As financial advisors, we are often asked about the importance of an up to date Will, Power of Attorney and Representation Agreements. Shockingly 56% of adult Canadians do not have a current or valid Will, leading us to recommend updating these documents, along with a discussion on who should be considered as the Executor.
The primary role of the Executor is to ensure your estate is protected and that the assets flow through to the named beneficiaries. The dispersion of the estate is to be executed in a caring and skillful manner, as any reasonable person would otherwise do.
The Executor has a “duty of loyalty” to the estate and must ensure that they act fairly and responsibly to all parties after paying any debts and liabilities.
What are the traits to look for in an Executor?
- Someone who is trustworthy, who will act in your best interests. Look for someone who already has their own financial affairs in order.
- Having a working knowledge of investments and tax planning is a desirable asset, however, these services can be delegated to outside professionals if needed
- Possessing personality traits that allow them to get along with all family members, especially in circumstances where a blended family exists
- Ideally the individual is not burdened by their own financial liabilities such as potential bankruptcy or business failure. Caution should be exercised if a history of substance abuse or gambling problems are known. Having a co-executor could ensure that these issues do not conflict with their duties to the ultimate beneficiaries
- Someone who is in good health and younger than you, who statistically should outlive you
- It is helpful to choose an Executor who is lives geographically close to you
- Having someone with a flexible schedule is more desirable than an individual with excessive work or family commitments that would make the tasks cumbersome.
Why a foreign Executor should not be appointed?
- Language may be a hurdle creating unnecessary delays and potential miscommunication
- Expenses in having the Executor travel to Canada, courier cost to ship documents, and a greater likelihood that even more outside specialized professionals such as tax lawyers and accountants are retained
- May create tax issues for the Executor if they are declared a “non-resident” which also has legal implications. Non-residents are subjected to different tax rules than residents, creating another layer of complexity for the estate
- Foreign Executors may also be faced with securing an “Estate Bond” to ensure the assets of the estate are not squandered or misused. An Estate Bond can be expensive to secure and an unnecessary expense the executor may be reluctant to pay.
What else can be done to assist a foreign Executor?
Consider instead that a co-executor be appointed, someone who is a resident in the province you reside. Ideally, this individual knows the foreign executor and speaks the same language if applicable. By residing locally, the co-executor can witness signatures with accountants, lawyers, bank representatives, realtors, and financial advisors as needed.
Should a co-executor not be an option, another viable consideration would be to appoint a Corporate Executor such as an estate lawyer, trust company, or accountant. While there are extra costs in having a third party, it creates neutrality and ease of administration for the beneficiaries.
Finally, regardless of where your executor lives, ensure that you have a secondary or contingent nominee appointed. Your first choice may predecease you OR may be unable to perform their duties due to health concerns.