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Tuesday, July 30, 2013

Some tips on deciding who to appoint as executor and trustee

Having trouble deciding who to appoint as your executor and trustee? Regular readers of this blog know that I am constantly encouraging people to put some serious thought into their choice of executor and trustee, so I'm really pleased to see that the reader who wrote to me below is doing exactly that. It's essential to find a trustworthy, honest executor, especially when there is a child involved.

Here is her question and my response:

"I'm wondering if it's a good or bad idea to consider asking my child's father (my ex) to be Executor/Trustee. I'm a single mother of a 14 year old child.  My relationship with my daughter's father ended when our daughter was a year old.  We are on friendly terms and my daughter and him have a great relationship.  We each own our own homes and are fully employed.  I have 7 adult siblings. I'm having a new will prepared as the old one is outdated.   I want everything to go to my daughter in the event of my passing.  In choosing an Executor, should I consider naming my daughter's father, since he would have her best interest in mind?  Or would it be best to have a trusted sibling?  Should I also appoint a Trustee (in case I die before my child is an adult)?  Same question ... should trustee be her father, or my sibling?"

It appears that you are lucky enough to have more than one possible candidate for the job. I suggest that after you've made your selection as first choice, also name an alternate or second choice to step in if your first choice person is unable or unwilling to take on the job. Co-executors working together might also be an option, but think very carefully about how two people will be able to get along when so many decisions must be made. It's harder than people think to act as a co-executor.

Because your daughter is not yet an adult, your will should set up a trust for her. If your will doesn't do this, the law will impose a trust in any event, but by setting it up in your will you can control most aspects of the trust. For example, you could choose to give some or all of your daughter's share to her at a later age than the minimum set out by law.

When a will contains a trust such as this, the person you name as executor is by default also the trustee of the trusts, unless you say otherwise. For example, many people like to have a family member as an executor but to hand the ongoing trust duties to a trust company. There are pros and cons to doing that. Your will is the place to name any separate trustee you might decide on.

In your question, you hit on the most important qualification for anyone acting as executor or trustee. You mentioned your daughter's best interests. It's essential that you trust your executor and trustee to work with your daughter's interests at heart. You mention that  your daughter has a great relationship with her father. This is wonderful news in the context of her living with him should you pass away, but that relationship isn't necessary for executorship or trusteeship. Here are some other factors you might want to consider as you make your decision:

If you should pass away while your daughter is a minor, her father will have the legal right to custody of her. This may mean that it would be easier to have him also in charge of her trust, as he would know what she needs. However, some parents in this situation tell me they'd like to have someone else in charge of the money simply to have a second set of eyes on the funds for safety.

Try to look into the future as much as you can, and think of how the lives of your potential executors and trustees might change. Your ex might re-marry and start a new family, which means he could be subject to new financial pressures.

Looking down the road also brings up the subject of the age of your potential executor. If  your siblings are a few years older than you, they are less ideal as candidates. While everyone may be in good health at the moment, as people age we are more likely to run into issues with incapacity (such as Alzheimer's disease) or to pass away than those who are younger than we are.

Consider your potential executor's ability and willingness to carry out the executor's duties. Someone at a geographical distance will find it harder to do the job (and you may run into bonding issues if the person lives outside of your province). Also think about how busy that person is. If they are already juggling a job, a marriage, children, travel etc, it might be unrealistic to expect them to drop everything and devote a year to winding up your estate, and several years to administering your daughter's trust.

Make sure your will is clear about what you want to pay your executor and trustee for the work they'll put into your estate.

Before making your final decision, talk to the person you want to name and ask them if they will do the job. Tell them it would involve administering a trust (you don't have to talk about actual dollar amounts). Talk about your wishes for burial or cremation. Give them a chance to ask questions, and a chance to turn down the job.

2 comments:

  1. It seems executors have a tough time fulfilling their duties - in my experience. And when the executor is related to the diseased or is a close friend, it leads to turmoil and permanently broken relationships. Why doesn't everyone hire a solicitor to carry out these duties - I'd say it's well worth the money. Don

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    Replies
    1. Very few lawyers will agree to act as an executor. They will, of course, act as a lawyer for an executor.

      You're right that an awful lot of executors have trouble. Some struggle because, though well-intentioned, they don't understand the rules or the paperwork, and make honest mistakes. Others are just lazy or greedy.

      An alternative to having either a family member or a lawyer is to appoint a trust company. This is becoming more popular every day as people realize that it's cheaper than they think, and that they get really good value for the money. Best of all, the family doesn't fight among themselves.

      Lynne

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