Considerations for effectively choosing and fulfilling an executor role.
This article has been compiled from “Appointing the right executor for your estate,” featured in Perspectives, Volume 1, Issue 1, Summer 2011 (page 22).
Estate-related considerations and creating a Will can undoubtedly be very emotional and challenging aspects of overall planning for many individuals, for a number of reasons. Whether it’s discomfort around discussions about death, fear of upsetting the family or causing disharmony, uncertainty around what the future may hold from a health perspective, or complex family dynamics, these feelings and circumstances often cause individuals to either delay or completely avoid important conversations and planning decisions. But while the emotional and situational aspects may seem difficult or overwhelming to navigate, it’s crucial for individuals to take a step back and remind themselves of the core reasons for, and the true purpose of, estate planning: to protect yourself, your loved ones and the legacy you will leave.
Specifically within this area of planning, there are a range of components to consider, but a central aspect to devote proper attention to is choosing and appointing an executor (called an “estate trustee” in Ontario and a “liquidator” in Quebec). As part of the decision process for selecting this integral role in estate administration, individuals need to have a clear understanding about the responsibilities and duties the role entails, as this will help in identifying the most ideal option. And while the majority of Canadians gravitate towards family members, it is critical to ensure their ultimate choice is a well-informed one, based on a number of key factors.
Choosing the right executor
An executor is a person or company who manages the estate of a deceased individual. This personal representative has obligations to both the beneficiaries (those who have been designated to receive funds, property or other benefits under a Will) and the creditors (an entity, individual or company to whom money is owed) of the estate and is legally responsible for distributing the estate (property, assets, possessions) of an individual according to the wishes outlined in his or her Will.
When it comes to choosing an executor, it’s common and natural for individuals to opt for a spouse, child, other family member or close friend, as the decision is often based on trust, especially given the fact that they’ll be handling all the personal details of one’s financial affairs and potentially getting involved in private family matters. In fact, according to recent statistics and survey data, it’s estimated that approximately 99 percent of individuals in Canada who are 45 or older intend to name a family member or friend as their executor.1 Yet while trust should definitely be a consideration, there is much more to the equation in selecting the most suitable and capable option.
In choosing an executor, the following are some key factors and considerations to take into account.
|Technical expertise and skills
- For all estates, there are tax-filing responsibilities that may be extensive, depending on the nature and extent of the deceased person’s assets.
- Experience with managing money and dealing with financial institutions may be beneficial to help manage some of the associated tasks. For example, locating the deceased person’s assets, creating a detailed inventory of family assets, managing the deceased person’s financial assets, and making investment or asset sale decisions.
|Time and availability
- Even a relatively simple estate with no ongoing trusts may take upwards of 18 months to administer.
- While the role does not require a full-time commitment, the duties and responsibilities are time consuming. This is especially important to consider if you are naming a child or family member who has a busy schedule with their own children and/or work demands.
- Many of the associated duties must be handled in person, or may be much easier to complete when the executor is local to the individual. For example, the executor is responsible for dealing with the deceased’s residence and personal effects, which may present additional challenges for someone who is located out-of-province or even out-of-town.
|Potential for family conflict
- Consider whether the individual you are choosing may create tension or friction among family members and beneficiaries.
- The executor will need to effectively communicate with family members and beneficiaries, and may be required to handle multiple beneficiaries, so the choice should be someone who is neutral and unbiased and who can handle matters in a professional manner.
- When a family member or loved one passes away, it’s a highly emotional and sometimes traumatic event for those close to the individual. These factors may impact the person’s ability to carry out the tasks of an executor or think clearly about the many organizational tasks that need immediate attention.
Being proactive in notifying the selected executor
Beyond choosing the right individual is discussing the appointment with him or her in advance. In doing so, you can ensure the individual is willing and able to take on the role, as well as provide a general awareness that he or she has been chosen. Unfortunately, it’s not uncommon for an individual to name their executor without asking them beforehand, and this may lead to a situation of surprise, potential conflict or the executor renouncing their appointment, all of which may cause unwanted delays and additional stress.
Fulfilling an executor role
According to survey data of individuals acting as executors, 31 percent noted having emotional issues, 47 percent reported administrative issues, and 26 percent noted legal issues.2 What statistics such as these indicate is that many may be overwhelmed by the extent of their role and the amount of tasks that come with it.
In being appointed as an executor, the following are some key aspects to be aware of.
|Balancing family members and beneficiaries objectively
- Part of an executor’s responsibilities include locating and meeting beneficiaries to explain the estate settlement process, from probate to distribution. Beneficiaries are often unaware of the tasks involved to administer an estate and the length of time before distribution can occur.
- Tensions may arise for a number of reasons when families try to organize a loved one’s estate, so the executor must be able to communicate with tact and diplomacy.
|Record-keeping and paperwork
- There is a significant amount of paperwork involved in administering an estate and part of the duties include accurate maintenance of financial records and estate administration, including a copy of all receipts.
|Expansiveness of duties
- It is crucial to consider whether the individual has the time, knowledge and resources to perform the required duties, as there can be many tasks involved for executors.
- The long list of duties includes, but is not limited to, tasks such as arranging and paying for a funeral; finding and securing all assets; notifying all holders of assets and service providers; if required, arranging for the residence to be emptied and cleaned, and the property to be sold; transferring ownership of all assets to the estate; finding, reviewing and filing claims for life insurance and pension benefits; collecting and paying debts; handling complex tax matters; and filing outstanding and final estate tax returns.
- The role also entails distributing all of the estate in line with the deceased’s final wishes as expressed in his or her will and according to provincial legislations.
- As an executor, an individual assumes potential liability, in that a breach of trust, error or omission resulting in a loss to the estate may result in personal liability to the executor.
Having a back-up
Consider naming an alternate executor in your Will. Doing so provides a greater level of assurance in the event the primary executor passes away before you or is ill when the time comes to settle your estate. This also drives home the importance of reviewing your executor choice periodically, as circumstances and situations can change.
This document has been prepared for use by the RBC Wealth Management member companies, RBC Dominion Securities Inc.*, RBC Phillips, Hager & North Investment Counsel Inc., RBC Global Asset Management Inc., Royal Trust Corporation of Canada and The Royal Trust Company (collectively, the “Companies”) and their affiliate, Royal Mutual Funds Inc. (RMFI). *Member – Canada Investor Protection Fund. Each of the Companies, RMFI and Royal Bank of Canada are separate corporate entities which are affiliates. “RBC advisor” refers to Private Bankers who are employees of Royal Bank of Canada and licenced representatives of RMFI, Investment Counsellors who are employees of RBC Phillips, Hager & North Investment Counsel Inc. and the private client division of RBC Global Asset Management Inc., Senior Trust Advisors and Trust Officers who are employees of The Royal Trust Company or Royal Trust Corporation of Canada, or Investment Advisors who are employees of RBC Dominion Securities Inc. In Quebec, financial planning services are provided by RMFI which is licenced as a financial services firm in that province. In the rest of Canada, financial planning services are available through RMFI, Royal Trust Corporation of Canada, The Royal Trust Company, or RBC Dominion Securities Inc. Estate and trust services are provided by Royal Trust Corporation of Canada and The Royal Trust Company. If specific products or services are not offered by one of the Companies, clients may request a referral to another RBC partner. The strategies, advice and technical content in this publication are provided for the general guidance and benefit of our clients, based on information believed to be accurate and complete, but neither the Companies, RMFI, nor Royal Bank of Canada, nor any of its affiliates nor any other person can guarantee accuracy or completeness. This publication is not intended as nor does it constitute tax or legal advice. Readers should consult a qualified legal, tax or other professional advisor when planning to implement a strategy. This will ensure that their individual circumstances have been considered properly and that action is taken on the latest available information. Interest rates, market conditions, tax rules, and other investment factors are subject to change. This information is not investment advice and should only be used in conjunction with a discussion with your RBC advisor. None of the Companies, RMFI, Royal Bank of Canada nor any of its affiliates nor any other person accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information contained herein. In certain branch locations, one or more of the Companies may carry on business from premises shared with other Royal Bank of Canada affiliates. Notwithstanding this fact, each of the Companies is a separate business and personal information and confidential information relating to client accounts can only be disclosed to other RBC affiliates if required to service your needs, by law or with your consent. Under the RBC Code of Conduct, RBC Privacy Principles and RBC Conflict of Interest Policy confidential information may not be shared between RBC affiliates without a valid reason.
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