Sunday, July 4, 2010

Can I appoint my lawyer as my executor?


In Canada, you can appoint either an individual or a trust company as your executor. If the individual you choose is a lawyer, that's the same as appointing any other person. It means, however, that you can't appoint the law firm that the lawyer works for, just the lawyer himself or herself.

By the way, I should clear up one common misconception here. If your lawyer acts as your executor, your lawyer cannot charge your estate for executor work at the same rate he or she would charge for legal work. If your lawyer may charge $350 to work on your lawsuit or contract, but he or she cannot charge that for executor work. This is because you appointed an individual executor who just happens to be a lawyer. The lawyer will be limited to charging what any other executor could charge (in Alberta, that's 1% to 5% of the estate).

If your executor is a lawyer and he or she does legal work for the estate, such as applying for probate, then that work can be charged at full lawyer's rates, because your executor would have to pay a lawyer for that anyway.

In my years of private practice, before coming to my current job of in-house lawyer, I was asked many, many times to act as executor for clients. I almost always turned it down. In speaking with other lawyers about this, I understand that most lawyers will turn it down most of the time. Where your lawyer is a family member or close friend, that's different. However, I think that even if you do want to appoint your lawyer, you may not be able to get your lawyer to agree to it.

Most people will ask their lawyer to be their executor because they don't have anyone in the family or a close friend that they feel is appropriate. This often happens when people have immigrated from another country and don't have relatives in Canada. It also happens when people don't have children, or their children live far away, or perhaps don't get along. It can also happen when the clients want to set up lengthy or complicated trusts that they don't feel would be best managed by an inexperienced person.

Before you name your lawyer as your executor, think about this. If you name your lawyer as your executor, and your lawyer dies before your estate or your trusts are wound up, who is then in charge of your estate? The executor named in your lawyer's Will becomes your executor. Do you even know who that is? Your lawyer's husband/wife? One of the lawyer's children? Remember that you are appointing the individual person who happens to be a lawyer; you're not appointing the law firm.

The same idea applies when you appoint your accountant, your financial planner or your doctor, all of whom I hear proposed as possible executors from time to time.

If you don't have an appropriate family member, or you need specialized skills for your estate that you are not sure are available in your family, consider a trust company. Most people immediately think that using a trust company is terribly expensive, but in reality it's cheaper than you think. It's certainly worth a phone call to a trust company, or a conversation with your banker, to find out what it would cost you. And always remember to look at the value of what you're getting and not just the price of what you're getting.

21 comments:

  1. Hello.
    you said: "Before you name your lawyer as your executor, think about this. If you name your lawyer as your executor, and your lawyer dies before your estate or your trusts are wound up, who is then in charge of your estate? The executor named in your lawyer's Will becomes your executor. Do you even know who that is? Your lawyer's husband/wife? One of the lawyer's children? Remember that you are appointing the individual person who happens to be a lawyer; you're not appointing the law firm". So if I understand correctly, it could happen with any INDIVIDUAL named as you Executor... You could end up with his wife/husband or children as your executor?
    Thanks for clarify this.
    Sincerely
    Annick

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  2. Hi Annick,
    Yes you are absolutely right. I said this in the context of appointing a lawyer because it's very common that a person wants to do this. Accountants are also a popular choice. But unlike an individual that is chosen because he or she is a relative, a lawyer or accountant is chosen for a set of professional skills. I just don't want people to try to get that set of skills just to end up with the opposite. Thanks for a good question!

    Lynne

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  3. Hello Lynne,
    Thank you very much for your answer. I am a little puzzled: I have read many times, and I have been told by Legal Aid also, that if the Executor is unable or unwilling to act, the Court will name an Administrator. It sounds strange to me that you could end up with the executor of your executor...

    Could you, please, clarify your statement. I am not an Anglophone and maybe didn't really understand you.

    Thank you very much.
    Annick

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  4. Hi Annick,
    The court will name an administrator - assuming that someone applies for that - when the testator passes away and his named executor refuses or is unable to act right from the start. In other words, there isn't anyone else named in the will to be the executor right from the start, so the court will allow someone else to do it.

    However, if a person dies and his named executor starts working on the estate, the situation is different.

    If your executor is working on your estate and passes away, the most likely scenario is that the executor's executor will take over the job that he or she had been doing. This is the situation I was thinking about in my answer to you.

    If your executor is working on your estate and wants to stop being your executor, he or she has to get the court's permission for that. So it could happen that at the same time, someone else will apply to be an administrator to take over. This is relatively rare but not unheard of.

    I hope this clears things up.
    Lynne

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  5. Thank you very much, Lynn.
    Sincerely
    Annick

    ReplyDelete
  6. goodgenie4u@yahoo.comFebruary 16, 2011 at 6:55 PM

    Some questions of a pragmatic nature
    (1) Can our son be our family lawyer, even if he specializes in commercial law? Or is that not a smart move?
    (2) Is an executor, family member or not, entitled to a fee, under Ontario or Canadian law? If so what is it.
    (3) Can both our children be named as executors? Is it bad karma or prudent given the issue of survivorship?

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  7. You've raised some interesting questions. To answer your first one, I'd have to ask what you mean by your "family lawyer". Do you mean someone that will represent everyone in the family? How will that work if there is a dispute of some kind? How will your son be able to maintain the lawyer/client confidentiality he is required to maintain if everyone in the family feels they are the client?

    The days of having one lawyer who handled everything from real estate to divorce to criminal defence are gone (unless you happen to live in a very small town with a shortage of lawyers and no larger centre nearby).

    Secondly, why would you want someone with an expressed interest and speciality in commercial law to do other kinds of work? That isn't what he wants to do, nor does he have the expertise in other areas to do a good job for you.

    If you are asking whether there is any law or rule that says a lawyer can't act for a family member, no there is no specific rule like that. There is, however, in the lawyer's code of conduct for pretty much every jurisdiction, a requirement that a lawyer not handle a matter if he is emotionally involved in it or can't maintain partiality.

    An executor is entitled to compensation in every jurisdiction in Canada. The best idea is for you to state in your will what he or she is to receive. This will avoid disputes. Think about an amount equal to 1% to 5% of the estate. If you don't say what it is, there is a default amount allowed. It varies province to province.

    Yes, both children can be executors. They can either be named jointly to act together, or one can be a first choice with the other as alternate in the event the first can't act. Unfortunately, most siblings find it almost impossible to work together as executors, so please think it through thoroughly before making that decision.

    Lynne

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  8. Darn typos! Obviously in the previous comment, I meant to say "impartiality" not "partiality"!

    Lynne

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  9. That's not a Typo Lynne. A Typo is when the correct spelling is known but a finger tip hits the wrong button that is very closely positioned on the keyboard to the intended key.. An example is when a word such as "forget" appears as "forger". Apart from that, it's an interesting column.

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  10. I stand corrected on the typo issue :)

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  11. My sister was appointed executor of our parents Will. Because of family squabbles she was afraid of people suing her, (not us) so she hired a lawyer. The Lawyer has stated that all under 19 beneficiaries (B.C.) inheritance will go to the Public Trustee's office to be kept in trust for them until they come of age. My parents Will left a small sum of money for each grandchild. However, their lawyer did tell them they must include a guardian for under age beneficiary and my parents assumed we as responsible parents would take over and put money away for kid's education, etc. B.C. Law states the executor of the Will should put away the under 19's inheritance until they reach legal age. We do not want our Children's money to go to the Public Trustee, we have had dealings with them in the past and couldn't get money released for a good deal of time. They also charge the children (who receive a meagre inheritance as it is) a fee to disburse the monies. Our question is this: Is it possible for my eldest sister, the executor of the Will, to take that money from the lawyer and put it into an account until our children reach the age of 19 if they are so intent on keeping it safe? This way our children would not have to pay a Fee to have the inheritance their grandparents left them>.. This is what B.C. Law states is the executor's job, to keep the under 19's money safe by putting it away. Can my sister keep the money instead of the Public Trustee of B.C. as executor and is this legal? Does she have the right to tell the lawyer she hired to give the monies to her to place in an account? She thinks she has no rights and will only do what the lawyer tells her to do.

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  12. Hi. Thanks for your question.

    Keep in mind that a guardian for a child is completely different than a trustee. When a guardian is named, they have absolutely no right to touch any money left for the child, unless the will specifically says they can have an amount to support the child.

    When someone writes a will, they have the choice to include wording that would allow the executor to pay a child's share to that child's parent for safekeeping. If that wording is not in the will, you can assume it was left out deliberately.

    The Public Trustee's office is not like a bank. The PT's office is not in the business to make money. Their mandate is make sure that a child's inheritance is safeguarded for the child. In practice, this means that if an executor can make alternate arrangements for the child's money, and is willing to assume the responsibility for the money, the PT might agree to those alternate arrangements. Your sister can have a conversation with the PT's office, or have the lawyer do that for her, but there is no guarantee they will agree.

    Lynne

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  13. If a client appoints their financial advisor as executor, is there any real or perceived conflict of interest.

    Please explain how it would or would not be.
    Thanks!

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  14. You say above, that your lawyer becomes the trustee as an individual and not the firm he is a partner in. How do you know that when all correspondence comes to us on his firms' letterhead. Secondly, it appears that my recently deceased Mother's estate was settled and her lawyer charged both trustee fees and legal fee

    ReplyDelete
    Replies
    1. You're right, it's not easy to tell. Most people don't know the difference, and that's why I wrote the post in the first place.

      On your mother's estate, it might be alright for the lawyer to charge both trustee fees and legal fees, depending on what he did for the estate. He can't charge both fees for the same work, of course. He can only charge legal fees for legal work that anyone would have to hire a lawyer to do. That usually means getting the probate.

      So, he can charge his usual legal fee to get the probate, but on the work where he was acting as executor and not lawyer, he can't charge the legal fee. He must charge the executor's fee, which is generally lower than the legal fee.

      I really hope that you received a detailed statement of account so that you can go through and identify exactly which items he charged the legal fee. If not, you are entitled to ask for an explanation so that you can understand the details.

      Lynne

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  15. This is nice. I had fun reading this article. Really interesting. Attorney Macon

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  16. Hello,
    I am a law clerk working for my father's small practice. He is quite elderly and has been named as Executor for some of his clients. He was considering offer me as a substitute for people who don't have many other options (while also advising them of trust companies etc.). I was considering starting up my own Executor Services business once he retired. Can you see any issues that could arise from this situation?

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    Replies
    1. Obviously if you're thinking of starting a business, you have a ton of research ahead of you, but I'll toss in a couple of thoughts, as follows: in Canada, only individuals and trust companies are legally allowed to be named as executors, so you'd be working on an agency basis. Some provinces specifically restrict applications for probate being prepared by anyone other than the executor himself or a lawyer. You'd have to be careful of practicing law without a license. You'd carry personal liability for any mistakes you made on estates. I know of a couple of people who have tried this business idea and failed due to lack of customers, but the result might be different in a different time and place. These are the first few thoughts that occur to me, so hopefully some of them are helpful.

      Lynne

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  17. Thanks Lynne! Yes I agree this could be tricky situation. Could I offer services as an individual? Although I am capable of doing the probate applications, I think I would still refer to a lawyer for this service. I want to act as an individual who has appropriate experience and education for the position of executrix. We often encounter clients who don't have a large enough estate for the banks and trust companies to act and don't have family members to fill the position. I've found this topic fairly difficult to research. Almost anyone can act as an executor, but my tricky part is if my father were introduce me to clients (in the above situation) as someone they could name as an executor, would that create a conflict of interest? The Law Society rules seem vague but I suppose I'll have to get real clarity prior to entering into this type of situation.
    Thanks again for the response!

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  18. Thanks Lynne. My mother lives on the other side of the country from the rest of our family and was trying to decide between a Trust Company and her lawyer as Executor. She asked the lawyer what would happen if he left the law firm or the firm ceased to exist, and he dodged the question. He chose not to make it clear that he would be acting as an individual and not as a member of the firm. He had suggested himself as an Executor when she enquired about fees charged by Trust Companies. I am disappointed that he wasn't more forthcoming with her.

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    Replies
    1. I've administered many estates through my law practice, and have worked for a leading trust company for 6 years, so I have experience in both options.

      In my opinion, it is BY FAR cheaper to hire a trust company. Your fee will be a flat rate calculated on the value of the estate. There is no charging by the hour. There are several people you can talk to or deal with, instead of just one person. They are very experienced and specifically trained to deal with estates. They are highly regulated by the banks. And if one person retires, moves away, or dies, the rest of the team is still there.

      Let me know which province your mom lives in and I'll send you the name of a trust company individual you or your Mom can contact for more information. You can always have a meeting and find out exactly what the fees are.

      Lynne

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