This month’s blog post was co-written by Brodie Kirsh, Associate at Aird & Berlis LLP, and Justin Irwin, Trust Officer at Cidel Private Bank.
When preparing an estate plan, there are many factors to consider such as tax efficiency, cross-border issues, beneficiary designations and family dynamics. However, it is also essential to think long and hard about your choice of executor (referred to as an “estate trustee” in Ontario). While advance arrangements are incredibly important, you should be cognizant of the fact that unexpected things may happen. Seeking advice from legal and other professionals can help you anticipate issues that may arise from your choice of executor. The following scenarios aim to illustrate what can go wrong with a choice of executor and why professional assistance can be beneficial.
Scenario 1: The Unreliable Executor
The deceased prepared a Will naming her son as executor. After she died, her son was convicted of a crime and sentenced to prison and so was unable to act. The alternate executor named in the Will was also unfit to act. The Will was misplaced and, with neither named executor able to act, the Estate went unadministered for two years. The Estate’s debts and expenses went unpaid, and the bank that had provided the deceased with a secured line of credit took possession of her house and sold it for below market value. To resolve this situation, the family’s lawyer applied to the Court to prove a photocopy of the Will and be appointed as executor. As a result of the delays in administration, the value of the Estate was significantly reduced by taxes, legal fees, and bank fees.
As showcased with this example, it is important to consider all an individual’s qualities and behaviors to determine whether there are any ‘red flags’ that might arise in the course of an estate’s administration. If you are unsure of whether your choice of executor would be a good fit, choosing a professional trustee may be the better option to ensure proper and consistent estate administration. Additionally, a professional trustee will be able to hold the original Will in a safe and secure location to avoid the challenges of proving a lost will.
Scenario 2: The Family Dispute
The deceased in this scenario left a Will naming one of her three children as executor. When the chosen executor was unable to act, poor communication between the three children caused delays before another one of the children was appointed as executor. Once appointed, the executor paid off the mortgage owing on the deceased’s real estate and completed significant repairs and renovations to sell the property. Unfortunately, sour relationships between the siblings provoked a series of disputes over the Estate. These included the amount the executor paid for professional services and other estate expenses, and a variety of issues involving loans and gifts to the siblings during the deceased’s lifetime. The disputes needed to be resolved via lengthy and costly litigation.
As evidenced in this example, appointing a family member to administer an estate, particularly when one sibling is appointed over another, may cause aggravation and exacerbate any existing disagreements within the family. Professional trustees, however, are not personally invested in the estate or the family’s affairs and are unlikely to have a potential conflict of interest. If you anticipate that family issues may cause future discord, it may be prudent to appoint a professional trustee to act as executor over a family member.
Scenario 3: The Complex Estate
The deceased died in Ontario without a Will. None of his immediate family lived in Canada, and no other family member would be an obvious choice to act as executor. Beyond the logistical difficulties, the deceased had a complicated Estate for a variety of reasons: (1) he was the majority shareholder of a business and the executor needed to determine the value of the shares to be bought out by his business partners, (2) he owned property outside of Canada, meaning that it would be necessary to deal with foreign jurisdictions, and (3) the deceased was involved in litigation before his death, which the executor would need to resolve. Given this state of affairs, none of the deceased’s family were eager to act as estate trustee.
When someone has a complex estate, it may be challenging for friends and family to administer. Rather than burdening those closest to you with a complex estate administration, a professional trustee may be in the best position to effectively administer your estate due to their specialized knowledge and expertise. Every person’s needs are different when it comes to estate planning and administration. As seen in the above examples, thinking ahead when it comes to your choice of executor can help you avoid many problems and save significant costs. If there is no suitable choice in your family or group of friends to act as executor, or if the estate will be complex or high conflict, then a professional trustee can provide the necessary experience, diligence, and impartiality. It is important to discuss these scenarios with a range of professional advisors such as lawyers, accountants, and wealth managers to ensure that there will always be a suitable executor who can continue the administration of the estate and any trusts that are included in your Will.
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