When it comes to the administration of an estate, sometimes you have to call in the professionals. Choosing an executor, also known as the estate trustee, is one of the most important — and potentially most difficult — decisions you will make as part of your estate plan.
Ideally, your executor will be a reliable, trustworthy person who knows the ins and outs of your estate, has a sound financial understanding and will act in an appropriate and unbiased manner, even in the face of potential discord among beneficiaries with competing interests.
In addition, your estate trustee should live in Ontario to avoid the extra expense and hassle of long-distance estate administration, which may include the payment of a bond into court, or the possibility the Court will prevent the executor from acting.
Sadly, not everyone has a family member or close friend who checks all those boxes. And even if you’re lucky enough to know someone who fits the bill, they may not be willing to take on the heavy burden of responsibility that comes with the job.
In most cases, testators are inclined to appoint the best person they can find rather than turning to a corporate executor. Professional executors — usually a trust company associated with one of Canada’s major banks — tend to be the pricey option, typically charging a fee of as much as five per cent of the assets that flow through the estate. However, there are certain situations where the cost premium may be worth the investment.
Here are four of the situations in which we are most likely to suggest clients consider appointing a professional executor:
1. Tense family dynamics
Some estate litigation cases arrive out of the blue, but there are plenty more that you can see coming a mile off.
For some families, years of resentment and grudges mean an ugly dispute is almost impossible to avoid, and executors are often caught in the middle.
Testators with multiple children often appoint more than one trustee, hoping this may neutralize claims of favouritism among sibling rivals. However, they are usually sowing the seeds of further discontent if the trustees are unable to cooperate and there is no mechanism for breaking an impasse during the administration of the estate.
When a friend or family member acts as trustee for the deceased, allegations of bias are more likely to be flung by beneficiaries who suspect their long personal history with the executor is a factor in the estate administration.
The advantage of a professional executor in these situations is that they are one step removed from whatever family drama has occurred over the years before the testator’s death. Beneficiaries can also take comfort from the knowledge that a corporate trust company will do things by the book, administering the estate in an unbiased and appropriate manner.
2. Elder executors
For some testators, including those without children, the people who spring to mind for the role of executor tend to be long-time friends or family members such as siblings, or even their parents — all people of a similar age to themselves, or older.
There is nothing wrong with picking an older estate trustee, but testators must accept the risk that their choice will predecease them or be unable to perform their duties for health reasons.
Appointing a professional executor eliminates that risk. Even if your contact at the corporate trust moves on, someone else at the company will step into the role on the same terms previously agreed to administer your estate.
3. Complex estates
Estates with larger value, unusual or complicated assets, including art, antiques or foreign property are also good candidates for professional executors.
For testators who run a business on their own or in partnership or incorporation, it may make sense to appoint a professional executor with experience in the area so that the company can continue operating as usual, as opposed to naming a spouse or other family member with limited knowledge about the enterprise.
4. Testamentary trusts
The continuity and neutrality associated with a professional executor may also appeal to those whose estate plans call for the creation of testamentary trusts, which can last for many years into the future after the death of the settlor.
For example, the parents of a child with special needs may already have appointed a professional trustee to administer a Henson Trust — a special type of testamentary trust that allows a disabled beneficiary to receive funds without endangering their entitlement to Ontario Disability Support Program benefits.
Parents often opt for trust companies because of the technical nature of a Henson Trust and the fact that it must be “fully discretionary,” meaning that the trustee alone decides exactly how much to distribute to the beneficiary, and when.
Don’t leave the fate of your estate to chance. Let’s work together to create a robust estate plan that ensures your wishes are seamlessly carried out. Contact me to schedule a consultation and take the first step towards a secure future for your loved ones.