Help clients choose a suitable estate executor

By Rosemary McCracken | February 20 2014 07:33PM

Choosing an executor to gather, protect and distribute the assets of his estate is one of the most important decisions your client can make to ensure that his wishes are carried out after his death.“Many people name a close relative, probably assuming that this person will be offended if he is not chosen,” said Christine Van Cauwenberghe, Investors Group’s Winnipeg-based assistant vice-president, tax and estate planning. “They may not understand that the individual will need to make informed decisions and can be personally liable for mistakes.”

Select an executor based on his or her suitability, said Ric Langford, director, wealth services, at BMO Harris Private Banking in Vancouver. “The person your client chooses should have some financial expertise, sound judgment, be organized and have a calm personality because he may need to resolve conflicts at a stressful time when family tensions can come bubbling to the service.”

An executor needs to be sensitive to family dynamics, added Evgeniya Pollock, Edward Jones’s Toronto-based department leader, client consultation team. She gave the example of a father who appoints his business partner as the executor of his estate. After the man’s death, the partner sells all his assets, intending to gather as much money as possible to divide among the beneficiaries. “But he hasn’t considered that some beneficiaries want to keep the family heirlooms.”

Confirm acceptance

An executor also needs enough time to carry out the duties, which can take up to 24 months after the client’s death, Van Causenbrghe said. “Before naming executors in their wills, clients should confirm their acceptance. And they can always bow out at the time of the client’s death, although if they start the job, they will need to finish it unless they can obtain a court clearance. If all the candidates bow out, the courts will appoint an executor, which may be the public trustee.”

She recommended naming more than one executor, and an uneven number with majority rule. “An alternative executor should also be named in case someone has to bow out or pre-deceases the client,” she added. “The client can also stipulate that an executor with special skill sets handle certain parts of the estate such as a family business or an art collection.”

Clients should review their wills every five years, Pollock noted, to ascertain that, among other things, “those named as executors are still able and willing to perform their duties.”

It’s not necessary for executors to live in the same city or even in the same province as your client, although proximity would reduce travel costs in selling real estate, and having art work and jewelry evaluated. “But encourage the client choose an executor who is a resident of Canada,” Pollock said. “The courts may require executors who live outside of Canada to post security bonds. The executors may have to come up with this money themselves, and the amount will depend on the size of the estate.”

Institutional executors

Clients who have large, complex estates may want to consider appointing institutional executors, Langford added. “BMO Trust Company will do the bulk of the administration from arranging the funeral, obtaining the death certificate, securing real estate if no one is living in the home, right though to making the final distributions to beneficiaries.

“This service may also be valuable in complicated family situations, such as with blended families,” he said. “A third party can facilitate communication among beneficiaries, and manage their expectations.”

The fees charged by institutional executors are similar to what all executors can claim—depending on the province in which the client lived, up to 5% of the value of the estate. “We address the fee with the client and suggest that it be set out in the will,” Langford said.

As part of the estate-planning process,Van Cauwengerghe said financial advisors should have clients draw up lists of important contacts’ names and where they are located: lawyers, accountants, the financial institutions with which the client does business, their executors and the beneficiaries of their wills. They will also need to list important documents and where they can be found: wills and power of attorney documents, insurance policies, real estate deeds, mortgages and vehicle ownership documents. “This will be of great assistance to executors after your client’s death,” she said.