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.