Over the years I have written several articles on executorships –from choosing the right executor to executor compensation and duties. Each time my inspiration for a topic stems from a recent problem facing a client. So many clients are still struggling with selecting the right executor, so a bit of a refresher is called for.
First, in my view, it is best to select someone who you know as decisive, not a procrastinator, is a peacekeeper but when pushed is able to dish-out tough love, and has that not so common quality “common-sense”! I have learned that career success, when selecting an executor, means nothing. People can be great at their jobs but horrible at the role of executor. Remember, the main reason why someone is successful in their profession is because they work night and day to perfect their craft. However, habit isn’t going to change all of a sudden when someone is called upon to prioritize the wind-up of your estate. I have seen children who were great accountants, financial planners and bankers but were terrible record keepers.
Second, I believe that someone who is not a beneficiary in the estate is the most ideal candidate to be your executor. Many executors who are family members are overcome with grief and have a difficult time dealing with cleaning out mom’s home, which is full of memories, resulting in an inability to make decisions and feeling paralyzed. Unfortunately, it is often the clean-up of the family home that breaks siblings apart. Usually, at least one child wants to buy the home, at what they hope will be below market value and others don’t want to spend the estate money needed to bring it up to market standards.
Often, a child who was power of attorney for mom expects to be paid for the time, pain and headaches they endured. This eventually ends up in a conflict of interest, as they cannot be both a “claimant” on the estate and the executor. Even worse, in many cases, the child-executor borrowed money from dad while he was alive and now there is a dispute about how much is owed back. The child-executor says the “advancements” were gifts, not loans, and dad is no longer around to say otherwise. Or worse, the child claims the “advancements” were gifts and are not to come off their inheritance and instead are over and above what they get from the estate.
I would like to debunk a few myths about executor appointments, that may help expose more options. First, the executor does not need to live nearby. Often, it makes more sense to hire a local specialist to assist, with say, cleaning out the family home. There are many new agencies that have been established to help busy executors get the job done. Also, information and documentation continues to flow faster and faster, and even more secure in our technology-crazed society, so there is no longer a need to live near the lawyer or the family residence in mom’s hometown. In addition, living south of the border is not a complete “stopper” either. There should be no issues as long as that foreign executor is joint with another individual who resides in Canada.
Something I hear far too often is “a trust company is too expensive”. But what price do you put on family relationships and the annual family holiday gathering or the BBQ that ends up being cancelled because of executor missteps? Family members are allowed to be paid the same as your lawyer, your accountant or neighbour who acts as executor, and that pay is not a prescribed percentage or fixed formula. The pay proposed must be approved by the beneficiaries, and if they can’t agree then a judge must rule. This whole dynamic is often what breaks families apart when Johnny, the eldest son, propose $125,000 as his compensation and his siblings hit the roof. With a trust company, the pay can be fixed in advance in order to avoid the inevitable arguing.
In addition, the trust company doesn’t get sick, distracted with their own life, pose a conflict of interest over money owed to mom, and doesn’t want to buy mom’s house. Nor is a trust company resentful of a sibling who was the “favourite” child. I think you get my point! One thing is certain, selecting one child simply because they are the eldest is dead wrong, and so is selecting your son when you know there is already a rift between his wife and your other daughter-in-law, for example.
If you choose the wrong executor, the costs and frustrations involved in forcing them to step-aside are really scary and potentially harmful to the estate as a whole. If the executor is not willing to resign voluntarily, you would need a court order to remove them. However, getting that court order is not easy, can be very costly and will take months in the best case.
Adam Cappelli is a founding partner of Cambridge LLP, with offices in Toronto, Burlington, Ottawa, and Elliot Lake. Prior to co-establishing his own practice in 2010, Adam was a partner for nine years at the largest full-service law firm in Southwestern Ontario (“Golden Horseshoe”) area. Each year since 2006, Adam has been voted by his peers as one of "The Best Lawyers in Canada" in the area of Estates and Trusts Law.