Who will be in charge of executing your will is one of the most important decisions to make in the estate planning process. People often only consider close family members, but they may not always be the best choice. Here are some key considerations.
An executor must be at least the age of majority. There is no legal upper age limit, unless a will provides one. Your executors should be financially mature, which is important in considering appointing children at younger ages. For those of advanced age, the concern is ensuring they will be capable to act as executor and for a reasonable period of time.
The number of executors will often depend on who has a financial interest in the estate. For example, it may not be necessary to appoint more than one executor who is also the sole beneficiary, if he or she is able to carry out the role.
Where there are multiple beneficiaries, there are risks in having a sole executor which must be carefully evaluated. To ensure a proper “balance and check” from a risk management and financial accountability viewpoint, having more than one executor is generally advisable. Two or more executors ensures that there is better continuity if a sole executor dies, becomes incapable, or for any other reason can’t complete the administration of the estate. Multiple executors bring to the table a variety of skills and attributes, including the technical and financial skills some have, and the knowledge and relationships of the family and its beneficiaries that others have, in order to build an effective “executor team”.
Where more than one executor is appointed, unless the will provides otherwise, the legal rule is they must unanimously agree on any decisions. This can result in “deadlock” if they can’t agree. To facilitate decision-making, a majority decision clause can allow for majority rule, and can also provide that one or more named persons must form part of the majority, effectively giving them a “veto”. The will can also provide a mechanism to name replacement executors to ensure there are always a minimum number, and for the appointment of additional executors.
One issue that is usually not expressly addressed in a will, but should be considered, is executor compensation. Each Canadian jurisdiction allows for executors to claim compensation, but the amount is often not fixed and is subject to court discretion, which can result in disputes, increased legal fees to sort out, and the executors receiving an amount never intended by the deceased. The will, however, can deal with compensation, and provide whether certain family members or others should be able to be paid or not, and the amount, based on a formula, fixed amount or hourly rate applied to time spent, or a combination of these approaches.
Complex issues arise under Canadian tax rules if an executor is not a Canadian resident. The tax residence of an estate is considered to be where its “mind and management” is, which is often, but not necessarily, where a majority of executors reside. If an executor is appointed who is not resident in a Canadian province or territory, some jurisdictions, including Ontario, require a bond or other security to be posted to protect the beneficiaries, which in some cases can be reduced or dispensed with. As well, there are issues with regard to U.S. resident executors being able to give instructions on investment accounts with certain Canadian financial institutions if the advisor is not licenced to provide investment advice to a U.S. resident under U.S. securities rules.
The most important factor, however, in choosing an executor are the qualitative ones, including whether they are trustworthy, impartial, and fair.
A business partner may not be an appropriate choice if they have an economic conflict with those of your estate and its beneficiaries. An executor must act only in the best interests of your estate and its beneficiaries in carrying out their role.
Business and financial acumen are important, and some or all of the executor team should have these skills. A practical issue is the willingness, interest and availability to take on the role.
How compatible are your executors? In appointing children to be executors, many people assume their children will all get along, but a reality check is important. Power dynamics often change after parents pass away, sometimes laying bare fractiousness among siblings. Having a neutral executor who is not a family member may be a solution, including a family friend or one or more professional executors, such as a professional advisor or trust company. Sometimes not appointing any family members is the best route.
Surprisingly, there is no licensing for an individual person to act as an executor and no professional education or qualifying course, yet the role has enormous responsibility as well as liability, and is increasingly complex given changing laws and tax rules.
Choosing your executors requires a thorough review of the key considerations set out above, which is by no means an exhaustive list.
At the end of the day, making a careful, informed and thoughtful choice will give you the peace of mind that you have done the best you can in making this key decision.
— Margaret O’Sullivan