Many people think their estate can be easily handled by their spouse, kids or a close friend. But as estates become more complex, so is the role of the executor. Because of that, you might want to reconsider who handles your final wishes.
The evolving role of the executor has created a heightened fiduciary duty, liability and work on the estate administration process, said David Dryburgh, a Licensed Assistant at Action Financial Group — HollisWealth®, a division of Industrial Alliance Securities Inc. Dryburgh also holds a Canadian Institute of Certified Executor Advisor designation.
If someone names their spouse or kids equally as executors, each one must sign off on everything, which, when emotions are also involved, can become complex and potentially difficult.
Dryburgh recommends selecting one to three executors, though odd numbers work best.
“With one executor, things are straightforward,” he explained. “With two, you have to dictate how disputes will be settled, for example, through a third party. You have to have a way to break ties. With three, you can have a majority rules rule within the will. You need two of three to agree.”
Anyone can have a complex estate whether they have a will or die intestate (without a will).
Dryburgh said there are also several common misconceptions that can create complexity. The first is about joint accounts. Most assume if an account is set up jointly with anyone other than a spouse, assets will bypass probate and go the joint account holder.
“Unless it’s clearly documented to the contrary, the assets are still considered part of the estate and they will be subject to estate administration tax,” Dryburgh said.
Another common misconception is that a common-law spouse is entitled to half of all the deceased spouse’s assets.
“Common law spouses have no rights to property. They can only make a dependent relief claim if they’re not included in the will or if there is no will,” Dryburgh said. “It would then be up to the court.”
In the case of divorced spouses, the will is read as if the newly deceased was predeceased by their spouse. However, if a couple is only separated, the will is read as though the ex-spouse is still the spouse.
“If the (newly deceased) has a common-law spouse but never divorced the previous spouse, things can become complex,” he said.
Dryburgh said while many people believe it’s up to the children or spouse to plan the funeral and/or burial, it’s not. That’s also the executor’s responsibility.
“That’s why we stress the importance of having a meeting between the testator (the person who owns the will) and the executor and the beneficiaries so their wishes are known to try and avoid conflict at the time of estate distribution,” he said.
“Lifestyles change frequently. A will is not a set it and forget it document. The executor needs to be brought into meetings to make sure they know the wishes of the testator.”
Executors are entitled to compensation from the estate unless the will expresses otherwise, usually up to five per cent. A testator can alternatively hire a trust company, which is usually cheaper, around the 2 ½ to 3 ½ per cent range.
Because of the complexity of some estates, an executor has a year before they must distribute anything from the estate. This gives the executor time to take an inventory of the estate, locate beneficiaries and get organized. Many simple estates can wrap up within a year, Dryburgh noted.
“The more you plan for it, the less complex it will be,” he said. “That’s the importance of giving everything a good amount of thought — you’re getting everything in order.”
This information has been prepared by David Dryburgh, who is Licensed Assistant for HollisWealth®. Opinions expressed in this article are those of Licenced Assistant only and do not necessarily reflect those of HollisWealth. HollisWealth® is a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.