Choosing an executor is no trivial matter

I have to say, I agree totally with the title of this article. Too many people make this very important decision without considering just how that decision will impact family members left behind. This article from Ellen Roseman at  www.thestar.com talks about how to make the choice of executor, and why it's so important to put some real thought into it. Click here to read the article.

Near the end of the article, Ms. Roseman discusses trust companies, who are professional executors. I work at a trust company, and to be honest before I came to work here I really didn't realize how well corporate executorship works for families who need independent executors or simply an experienced helping hand. I invite anyone with questions about how trust companies work to drop me a line.

Passing the torch to the next generation

There's a good article in www.globeadvisor.com that talks about several issues relating to passing your estate on to your children. It covers a bit of everything, from choice of executor to life insurance, but the main topic is saving on taxes when passing on property. I wish more people would read articles like this one before going ahead with steps like putting their children's names on the cottage.  Click here to read the article.

Zsa Zsa's case shows importance of naming a fiduciary

I've always believed that there is something we can learn about our own estate planning by looking at the unfortunate situations of those who are famous and in the news. Zsa Zsa Gabor is one such person whose estate planning woes are broadcast for everyone to see. Those of us who are not celebrities have the same issues and concerns; they are just not as visible to the world.

I've attached a link here to a story from the American Academy of Estate Planning Lawyers that talks about Ms. Gabor's case. Click here to read it. Because the story is American, you'll find the language a little different. A "fiduciary" as referred to in this article refers to a trustee and someone acting under a Power of Attorney. The overall message? Your estate planning should include planning for disability, not just for your eventual death, and that you need to be pretty darn careful about who you put in charge.

Know exactly what you're getting into before you agree to act as executor

How I enjoy finding easy-to-read articles that are filled with common sense that I can share with my readers! I'm attaching an article by Gail Vaz-Oxlade that appears in www.moneysense.ca. In the article, Ms. Vaz-Oxlade suggests that you give serious thought to whether or not you accept an executor appointment in someone's will. Click here to read the article.

I totally agree that it's something you need to think carefully about before going ahead. If you start work as an executor on an estate, you have the job for life unless the court releases you. If you make mistakes, you can be held personally liable.

To those of you who are in over your heads and simply can't seem to deal with the estate properly because of time constraints, battling beneficiaries or legal issues, get help. See a lawyer or trust company and ask them to give you some guidance or even take over parts of the work. Did you know that you can walk into almost any major bank and ask them to put you in touch with their in-house trust company?

Think twice before you say yes

Do people named as executors in wills know that they have the right to turn down the executorship appointment?

I bet William Bourner wishes he had refused to act as executor. I'm attaching a link to a story on www.allaboutestates.ca that tells Mr. Bourner's story. He acted as executor for his mother's estate, and ended up being ordered by the court to produce an accounting for things that happened almost 50 years before he took over as executor. Click here to read the article, which is a real eye-opener.

The key to turning down (known as "renouncing") an executor appointment is to do so before you take any steps on behalf of the estate. Once you've started acting as executor, you can't just walk away from the job no matter how irritating it may be, without the court's permission. You're executor for life until the court dismisses you.

So, as our friends at www.allaboutestates.ca have already said, think twice before you say yes.

Using your will now to appoint an executor later

Choosing an executor should take a lot of thought. You should always try to be realistic about what you're asking people to do in your will. When clients discuss their choice of executor with me, they often express a wish that they would like to appoint a son or daughter but feel that the child is just not quite old enough yet. This is certainly a reasonable thought, as most of us wouldn't like to leave someone as young as 18 or 19 in charge of an estate. One way around this is to appoint an executor now in your will, then change your will after the child attains the age you think is appropriate.

Taking this approach assumes that you will have the opportunity to change your will when the time comes, and won't be incapacitated or killed unexpectedly or prematurely.

There is also an easier way to include the child as executor. You could state in your will that your son or daughter is to be named the executor only if he or she has attained a certain age.

For example, a woman might state in her will that her husband, John, is to be her first choice of executor. If John should predecease her or be unable or unwilling to act as executor, she would like her daughter, Jeannie, to be the executor, but only if Jeannie is at least 25 years old at the time. She might then say that if Jeannie isn't yet 25 at the time then she appoints her brother, Fred, to be the executor instead.

She could leave it there, or she could go on to say that the daughter is to be added on her 25th birthday to work along with the current executor.

This is very similar to the appointment of a guardian for a child, who will only be a guardian if both parents have passed away and if there is still a child under the age of majority. It's alright to add a few "ifs" to your will, so long as you are absolutely clear about how it all works, and so long as your will clearly explains your intentions. This isn't something I'd ever recommend that non-lawyers try on their own in a home-made will; leave the creative drafting to the pros.

I always tell my customers that when they are preparing a will today, their first goal is to cover off the next five years. This means basing your will on the way things are now, but taking reasonable possible changes into consideration.

Can the estate lawyer act against one of the executors?

I received an interesting question today by way of my Facebook page. I think it's interesting because at the core of the question is the role of the lawyer for the estate. This is a very poorly understood role. The beneficiaries think the lawyer works for the beneficiaries. The executors think the lawyer works for the executors. The lawyer may not do a good job in explaining it.

Here's the question:

"There are three executors on an estate. A directive in the will states that one of the executors who lives on an estate property must vacate the property by April 2012. She has stalled and has received a letter about this from the estate lawyer. She is ignoring the directive in the will and the lawyer is dragging his heels. What can the other executors do to get her out?"

My guess is that the letter from the lawyer did not include any demands that she leave the property, or even a request that she do so. It most likely simply reminded her of what's in the will and of her obligation to act on behalf of the estate and suggested that she keep that in mind.

Why?

The estate lawyer works for the executors. The lawyer can't act for the executor on the estate as well as against her on the same estate. Legal ethics and common sense both preclude that. So the estate lawyer isn't in any position to demand that she leave. He/she should have explained that when agreeing to write a letter.

I hope that the first thing that was done was to check the will to see whether it contains a clause saying that the executors can make decisions based on a majority vote. Without that clause, all decisions must be unanimous by all three. This is yet another major drawback of home-made wills (which I assume this was, to appoint three executors. Why on earth did this person appoint three, anyway?). Any lawyer who has been around the estate-planning block knows to include a majority vote clause when there are three executors. If that clause is present, the two executors can simply out-vote her on the question of whether they are going to evict her forcibly.

In the absence of the majority vote, if the executors of this estate want this person forced out of the property, they are going to have to hire a separate lawyer to do that. Other legal issues will come into play, as they are only two of the three people with the legal right to give legal instructions on behalf of the estate. Unfortunately one is being selfish and ignoring the law, and this will probably end up involving an application to remove her as executor based on her detriment to the estate.

Another bit of fall-out is that the estate will likely end up needing a new estate lawyer. The general rule when one lawyer acts for several people is that if those people end up in a fight, everyone has to get a new lawyer. The first lawyer can't represent any of them any more. If the probate has already been granted, this is probably not a big deal.

Of course, communication between the executors is going to deteriorate even further if one is evicted as discussed above. Hopefully she will be removed entirely from her executor role, as otherwise future decision-making between the three is going to be a nightmare. None of this is good for the estate, but this is the kind of thing that happens when people make a poor choice of executor.

Proceed with caution: Executors do some heavy lifting

Several months ago I spoke with Elyse Umlauf, a reporter, but it wasn't until today that I came across the article she wrote based on our interview.

The article talks about 8 things you should consider when choosing an executor. Then, just to round out the topic, it talks about 5 things you should consider before saying yes when someone asks you to be their executor. It has tons of good information so if you want to check it out, click here to be taken to the Canadian Newsletter for www.seniorsrealestate.com.

Executors beware - it's not an easy job

Those of you currently acting as executors are finding out the hard way just how tough it is to look after an estate and to keep everyone happy. Being an executor is, quite simply, much harder than anyone realizes until they have to do it.

I'm attaching a link - click here - to a recent Globe and Mail article that talks about how hard it is to do a good job as an executor, and why it's so hard. I am one of three people who were interviewed for the article, so any comments you'd like to leave about the article are, as always, appreciated.

Son who stole 150,000 from his father's estate for luxury lifestyle is jailed

How many stories are out there about greedy, negligent or incompetent executors? It seems that we hear more and more of them all the time. Every time I see one, I want to share it here as an example of what can go wrong if you don't choose your executor well. As the attached story from www.dailymail.uk.co shows, choosing one of your children isn't necessarily a good idea.

In this story, a man named his son as his executor. The story describes the 45-year-old son as "jobless". Obviously being unemployed by itself doesn't necessarily mean anything about whether the person would be a good choice of executor, unless being unemployed was a chronic condition for that person. I often see parents who want to appoint their children as executors, despite the children having serious, chronic money problems.

Not only does it make no sense to appoint someone who has demonstrated his or her inability to deal with finances, but you must also realize that you are dangling a tempting carrot in front of someone who may see the estate as a way of relieving fierce financial pressures.

Click here to read this story. You will see just how easily someone can drain an estate, and how easily they can justify their own actions. I hope it will make even one person think twice before appointing an unsuitable son or daughter as their executor.

Tips and thoughts on hiring an executor

As regular readers of this blog know, I am always going on about how important it is to select an executor for your estate with care. I am always urging you to put some real thought into your choice for this role. I've come across an article in http://www.capitalmagazine.ca/ that delivers a similar message, but also contains tips and ideas for making that choice. Click here to read the article.

You'll notice that the title of the piece is "hiring" an executor, not "bestowing an honour upon" an executor. The title sets the tone for the article by recognizing that being an executor is a tough job and you need to place the right person to get the job done.

Something I didn't see in this article that I think is very important is the need to name an alternate executor who will take over if your first choice has passed away or for some reason can't or won't take on the job. Unless you're naming a trust company as your first choice, you should name an alternate.

Will the judge remove the executor if I apply to the court?

The majority of the questions I received this week were from beneficiaries who are fed up with the executors in charge of estates in which they are involved. They said the executors are terrible and the beneficiaries want to go to court to have the executors removed. I can see their point. An awful lot of executors really are doing a terrible job, and some will no doubt be removed. I'd like to take a few minutes to take a closer look at this idea of a beneficiary applying to the court to remove an executor.

It's an uphill job. Nobody should think that getting an executor tossed out of an estate is quick or easy. First of all, there are two sides to every story (actually there are probably more like ten) and the court process for dealing with testimony can be lengthy. Assuming that the executor objects to being booted out of the job, there may be affidavits filed, counter-affidavits filed, examinations on affidavit (in-person cross examination of what you said in your affidavit) held, undertakings given. This could take months.

The real obstacle to removing an executor is the fact that he or she was chosen by the deceased. If a judge removes the executor, the judge is in effect re-writing part of the will. They don't take that lightly; in fact judges will make every effort to uphold the terms of the will as much as possible.

If you apply to the court to ask that the executor be removed, the judge has more options than simply saying yes or no to that request. In fact, the lawyer that helps you bring your application to court should know this, and suggest some of those less drastic options that might work for you as a back-up in case the judge does say no. The judge may try to get things back on track with the current executor.

For example, if the problem you're having with the executor is that she simply will not give any information and you believe that money has gone missing, the judge might order a passing of accounts. As another example, if your complaint is that the executor is simply dragging his heels and isn't doing anything at all, to the detriment of the estate, the judge might impose a deadline for taking certain steps. Depending on the issue, the judge could order the sale of a house, direct mediation between certain parties or set executor's compensation.

Keep in mind that if you're proposing that an executor be removed, you'd best have a replacement in mind. The best option would be an alternate named in the will, if there is one. The judge may not think that having an estate with no executor is good for the estate, and having nobody in charge definitely isn't going to resolve your concerns.

This is not to say that it's impossible to remove a rogue executor. It certainly does happen. It probably needs to happen more often than it does. Sometimes in the really egregious cases the executor ends up in jail either for theft from the estate or for contempt of the judge's orders. In other, less dramatic, cases the executor isn't jailed but is released from his or her duties, perhaps with costs assessed against him or her by the court.

I look at this as a positive thing. Yes, I'm a born optimist, I know that, but look at it this way. Maybe the only thing you can think of to fix a broken estate is to remove the executor. Seeing an experienced lawyer and getting in front of a judge brings you face to face two very knowledgeable people who can help you with that estate. They will suggest solutions that you might never have thought of.

Civil contempt and the wayward trustee

Here is yet another story about an executor who chose not to follow the rules, including court orders directing him to pass his accounts. Yes, he ended up in jail for refusing to pass his accounts, but this article by Jason de Vries of http://www.allaboutestates.ca/ describes what the beneficiaries had to go through to achieve that. It sure takes persistence to bring some of these wayward executors to heel.

How to leave a substantial estate in safe hands

Who have you appointed as your executor in your will? Did you consider appointing someone other than your spouse or children? There is a new article in the Globe and Mail that talks about alternate choices, including a trust company.

Having worked for a trust company for the last four years, I've answered many, many questions about how a trust company works. The first thing people ask me is how much it costs to have a trust company as an executor. Almost everyone is surprised to learn that a trust company charges the same fee that any executor - such as your kids or friends - can charge. The difference is, we have expertise!

If you've ever wondered whether a trust company is a good choice for you (or perhaps your parents), click here to read the Globe and Mail article for some good information and ideas.

Can the lawyer who writes the will be an executor? How much can he charge?

The relationship between lawyers and executors is in theory pretty simple. The executor represents the estate and hires the lawyer to give legal advice and to prepare probate documents. However, in practice there is often confusion among clients, executors and beneficiaries as to the role the lawyer is supposed to play. The following question, which is really a group of separate but related questions, was sent to me some time ago by a reader. Because this reader's questions are those I hear so often in my work, I thought everyone would be interested in the answer.

The question:

Can a lawyer who writes up a will also be an executor of that will? Also, can he claim fees as both a lawyer and as the executor? And who decides how much the executor receives? If there are two executors, do they both get the same amount? Are there any limits to executor fees?

Certainly a lawyer who writes a will can be an executor of the will. There is no conflict there. However, if the lawyer who writes the will is also a beneficiary, that's a problem. Over the years I've met a handful of elderly people who are so grateful for help and attention that they have wanted to leave me something in their wills that I prepared for them. I've never accepted this, and I never will. Even if I knew for sure I hadn't influenced them in any way, the optics of the situation would be terrible.

At the time the lawyer drew up the will, he or she would have billed the client legal fees for that service. If the client later passes away and the lawyer is the executor, the lawyer can only charge executor's fees and not legal fees for the executor work.

Having said that, you must realize that an executor normally hires a lawyer to prepare probate documents, and pays the lawyer legal fees for that. If the executor is a lawyer, it is acceptable if he or she hires himself or herself (or their office, partners etc) to do that. The lawyer can charge legal fees for the probate work. This is not charging legal fees for the whole estate; I am referring to the steps involved in preparing the probate documents, filing them, going to court if necessary and obtaining the Grant of Probate.

The billing and recording of the lawyer's time on the estate might be complicated, as the lawyer is filling two roles. The executor's rate of pay and the lawyer's rate of pay are likely quite different, and will be billed and paid at different times.

As for who decides how much the executor receives, I wish more people addressed this in their wills. If there is an amount or a percentage stated in the will, that is how much the executor will get. The will rules. The majority of wills, though, don't say anything about executor's fees. When nothing is said in the will, the executor calculates how much he or she thinks is appropriate, based on time spent, complications (missing beneficiaries, overseas beneficiaries, missing assets, etc), size of the estate (bigger estate = more responsibility), number of beneficiaries, any losses the executor may have caused to the estate, and similar factors.

The executor asks for this amount by including it in his or her final accounting that is presented to the residuary beneficiaries at the end of the estate. If the beneficiaries agree, they sign off and the executor [ays himself or herself out of the estate.

If the beneficiaries don't agree, and believe me they frequently don't, they can attempt to negotiate the fee with the executor. If that is unsuccessful, the amount of executor fees must be set by a judge. Keep in mind that no beneficiaries can be paid their shares until this question is resolved, because nobody will know what the judge is going to decide.

There are limits on how much an executor can charge (where there is no guidance in the will). Each province and territory has a Trustee Act that says something about fees, but in many areas it only refers to a "fair and reasonable fee", which is certainly open to interpretation. The courts have dealt with this frequently and clearly, and the range of "fair and reasonable" is interpreted as between 1% and 5% of an estate.

The final question is whether two executors split a fee equally. Yes, they split the fee, but the split should only be equal if the amount of work done by them was approximately equal.

Can a lawyer be executor, power of attorney and witness?

When a client sees his or her lawyer to talk about wills, powers of attorney and health care directives, a good deal of time is (or should be) spent talking about who the person wants to act on his or her behalf. Someone has to be named as executor of the will. Sometimes a person other than the executor is appointed trustee of certain trusts under the will. Sometimes a guardian has to be appointed for minor children. Then of course someone has to be appointed as the Attorney under the power of attorney, and as Agent under a health care directive.

The choice belongs to the client. The lawyer will make sure that the choice falls within legal parameters, and hopefully will also share the benefit of experience with previous client estates. From time to time a client will ask the lawyer to act as executor or power of attorney. Most of the time, the lawyer will refuse. Despite a public suspicion that lawyers will act as anybody's executor for the money, let me tell you that the time and headaches of being an executor far, far outweigh any fee a lawyer might collect. Most of us will rather stand on our heads underwater for an hour than act as an executor for a client, and would rather stay under there permanently than act under a power of attorney.

Regardless, it does sometimes happen that the lawyer accepts the appointment, usually because there isn't anyone else and nobody thinks of using a trust company. The following query was sent to me by way of e-mail by a reader and captures many of the questions people have when lawyers are appointed:

"What if a lawyer wrote the will which makes him executor of the will, and then the lawyer is the power of attorney for that person? Does the will become invalid as he also signed as a witness of the will?"

It is perfectly alright for a lawyer to prepare a will which appoints himself as executor. Having the lawyer act as witness to the will is not best practice, in my view, but it does not invalidate the will. The optics are not good when one person fills this many roles. A lawyer always needs to be aware of ethical responsibilities to clients, such as maintaining impartiality and it can appear that the lawyer was not impartial in a case like this.

Obviously I don't know the circumstances of the signing of this will, but I'm imagining a situation that was very short on time or physically remote or in some other way made it difficult to bring in an independent witness. There is also the possibility that the lawyer and the client were personal friends and that the lawyer took on these roles as a friend who just happened to also be a lawyer. No doubt the lawyer's file is thick with pages of notes on why the will and power of attorney were done this way; I know mine would be.

If the will leaves any money or goods to the lawyer as a gift, the will is still valid and so is the executor appointment but these gifts will be void. This is because he acted as a witness. The same rule applies to anyone who witnesses a will.

If you're considering asking your lawyer to be your executor or your power of attorney, check out a trust company first. They are cheaper than you think and very experienced with estate matters. You'll also avoid this kind of situation where one individual is taking on the role of lawyer, executor, trustee, power of attorney and witness.

Literary executor of Wm Faulkner's estate doing exactly what he is supposed to do

As I love most classic literature I was pleased to see that a reputable production company has signed a deal with HBO and the literary executor of the estate of William Faulkner, Nobel prizewinner and author of several important novels and short stories. Click here to read the story in http://www.huffingtonpost.com/.

As an estate planning lawyer, I was even more pleased to see that Mr. Faulkner's literary executor is doing exactly what he is supposed to do. How wonderful to hear about an estate success story rather than a headline-grabbing disaster!A literary executor is one who is named in a will to be the custodian of literary works and incidental items such as copyrights, book-to-movie contracts, foreign rights, sales, etc that arise from the literary works.

The literary executor is not necessarily the executor of the deceased's entire estate, though he could be. The literary executor is often chosen because of his knowledge either of the deceased's creative works or his knowledge of the literary world, or both. A similar role may be assigned to an executor for a painter or craftsperson or anyone who creates works of imagination.

Any novelist, story-writer or other creative artist should consider appointing a literary executor for his or her own estate.

The attached photo of Faulkner by Creative Commons was found on the Huffington Post website noted above.

One executor? Or should I have more?

I'm always telling my readers that they should put some careful thought into their choice of executor, so I was glad to see the following question from a reader who is obviously weighing his or her options. Here is the question:

"What is your opinion in having more than one executor named in a Will vs.one?"
Let me start by saying that there is no one right answer to that question that will suit everyone. My experience over the years has been that when there is more than one executor, they are usually siblings. This is not often a good idea simply because of the friction that develops between them.

That doesn't mean that multiple executors is never a good idea. An idea that is becoming more popular is naming a trust company as a co-executor with a spouse or child of the testator. That combines the expertise of the trust company with the family knowledge of the spouse or child. That is most often very successful.

There are some things you should take into consideration when making your decision about whether to go with one executor or more than one. First of all, ask yourself why you feel you need or want more than one. Is it because you suspect that one of the people couldn't really handle the job? Do you think it's too much work or too complicated? Do you feel that one of them might just need someone to keep an eye on him? Or are you afraid to offend someone by leaving him or her out? If you are honest about your motives, you might just find your answer staring you in the face.

If you're afraid that the job is too complicated for the person you have in mind, then he or she is not the right person. It's as simple as that. You won't be around to offer that person help or advice, so don't put anyone in charge who is going to fold under pressure or be so overwhelmed that they simply walk away from your estate.

If you feel that the person needs someone to keep an eye on them, again, this is not a good choice for you. I can't even begin to describe the number of executors I've seen who have ignored the will or parts of it, or who have dragged an estate out for years because it was to their financial advantage. Why put someone in charge if you suspect they might be unreasonable or bull-headed or even dishonest? Having a co-executor working with that person only means an unending fight and won't solve the problems that the first executor will create.

Many parents automatically name both or all of their children as their executors. They tell me they do this because they want to treat the children the same and not favour one above the other. They even expect the children to work together as executors when one lives in another country or province. In some cases their will states that if the children as beneficiaries can't agree on who gets which items, the executor will decide. But if the children are the executors, then who decides? A better solution is to name one child as the executor (choose the oldest, or the one with a job in law, or the one who lives closest, for example) and name the other as the alternate. The alternate executor takes over if the first named executor refuses or for some reason is unable to act as executor.

Having stated the possible downside of having more than one executor, I am compelled to point out the drawback of having only one. Having just one might create a whole different set of problems, largely because lay executors tend to inadvertently create problems for themselves. These are usually mistakes such as ignoring parts of the will, or withholding information from the beneficiaries. This type of mistake happens because executors in general don't have a good understanding of their role and their limitations.

So, what's the answer? One or more than one? It will depend on who you have available to you, and how the various parties get along. Be realistic about how any given candidate handles money and how he or she communicates with others. Try to leave behind outdated ideas such as "honouring" someone by naming them as your executor, and make a truly business-like decision. Who is the best candidate(s) for the job?

Can I be removed as co-executor because I live outside the country?

The rights and duties of an executor continue to be a mystery to most people. I'm still learning new things about estates after 25 years on the job, so I know how tough it is to fully understand what you are supposed to be doing or not doing.

The following is a question received here on my blog that I believe will interest a number of readers, as so many of you are executors yourselves:

Can a family member who you were co-listed as Executor and Power of Attorney remove your name due to the fact that you live out of the country?

Whenever a question about rights under a document arises, the first place to look is the document itself. It's not unusual for a will to state that if an executor or co-executor lives outside of the country, he/she loses the right to act as executor. While this might appear that it's the co-executor who is removing you, it's really a matter of the executor following what's in the will. Ask for a copy of the will and Power of Attorney so that you can check on that.

When you are named in a will as an executor, or named in a Power of Attorney as an attorney, in law this is considered a benefit, in that you've been given a right. The person who named you gave you the right to administer the estate, or to administer his/her finances while he/she is incapacitated. That person had his/her reasons for choosing you. This is not something that a co-executor or co-attorney can decide; the document states who is in charge and if the co-executor or co-attorney doesn't like it, he/she can choose not to act. Having said that, I can tell you that I've seen a huge number of co-executors and co-attorneys try to re-write the testator's wishes by deciding that a different arrangement would be "better". Unfortunately that only means better for them, not necessarily better for the estate. They get away with it simply because nobody challenges them.

Assuming the will and Power of Attorney that appoint you are valid, you have a choice not to accept the appointment if you think it will be too difficult from your location. You would sign a Renunciation form that would remove you. However, this is something you choose to do, not something that others choose for you.

Don't be victimized by estate abuse

This article from http://www.canadiancapital.ca/ talks about the estate of Paul Penna, in which millions of dollars went missing in the hands of a group of executors. Click here to read the article. While I agree with the article's conclusion that the choice of executor is crucial, I don't agree with all of the opinions and recommedations given by the people quoted in the article. In any event, it's an excellent article and contains plenty of food for thought.