Most Canadians eventually get around to estate planning and putting their financial affairs in order – even if that often occurs later in life than it should.
But creating a last will and testament really needs to involve more than a quick visit to a lawyer’s office for a document signing.
For those nearing or entering retirement, it is critical not only to ensure your will is up to date, but also that you have chosen an executor(s) up to the challenge of carrying out your final wishes.
Given that your executor acts as your voice after you die, Canadians need to put a lot more thought into who they select for the role, says Darren Coleman, senior portfolio manager, private client group, with Coleman Wealth at Raymond James Ltd. In Toronto.
“People need to change this misconception or idea that it is an honour to choose someone as your executor,” he says. “It is a sign of tremendous trust and confidence in someone else, but at the same time, you’re also handing someone a remarkably difficult burden.”
That burden includes time-consuming administrative duties such as dealing with banks, insurance companies and government as well as dealing with the deceased’s family members, who may or may not be beneficiaries of the estate’s assets.
“They have to be able to handle the emotional effort of doing the executor’s role,” Mr. Coleman says. “They wind up having the beneficiaries – who could be family – be very unhappy with them in their decision making because the executor has to act for the deceased, not necessarily give every family member what they want.”
Although surveys show nearly one-half of Canadian adults don’t have a last will and testament, the good news is that percentage drops as we get older and estate planning becomes more important.
The vast majority of Canadians over 65 have wills (95 per cent) according to a 2019 report by the Financial Consumer Agency of Canada; however, more than half (53 per cent) have not updated their wills or powers of attorney (57 per cent) in the last five years.
Duties of an executor range from onerous (dealing with the Canada Revenue Agency on taxes and other finances) to sombre (handling funeral arrangements) to mundane (disposing of household possessions).
“You have got to be a juggler and a bit of a jack of all trades,” says Susan Mendel, an estate services specialist with True North Executor Solutions Inc. in Vancouver.
Ms. Mendel, who often works on behalf of trustees and executors, advises people to make it as simple as possible for their executors. That includes creating a list of key contacts, how to access finances and insurance policies, safety deposit boxes, passwords for electronic devices, etc.
“Only the will-maker knows the condition of their estate, what they have and what they owe, and what sort of family complications there may be; whether their affairs are in order or not.”
When updating a will, people should also re-evaluate whether those selected as executors are still willing and able to carry out the duties.
Some variables include age, health, geography and continued willingness to do the job.
Stephen Hsai, a Vancouver lawyer specializing in estate planning with Miller Thomson LLP, has a “three T” rule for executor selection: “The ideal executor should be someone you trust, who has the time to do the job, and who is in the territory.”
For those updating an existing will, that means perhaps dropping a prior executor because he or she have moved to another province or country, is in poor health or no longer wishes to take on the role.
Mr. Hsai stresses that would-be executors should be asked first if they are willing to be executors (many are surprisedly appointed without being asked) and there should be an alternate executor in case the first person named is unable or unwilling to act.
He adds that naming too many coexecutors is a common pitfall, giving the example of parents selecting all four of their children as executors which can lead to “deadlocks and to co-ordination issues.”
The couple could instead consider appointing one of the four children as executor, he says. For example, a child who gets along with all the siblings and who is trusted by them, with one or more other children as backup executors.
Should you hire a corporate executor?
For people with complicated estates or limited choices for executors, appointing a professional trustee may be a good option, Mr. Coleman says.
“If you have a reasonably decent-sized estate, which many people now have just by virtue of their house going up in value, a corporate executor or a trust company can be a very, very significant benefit because you don’t have to worry about them not doing the job or getting sick or not knowing how to do it.”
The Toronto adviser notes that the cost of an executor is ultimately set by the courts, meaning a professional and family friend could end up costing an estate the same amount in the end.
“What many people believe is, ‘If I hire my cousin or my friend, they will not really charge the estate, so the professional executor is going to be more expensive.’ But the reality is all the executors are entitled to the same level of compensation,” he says.
“It is one of the rare circumstances where the professional and the amateur are the same price.”
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