Estate planning sounds esoteric, confusing and only for people in high-income brackets. And while the estate planning stakes are high for people with at least $1-million in liquid assets – the general definition of someone of high net worth – for those of us lower down on the asset totem pole, the estate planning principles remain exactly the same.
Estate executor responsibilities can be assigned to a relative, a friend, a beneficiary, a professional – such as a lawyer or accountant – or what is known as a corporate executor (incorporated trust companies that are usually subsidiaries of banks).
Those responsibilities can be onerous – they involve valuing estate assets, filing tax returns, paying relevant taxes and debts, plus making sure that beneficiaries get what is willed to them. On top of that there are records to be kept. It’s not easy.
Friends and family members are tempting candidates, but wait. Do they have the legal acumen of a lawyer or the financial insights of an accountant? And are they poised and neutral enough to stick handle conflicts and controversy?
Don’t get carried away
It’s easy to get carried away by the feeling of honor that comes with being named an executor but, trust me, that feeling can all too quickly evaporate when the full weight of the trouble (and time) being an executor involves becomes clear.
A major executor responsibility is to ensure that all creditors, not to mention the correct taxes, are properly disbursed before residual assets are distributed to beneficiaries. Be aware that in the event of an error, the executor can be held personally liable.
Seamless process vs. a potential nightmare
And that’s where a corporate executor, with knowledge and assistance in estate, trust and tax laws, asset gathering and valuation, property management, investing and accounting, can make the difference between a seamless process and a nightmare.
Whatever route is chosen, there are – potentially – fees involved. While a personal executor can be paid the same fee as a corporate executor – which can be as much as 2.5% on assets coming in and 2.5% on assets going the other way – some personal executors (especially those who are beneficiaries) may decide to forgo a fee.
The case for a corporate executor
Writing in The Globe and Mail (February 22, 2012) estate-planning expert Marlene Habib offered a checklist of matters to keep in mind when deciding to use a corporate executor:
- Can offer an impartial, unemotional and objective approach to estate administration, while managing conflicting interests such as blended families, previous marriages and difficult personalities.
- Is readily available. Eliminates worries about a faraway executor, or an executor dying or becoming incapacitated or otherwise being unable to execute the will.
- Can provide continuity, especially when there is a need for long-term trusts and financial care in certain family situations, such as an ill spouse or minor or disabled children.
- When hiring a corporate executor, there is often no need to hire additional outside experts, meaning no extra cost to the estate.
- A corporate executor may not be able to offer the personal touch of a relative or friend who knows the will maker.
- An individual should add to his/her will a clause saying that a personal executor who is inexperienced may be authorized to appoint a trust company to perform more difficult duties such as arranging trust funds, and that an alternative executor should be named in case the first choice is unable to act or dies before the will is executed. Both executors and alternatives should also have copies of the will.
‘It’s Complicated’ is the name of a terrific domestic comedy movie starring Meryl Streep and Alec Baldwin. The movie is hilarious but the title is prophetic. As you can see from the checklist, it’s complicated sums up the estate planning process. Through Scotia Wealth Management, Scotia Trust and the Ritcey Team, you can acquire seamless access to professional help for all your estate planning needs. It’s just a thought.
Dave Ritcey, The Ritcey Team, Scotia Wealth Management