Friday, January 1, 2010

Can my executor also be a beneficiary?

I am often asked by people planning their Wills whether it is possible for a beneficiary under their Will to also be named as the executor. This is particularly common in family situations when of course people want to name their own spouses and children as both beneficiary and executor.

In Alberta there is no law that excludes someone from being both beneficiary and executor. This is done all the time, for example where a married couple name each other as their executors and also leave their estates to each other. In cases like that, not only is there no prohibition against the arrangement, but it is clearly the best arrangement that could be made for that particular person's Will. When one person is inheriting the whole estate, having that person act as executor can simplify administrative matters.

There are some situations in which it does not always make sense for the beneficiary and the executor to be the same person. For example, if you are setting up a trust for your son that is intended to ensure that the son doesn't blow all of his money, it doesn't really make sense for the son to be the executor (which also makes him the trustee of his own trust). When the executor is also the trustee of a trust, he or she usually has the power to decide how much of the money in trust is paid to the beneficiary at any given time. It isn't much protection to put the son in charge of deciding how much money he is to receive.

Rather than naming the first person who comes to mind as your executor, put some thought into what an executor under your Will is going to have to do once you have passed away. Once you have an idea what the challenges will be, you can better decide who is equipped to handle those challenges. Remember that if you need a neutral third party to handle a trust, though not necessarily the whole executorship, you can always consider naming a trust company.

There is one restriction that can cause a problem. You cannot allow your beneficiaries to also act as witnesses. Should one of your beneficiaries also be a witness, your Will is still valid, but that beneficiary's gift is invalid. I have seen Wills in which the person had his children act as witnesses to his home-made Will, and tried to leave the estate to those same children. The gifts were invalid, which basically left the man with no Will at all. Fortunately the mistake was discovered on a Will review while the man was still alive and able to correct it.

6 comments:

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  2. My common-law husband and I have lived together for twenty years, in a house in Ontario which is solely in my name, as is the mortgage on it. I want to make sure that when I die, my husband will be the sole beneficiary as stated in my will. Is that sufficient to ensure that he inherits the house as he is still legally married to his "ex" wife and I have brothers and sisters, all of whom live in other countries. I am guessing that as my common-law spouse and I have no children together, my siblings would be my legal next-of-kin. Thank you for any response . . . !

    ReplyDelete
  3. Hi, I've answered your question as a new blog post, so please look for it there.

    Lynne

    ReplyDelete
  4. My mother has been named as the sole beneficary of a life insurnace policy. She is also named as the executor of the will which names her as the sole beni. of the insurance policy. Does she have to use the money in the life insurance policy (beneficery) to pay the debts of the deceased (executor)?

    ReplyDelete
    Replies
    1. If someone is named as the beneficiary of a policy, the proceeds of that policy do not form part of the estate. The funds should therefore not be mingled with estate funds or used to pay estate debts. It sounds as if your mother was named personally as the beneficiary of the policy, which has nothing to do with being the executor. If you or your mother are not certain, it's a good idea to take the paperwork to an experienced lawyer who can read the exact wording and give you an opinion on it.

      Lynne

      Delete
  5. Hello. My father passed away and recently my mother passed away. She made her 3 sons the executors and beneficiaries. Two sons are living in the estate homes rent free. How do I remove them from the estate homes. Also on son recently bankrupt his company and the other son is under criminal investigation. Can they both be removed as executors. thank you

    ReplyDelete

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