Lawyers as Executors
Choosing an executor (known as an “estate trustee”) can often prove to be a difficult decision for many clients. Many times, clients are unsure as to who may be best suited for this role. Let me begin by offering you some tips on what qualities your executor would ideally possess. When making your selection consider these points:
- Has your executor been advised of their appointment and agreed to accept the role?
- Will your executor have the necessary time to devote to and act in this role in the face of his or her own career and personal commitments to their immediate family members?
- Does your executor live in Canada, and preferably, in Ontario?
- Has your executor ever been bankrupt or sued by creditors? Is your executor a good record keeper, well organized and does your executor take deadlines very seriously?
- Would you say your executor has good business sense, especially when it comes to reviewing legal documents and contracts, and evaluating proposals and quotes for services? Will your executor know when it is appropriate to hire the assistance of another professional for guidance and advice?
- Do you believe your executor would be calm and level-headed when dealing with stressful issues and anxious and aggressive personalities? Would they be able to navigate family dynamics delicately? Will your executor’s judgement be clouded by emotions?
- Would your executor get along well with your heirs and have no reason to be biased, envious, or jealous? Would your executor know how to deal with someone who may be causing discord, creating controversary or threatening litigation?
- Is your executor potentially at risk of being in a conflict-of-interest position? For example, has your executor borrowed money from you and it could be unclear what amount is still owed; have they received advances on their inheritance above what other heirs may have received; have they managed your financial decisions as power of attorney for a long time raising questions for other heirs about how your affairs were managed; could it be alleged that your executor helped facilitate the changes you made to your will that now omits certain heirs or treats your heirs in ways that are substantially different; is your executor capable of being objective, attentive and impartial in managing a trust for an heir who is related to them?
- Will your executor have to charge as an expense to your estate, the premiums associated with errors & omissions insurance?
If some of these points are causing you consternation about who to appoint as your executor, you are not alone.
You may want to give some consideration to naming me to act as your executor. This is a role that I am taking on more and more now that I have built a solid team around me.
What are some of the advantages to appointing me as your executor?
Expertise – Having been engaged in the practice of law for more than a quarter century and having specialized in estates and trusts law, I have:
- been retained as a legal advisor to executors, trustees, attorneys acting under a power of attorney, guardians appointed by the Court, etc., and other fiduciaries.
- been appointed by clients and have carried out the duties of an executor in many estates—simple to very complex, and modest to significant in terms of value.
- been appointed by the Court to serve as an “Estate Trustee During Litigation” – where beneficiaries are fighting over an estate and the Court requires someone independent and experienced to protect and preserve the assets of the estate (and pay its debts) until the dispute has been resolved.
So, suffice it to say, “I know a thing or two as I have seen a thing or two” (to borrow the tag-line from the Farmers Insurance commercials).
Breadth and Depth of My “Team” – I have under my employ experienced estate and trust lawyers, clerks, and staff as part of my estates group at Cambridge LLP. My team assists me not only with the day-to-day legal work required, but also the non-legal tasks necessary to wind-up an estate.
In addition, I have, over the years, built many strong and trusting relationships with other professional advisors who may be called upon to advise and provide services ancillary to my role as an executor. Accountants, business valuators, investment managers, real estate agents and other lawyers who deal with matters unrelated to the legal expertise of Cambridge LLP, are examples of outside professionals in my network. I have over the years tried to align myself with professionals who are leaders in their fields, and who are both pragmatic and reasonably priced.
Financial Protection – Lawyers in Ontario are required by law to carry at least $1 Million dollars of professional liability (malpractice) insurance. This insurance coverage is provided by the Lawyers’ Professional Indemnity Company (“LawPRO”). LawPRO provides errors and omissions insurance to the more than 27,000 members of the Law Society of Ontario. In addition to the $1 Million of LawPRO coverage, as a firm we also carry $9 Million of “excess insurance”. These policies are in place in the event an error is made by me or my team in relation to both the legal and non-legal work performed as part of an estate wind-up. Is your estate protected if your executor makes an error?
Competitive Fees – Generally speaking, all executors are entitled to compensation. The amount of compensation that may be claimed can be modified by the terms of your Will, but usually the provisions of the Trustees Act serve as the default.
The Trustee Act states that compensation claimed by an executor should be whatever is “fair and reasonable” having regard to the “care, pains and trouble and time expended in and about the estate”. Over time the Courts when assessing what is fair and reasonable have examined a variety of factors ranging from the actual time spent by the estate trustee, the level of complexity of the issues resolved by the estate trustee and the value of the estate. Contrary to what many people believe, an executor is not entitled to simply claim 5% of the value of the estate as compensation. The “5% usual percentage” (as it is called) is a guideline or reference point only, and it is considered in reference to the factors noted above. To gain more perspective on why the “5% usual percentage” is not seen as fair and reasonable in a lot of estate matters, consider whether it takes more skill, risk, stress, responsibility, and time to direct a bank to cash in a $50,000 GIC versus a $500,000 GIC. So how would an executor justify claiming $2,500 in fees in the former, and $25,000 in the latter?
In the end, the amount of compensation that I propose must be approved by those persons with a majority interest in the estate, and if they cannot agree, then a judge can be petitioned to review the matter and decide. Whether you name me, or your son, or your best friend, the amount of compensation to be paid is calculated in the same manner. As a lawyer I am not entitled to claim more fees simply because I am a lawyer.
In summary, appointing an executor requires careful consideration, especially if you don’t have someone in mind possessing many of the qualities discussed above.