What are the duties of an executor?
An executor carries out the terms of your Will and administers your estate. The executor is responsible to collect assets, satisfy estate debts, file income tax returns and pay taxes owing, pay legacies, carrying out bequests of property such as real estate and personal effects, and finally distributing the remainder of your estate to those named under your Will.
The difference between an executor and a trustee.
An executor settles the estate whereas a trustee is involved only if there are continuing trusts under the Will (as opposed to an outright distribution). The trustee must manage any trusts in the Will until they terminate in accordance with the terms provided therein. A trustee looks after such things as management of your investments, income and capital distributions and tax compliance.
Usually the same person(s) act as both executor and trustee.
When choosing your executor, bear in mind that your Will only comes into effect on your passing. During your lifetime, your Will may be amended to reflect your changing situation.
Number of executors
The number of executors often depends on who has a financial interest in your estate. You may only need to appoint one executor if that person is your sole beneficiary – and if he/she is able to carry out the role. If there are many beneficiaries, having more than one executor is usually advisable for financial accountability. Also, having at least two executors ensures that there is continuity if one dies or is not able to act.
If more than one executor is appointed, they must unanimously agree on any decisions. To avoid deadlock, your Will could well include a clause to allow for majority rule. This provision can also include a requirement for one or more named persons to be in the majority thus giving him or her a veto.
Your Will should usually also provide a mechanism to name replacement executors to ensure there is always a sufficient number. This can be done by giving a specific person the power to appoint additional executors.
The law of each province allows for executors to claim compensation, but if the amount is not fixed in the Will it is subject to court discretion. This can result in disputes. Consider, therefore, whether there should be express provisions in your Will to deal with the amount of compensation, if any.
Issues arise under our tax rules if an executor is not a Canadian resident. One possible problem is that the tax residence of an estate is considered to be where its “mind and management’ is located, which may give rise to a tax problem. As well, if an executor is not a Canadian resident, a bond or other security may have to be posted to protect the beneficiaries. This can, in some cases, be reduced or dispensed with by application to the court which, of course, increases costs.
In appointing their children to be executors, it is often assumed that siblings will all work together. Sometimes power dynamics can change after parents die and arguments can arise among family members. Having an executor who is not a family member could be a solution.
Choosing your executors requires a careful consideration of all these factors.
© The foregoing provides only an overview and does not constitute legal advice. You are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained in the context of your own particular circumstances.