Monday, September 27, 2010

Can my spouse be my executor?

I'm often asked whether having your spouse act as the executor of your Will as well as being the beneficiary of your Will is a conflict. Just the fact that someone is your spouse is not a conflict. In fact, it's very common that husbands and wives appoint each other as their executors.

It works because the finances of the husband and wife are already intertwined, such as when they take out life insurance policies that name each other, or open RRSPs and designate each other as beneficiaries. In most cases, they leave their estates to each other. In addition, it is usually safe to say that they have similar plans when it comes to looking after their children once both of them are gone.

This is not to say that it can't get complicated. For example, where there is a trust set up for a spouse, it might not be ideal for that spouse to be the trustee in charge of deciding whether they want to pay money to themselves. A trust for a spouse might be set up if, for example, a man and woman get married, and it's a second marriage for one of them. Let's say it's the husband who is marrying for the second time. He sets up his Will so that his second spouse can live comfortably for the rest of her life, but when she passes away, the remainder of the estate goes to the man's children from the first marriage.

Maybe it wouldn't make sense for the second wife to be in charge of her own trust. Even if she were completely honest, there is always the appearance of conflict of interest that might cause the children of the first marriage to speculate about how much she is taking for herself and how much she is leaving for them.

Even this doesn't mean that the spouse can't be the executor. A man like the one in our example can say that his spouse is to be his executor, but if there is a trust set up for his spouse, it is to be managed by another trustee. We do this a lot in the trust company where I work. We either act alone as the trustee, or we handle it together with the wife. This doesn't mean that the man doesn't trust his wife. It just means that he is aware of the optics of the situation and wants to avoid problems with the children if possible.

When it comes to choosing an executor, I often advise clients to decide first what they want to have happen with their estates. Once they know what the job is going to involve, they can think about who is best suited to do it. The spouse may or may not be the best choice.

As with all legal issues, the question is not whether you can do something; it is whether you should do it.

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