Bob and Sally Smith appointed each other to serve as the executor of each others estate. What happens if both of them die? They have appointed their daughter, Anna, to serve as the alternate executor. It will be her job to divide the estate between her and her brother.
Anna is exactly the right choice for the Smith family as alternate executor. She lives close to them. She has the time. She is responsible. Her brother would have been good for the job too, but he lives in Vancouver and is really busy.
Who should you appoint as executor of your estate?
Most people pick a family member, such as a son or sister. Other people pick friends, or close business associates. Some ask a professional advisor, such as family lawyer or accountant. Still others pick a trust company.
There are advantages to picking a family member. A spouse, child, brother, or other family member will know your affairs. They can clean out your house and identify family heirlooms. If they are a beneficiary, then they are interested in the outcome. They want to get the money out of the estate as quickly as everyone else does.
A family member may not be a good choice if your affairs are complex and he or she will not have the skills for the job. That might be the case if you have a business, or if the family members available to you are young and inexperienced. A family member may be a poor choice if you see the possibility of a fight among the beneficiaries of the estate.
Should the executor live in the same city as you do? It is generally more convenient. There can be a lot of legwork. An executor who lives outside of Alberta may have to fly in and out more than once. Appointing an out-of-province executor can be more than simply inconvenient. The executor will be forced to post a bond unless the court can be convinced to make an exception. That bond is usually placed through an insurance company. It can get very expensive. That by itself is a good reason to pass over someone outside of Alberta.
Appointing an executor from a different country is more trouble still. As a rule, an estate is tax resident wherever the executor happens to reside. If you appoint a child who lives in the US to be your executor, your estate will be governed by US income tax laws. That can be a huge complication.
Inside of Canada, that same rule can work to your advantage. If you pick a child who lives in Alberta, then any income earned on estate assets will be taxed in Alberta under lower tax rates. If you pick a child in another province then income on your estate will be taxed at higher rates in that other province. For some estates, the tax savings can be significant.
You can appoint joint executors to serve together or a single executor to serve alone. Which is better? If one person has all of the skills, then one person alone is generally a good idea. Having two executors doing everything together doubles the work.
Sometimes a team does make better sense. Different people bring different strengths to the job. One might know your business affairs and the other your personal affairs. Together, they can do a better job.
Every executor is entitled to a fee. Family members tend to charge less. Friends and extended family tend to charge more. Trust companies and professional advisors tend to charge the most. You may want to give some thought to setting the amount of the fee in the will itself, or by advance written agreement with the executor. That avoids fights.
Fifty years ago, it was quite common to appoint the family lawyer to serve as an executor of the estate. Things have changed. Most lawyers will now refuse the job if you ask them. Professional advisors are often too busy, and it is not their normal work.
Trust companies are a popular choice. They have professionals on staff that do nothing but administer estates. They are good at it. A trust company will charge significant fees, but you generally get what you pay for in this world.
A trust company is an option only if your estate is going to be fairly substantial. Many trust companies will not agree to serve as executor unless the estate is projected to exceed $500,000.
The Smith family is real. Names were changed to protect confidentiality.
Next week’s column: An estate plan gone wrong.
John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers. ca , or visit www.welglawyers.ca
© John E. S. Poyser 2009.
This article was current when it was written. No effort has been made to update it. It is not a replacement for legal advice.