Retirement

Choosing The Right Executor Is Important

Recently, Tom was kind enough to review my book Smart Tips for Estate Planning.  Recently, I have been working with some executors of estates and people reviewing their estate plans with questions about who makes a good executor so I thought this would be a great time to write about the topic and offer some advice on the topic of choosing an executor of a will and what executors need to do.  I’ll start with a little story from my book.

Good kids are not always good executors

Sabrina is a widowed mother with two adult children.  Both children are employed, well-educated, live nearby, and are equal beneficiaries of the estate.   While neither of the children is in desperate need of money, they could both use their inheritances to pay debts and maintain their homes and vehicles.  In her Will, Sabrina decided to name her children joint executors of her estate.

After Sabrina died, her children were faced with a few assets:  the family home and its contents, a car, the RRIF, and two other investment accounts.  A year later, nothing had been done.  By comparison, a responsible executor would likely have done many significant things in the subsequent year like obtained probate, insured the property as a vacant home, cleaned out the home, distributed the contents, sold the home, changed registration on the car, collapsed and distributed the RRIF, collapsed the investment accounts into an estate account, and filed the terminal tax return.

Why hadn’t anything been done by the children?  The reasons were numerous.  Neither child had any experience settling an estate.  Both children were busy and uninterested in settling the estate.  Each child wanted the other one to take the lead.  Both children were intimidated about meeting with a lawyer and fearful of the cost of a lawyer.

By their inaction, the children are increasing their risk of loss (by failing to properly insure the home and re-register the car), increasing their tax bill (by failing to pay tax on the RRIF and file the terminal tax return), and incurring the ongoing costs of owing the home (utility bills and property taxes).

These risks and costs will continue until the children decide to act.  In the meantime, no one has any power to compel or encourage the children to carry out their legal obligation to settle their mother’s estate.  Choosing the wrong executor of a will can mean your life savings are simply wasted away.

Other relevant articles

Being the executor for the estate
Misconceptions of Estate Planning
Dying without a will

Comments

  1. James

    i can understand this to be a very scary and uneasy time. but this is a great example of how and why it is so important to talk to the experts so you nervousness does not come back to bite you in the end.

  2. Ryan P

    A few keys things I have learned in my latest of three times as an executor:
    – Where possible, choose a single executor who lives nearby. (Having co-executors means ALL executors have to sign EACH piece of paperwork.) NOTE: If different people are named (as the agent in the Personal Directive and the attorney named in the Enduring Power of Attorney), there is potential for the agent to say the person needs to move into an assisted living facility, but the attorney is unwilling to pay for the expenses. The result is a time-consuming and needless-cost process involving lawyers and the courts.
    – Where possible, choose an alternate executor (should the primary executor be unwilling or unable to act as the executor at some time in the future).
    – Where possible, choose executors who are one generation younger than yourself. (It increases the probability the executor(s) will still be willing and available to complete the executor responsibilities.
    – Rather than stating the executor’s time and expenses can be paid from the estate (which opens up the “reasonable charges” discussion AND requires the estate to issue a T4 slip (i.e. taxable income) to the executor), the will could stipulate x% be paid to the executor (whomever accepts the responsibilities *from start to finish*), and the balance of the estate would then be divided according to a predetermined formula.

    For my father’s estate, I provided scanned copies of all financial documents directly to each of my siblings and send them updates (i.e. steps completed and next steps) as needed. With this approach, I am confident each of them have both implicit and explicit confidence in every portion of the required work from the start to the end of the process.

    For whatever it is worth.

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