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Superior organizational skills are a must for an executor.Visual Generation/iStockPhoto / Getty Images

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For many Canadians, choosing an appropriate executor for their will is one of the most challenging aspects of estate planning.

When considering a loved one for this role, the testator must identify a person with the necessary skills, capacity and time to manage an estate. The executor has several responsibilities, including organizing funeral and burial wishes, distributing assets to beneficiaries, paying off estate debts and selling property where necessary.

Wealth advisors should encourage their clients to consider factors such as time constraints, competency and proximity when choosing their executor. For example, if a client decides that their adult child will be the executor of their estate, but the child lives in a different province, the client needs to consider the practicality of the child’s future obligation to travel multiple times to sign documents or sell properties.

It’s also worth exploring whether a family member is the right option. Depending on the complexity of an estate, a person may not wish to place the role in the hands of busy children. The process of distributing assets and paying off debts could take months or even years, particularly if real estate or operating businesses form a part of the estate. Others may not feel their children or loved ones have the competency required to fulfil the role. A professional executor may be the right solution in this case.

If a client has multiple children, a common approach is to name two or more children as executors to their wills, with the wish that they share the obligations of the role. However, choosing multiple executors can increase complexity as multiple signatures are then needed to progress the division of assets.

If the client selects co-executors, they should include a formal rule in the will for how to make decisions in the case of conflict. In the multi-executor scenario, advisors should encourage clients to choose an executor with good communication skills, so they’re equipped to navigate complex relationships or emotions that come with the death of a loved one.

One of the primary benefits of choosing a family member is it gives your client the opportunity to be value-driven and purposeful throughout the estate planning process. Family members and loved ones may have a better understanding of the deceased’s values and beliefs around wealth. Through family meetings and open conversations, estate planning can bring families closer together.

Compensation and legal obligations

Once the client chooses a suitable loved one or family member for the role, wealth advisors should encourage them to organize a family meeting to share the breadth of their assets, how they would like them distributed and their desires for their legacy.

For example, if a part of their will involves leaving assets to a charity or non-family member, this meeting is an opportunity for them to explain why this decision was made and why it’s meaningful for the testator. Wealth advisors can add value by encouraging family meetings or even facilitating meetings throughout the estate planning process.

Following the selection of the executor, the client should also state in their will if and how the executor will be compensated. If the executor is a family member, they may wish to complete the role out of goodwill, especially if they are also a beneficiary.

However, given that the time commitment and obligations are quite significant, it can be worth outlining a compensation plan in the will. While the typical range for compensation is between 1.5 to 5 per cent of the gross value of the estate, compensation will depend on the size of the estate, the number of assets and debts and the time needed to complete the process.

The client should also specify that the estate can hire and pay professional advisors such as real estate agents, business valuators, accountants and legal advisors.

Wealth advisors should also remind clients to familiarize their executors with the legal obligations of the role. When someone agrees to be an executor, they’re required to fulfil a duty of care. This duty entails taking care of the estate’s property as if it were their own. The executor should not benefit personally from their approach to handling the distribution of the estate’s assets. If the executor fails to fulfil their obligations as laid out in the will, they can be found personally liable for losses the estate incurs.

An executor may choose to refuse the role, which is one reason clients should share their plans with their executor while writing the will. It’s also common to name a substitute executor in case the original is unable or unwilling to commit.

A client’s plans for their wealth at passing should not be a surprise to their beneficiaries or the executor. Advisors can help solidify the client’s priorities and ensure that the plan reflects their values regarding their wealth, both in what they wish to accomplish during life and afterwards as a legacy.

Tricia Leadbeater is portfolio manager and investment advisor with Leadbeater Wealth Management at Richardson Wealth Ltd. in Calgary.

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