to appoint one of them as your executor. The children who weren’t picked may see it as a sign that you had a favourite.
“Reason goes out the window and emotion comes in,” says Stanley Kershman, a partner in the law firm Kershman and Kerr in Ottawa. “All of the family history starts to come out, and it can become very, very destructive to the family fabric.”
To get around possible personality conflicts, some people make a trust company or similar institution their executor. However, this is really only an option for those with complex estates. “Institutions are usually geared to medium-sized to large estates, and it can become very costly to have an institution do a small, very simple estate,” explains Kershman.
Ask, don’t tell
Once you’ve chosen your executor, you must make the choice legal by including it in your will — preferably one drawn up by a lawyer. You don’t have to ask your executor for permission before appointing him or her, but it’s a good idea to do so. Otherwise, the appointment can come as an unwelcome surprise.
Whether you ask permission or not, your chosen executor can decline the appointment after you pass away. If you’ve chosen an alternate executor in your will, that person may also turn down the job. Then someone else (usually a family member) will have to apply through the courts to serve as the executor. That process takes time, so it’s smart to make sure you have chosen a willing executor.
The executor doesn’t have to work for free. In most provinces, the executor is entitled to a percentage of the gross value of the estate (in British Columbia, for example, the maximum is five per cent). The executor will pay himself from the estate with the approval of the beneficiaries, who must approve the fee because the estate belongs to them.
However, if you think your executor might be hesitant to claim a fee, you can gift a specific dollar amount to the executor in lieu of a fee. One advantage of this approach is that, if you clearly state that the money is a gift rather than compensation or a fee, it is tax free. The drawback, says Standerwick, is that you might pick an amount that is too high or too low for the work involved.