By Erin Kelley, LL.B
Very important factors to consider
So, you’ve decided to sit down and create an estate plan. That’s step one. Step two, involves providing a lawyer with instructions for your estate plan. When you speak with a lawyer, one of the first questions you’re asked is “who do you want to administer your Estate?” This person is called your estate trustee (formally called executor/executrix), and while this seems like a simple decision, it is important to think carefully about who you choose to act in this role.
In an article published last issue, Raymond Murray detailed the duties of an estate trustee. Some of these duties include:
• Locating and reading your Last Will;
• Gathering, safeguarding, and actively managing your assets;
• Determining all debts and liabilities of your estate, and ensuring these debts get paid before all funds are distributed from the estate, including the payment of income tax liabilities;
• Keeping your beneficiaries informed throughout the administration of your Estate;
• Consulting with a lawyer and obtaining a Certificate of Appointment of Estate Trustee from the Court, if required (formally called probate);
• Consulting with an accountant to file all tax returns on behalf of the Estate, including your final personal tax return; and
• Distributing your assets according to your Will,• once all debts are paid, and the estate trustee has received a Tax Clearance Certificate from Canada Revenue Agency confirming no further income taxes are owed.
The role of estate trustee comes with great responsibility—choosing the right person is an important decision. Here are three important factors to keep in mind when choosing your estate trustee:
The characteristics of your estate trustee
The first thing to consider when choosing an estate trustee is who in your life is equipped to handle the responsibility of administering your estate. The role involves a significant amount of time, effort, and often, stress.
Your spouse or partner may seem like the obvious choice and in many cases, they are, but consider what role your significant other currently plays in the relationship. Are they involved in the management of your individual or collective finances? If your spouse typically leaves these tasks to you, or finds them overwhelming, they may not be the best choice for your estate trustee.
Another factor to consider is the age of your spouse. If advancing age has led to health challenges, for example, that’s another factor to consider. Your spouse may not be at a point in their life where they can take on the extra work involved in being an estate trustee. Overall, regardless of who you appoint, the ability of this individual to be organized, manage and liquidate assets, communicate effectively, and adhere to deadlines are all important traits required of your estate trustee.
Family dynamics
In my view, this factor is critical to avoiding estate disputes after your death.
You think, I have two children, I should appoint them both, right? I don’t want one to feel left out. In most cases, choosing two estate trustees (or any even number of trustees) is not the recommended course. Naming two trustees together increases the litigation risk for your estate. If the two estate trustees cannot make a decision together, their recourse is to bring the issue before the courts, unless the Will sets out a third-party arbitrator to be the tie-breaker for any disputes.
If you appoint one child, choose the child who a) has the characteristics to complete the estate administration tasks, and b) who can communicate clearly with the rest of the beneficiaries. It is important that your estate trustee is someone who knows your wishes well and can keep the beneficiaries informed throughout the estate administration.
These considerations, would of course, apply equally if you were trying to decide between nieces and nephews, or other family relations, when choosing an estate trustee.
If the family dynamics are such that you worry, regardless of which family member you choose, you may want to consider appointing a professional trustee, such as a trust company. Your estate pays professional fees for this service, but it can be a sound investment if the alternative is an increased risk of estate litigation. Appointing a friend, rather than a family member, is another way to bring neutrality into your estate administration, but their expectations around compensation should also be discussed to ensure they are motivated to accept the appointment when the time comes.
The location of your estate trustee
Location also plays an important role when determining who to name as your estate trustee. If you live in Ontario and your named estate trustee lives outside of the province, they will be required to post a security bond before the Court will confirm their appointment under the Will (i.e. grant a Certificate of Appointment of Estate Trustee). The Court also has jurisdiction to waive this requirement—and often do so with the consent of all beneficiaries. However, the Court can always refuse to exercise that discretion and insist a bond be obtained. Furthermore, even when the requirement is waived, there are still additional legal fees charged to your estate in preparing an application that includes a request to waive the bond requirement.
Therefore, it is often desirable to appoint an estate trustee who lives in Ontario, provided this person is otherwise a good candidate, based on the other considerations outlined above. But the personal characteristics of your estate trustee should ultimately be much more influential factors in the decision.
Erin Kelley is an associate lawyer with the Ottawa law firm of Nelligan Law (nelliganlaw.ca) and a member of the Estates Law practice group.
NOTE TO READERS: THE VIEWS OF THE AUTHOR DO NOT NECESSARILY REFLECT THOSE OF COYLE MEDIA GROUP . THIS ARTICLE IS PROVIDED AS A GENERAL SOURCE OF INFORMATION ONLY AND SHOULD NOT BE CONSIDERED TO BE PERSONAL INVESTMENT OR LEGAL ADVICE, OR A SOLICITATION TO BUY SERVICES. READERS SHOULD CONSULT WITH THEIR FINANCIAL OR LEGAL ADVISOR TO ENSURE IT IS SUITABLE FOR THEIR CIRCUMSTANCES.
