Bob Simpson: Welcome to our series of podcasts, Plan your Estate outside the box. We are here to talk about estate planning in a friendly and informal way. My name is Bob Simpson and I’m here with Nicholas Meyer, director of business development at estate stewards, inc. Nicholas is a trust and estate practitioner.
Nicholas has an extensive experience in the trust business and the family office. Business. He’s been helping families and family offices in Canada and internationally with the appropriate structuring for their wealth and their family. Having worked with many different clients. Nicholas understands how unique each family is and how complex the family dynamics can be.
Especially when dealing with the settlement of an estate. He is very passionate about the work that he does for his clients. Now, why do we make these podcasts? Our main and primary goal is to help you to preserve family harmony and what we call intergenerational peace of mind. This is our passion. This is our mission.
We will share with you our stories, our experiences, and our knowledge. Let’s kick off the discussion and welcome Nicholas to this podcast. Then let me ask you a really broad question to kick things off. What is it that an executor does?
Nicholas Meyer: Thank you Bob for this introduction, as the name says, the executor is in charge of executing, your will. So in a nutshell, the executor is in charge of ensuring that your instructions, which are set out in your will, will be executed. That is the main and general duty of an executor.
Bob Simpson: What are the duties? That’s a good description of what an executor is, but what are the duties of an executor?
Nicholas Meyer: There are several duties that an executor must perform actually an executor can perform up to 600 tasks in order for an estate to be fully settled.
I would say the main duties of an executor is A to contact their beneficiaries to gather all information in the documents regarding the value of the estate. To ensure (if it’s needed) the preparation and the filing of the probate application, and also to ensure the safeguarding of the assets whilst the estate is in the process of being settled.
And, for example, the sale of certain assets, the typical one is the home. If the home is now vacant because the spouses have both passed away, one of the first duties of an executor. Is a to ensure it’s properly insured and put it on the market if it has to be sold. So these are some of the duties.
Another one, which is absolutely crucial is to ensure the preparation of the final tax return because each deceased person has to file what we call the terminal tax return. This is the duty of the executor. And which requires a lot of information and lots of documents. So it’s quite a burdensome task to complete.
Bob Simpson: Those are the duties of an executor. Let’s talk briefly about what are the responsibilities of an executor. Sounds like, kind of a, sounds like kind of a cushy job where maybe it’s, you know, is that a good way to cut in on somebody will? If you’re not a beneficiary of the will, that you can get assigned to be the executor that you can actually make some money?
Nicholas Meyer: Excellent question. No, the executor has a fiduciary responsibility. What does it mean? They have to act in the best interest of the beneficiary and to treat them equally, unless, the will provides something different, but very often not the case. So the executor has treated the beneficiaries equally and has to act in the best interest, which means that there’s a high level of duty for the executor.
This is a very important responsibility of the executor, really very important. And one thing I would like to add that a lot of people are not aware of. Is that the executor is also liable on his or her own assets regarding the good fulfillment and implementation of the tasks, which are assigned to him. So executors better be very careful as to what they are trying to do and what they have to do when they’re performing their duties.
They are liable and let’s put it this way. They’re on the hook until the estate is fully settled, especially from a tax standpoint. So yes, this is an important duty. This is very serious and it has to be taken very serious.
Bob Simpson: When I look at that as a list, Nicholas and I see the word duties, responsibilities, and liability.
Why would somebody want to be an executor of a, will? Do they get paid for that?
Nicholas Meyer: It’s a great question. Well, very often people ask us their spouse to be their primary executor. We will be the executor of each other. This is a very common and very good setup, except that people get a bit older and they might not want to act as an executor when they’re 80 or 85.
As you said, there are a lot of duties, a lot of responsibility, a lot of liabilities. And let’s put it this way. Most of the people are not aware of that. So very often they think that it’s an honor order to be an honor to be an executor, it might be an honor. It is also a burden so people must really understand the full extent of their duties and responsibilities.
Now in terms of the compensation, what people are usually not aware that they can as a rule of thumb, this can vary from time to time, depending on the circumstances, but as a rule of thumb in Ontario an executor can claim compensation at the end of the process, up to 5% of the value of the estate.
And it is a very good question, which is never asked essentially, Oh, I’m going to ask one of my friends to be the executor. Great, very often this request is made on the implicit assumption that this task will be performed for free. I don’t think that should be assumed at all. This is a relatively lengthy task.
It can go be 12 to 18 months if people are still working well, basically they’re doing that on top of their work. I don’t think that you can assume in any event that this task is going to be performed for free and they often it’s very ambiguous. So perhaps if you ask you your children to act as your executor, well, you can say, well, anyway, they might.
Get a share of the inheritance. So they will not claim for compensation. It’s like normal. They, they do this work, but you cannot assume that it will be made for free because it’s not a small task. It’s a very serious task which is rather time consuming.
Bob Simpson: Yeah. So when a guy delivers a pizza to my house, I usually give him up, you know, two or $3 tip.
If you’re a beneficiary of a will, should that person be tipping the executor?
Nicholas Meyer: You know, it’s, it’s a complicated question because if this question of the compensation has not been discussed. Whilst the testator was alive. That can be a perfect area for litigation. Let’s assume that, there is no agreement from the beneficiaries with regard to the compensation of the executor.
Then the executor will have to pass the accounts before court to have the accounts approved by the court. So as usual, that, what does it trigger? Additional delays, additional costs. So whomever you appoint as your executor, this question should be addressed at some stage. You can, for example, say in, your will that if it’s a beneficiary, who is the executor, well, you’re getting some one way or the other share of the estate.
You don’t need to be compensated for that. As usual in these cases, it should be very clear. You should have that discussion before, not after, because after it’s always late. So. Have that discussion. And perhaps you can, to a certain extent assume that this work does not trigger any kind of compensation when it is a beneficiary who is the executor it can certainly not be assumed when we’re dealing with a friend with a person who is not a beneficiary.
That is again, a sort of gray area, which is likely to trigger some unpleasant discussion.
Bob Simpson: If I’m a beneficiary of an estate and I’ve been appointed the executor. Is it a good idea when you’re structuring the will to discuss compensation for the executor? Because that one person may be doing all the work and then getting an equal share of the, uh, of the estate.
Is it a good idea to cover that when you’re setting up your will?
Nicholas Meyer: Yes, for sure. And this is one of them. One of the traditionally complicated areas, because people don’t want to talk about that because already too often, people are not wanting to discuss these sensitive issues. with their children. So let’s assume that they have appointed their, uh, their two children are their co-executor.
Well, they usually will not discuss, compensation, which is not an issue. If the two co-executors are the only beneficiaries. But if there is another beneficiary that can trigger an additional complexity, you know, Bob, as a matter of principle, it’s always better to talk about money issues openly.
I know it’s not a pleasant discussion and I’m not sure I have ever seen a family. who are pleased to have that discussion, but it’s quite a fundamental. Because to have that discussion, while people get along are still alive and are capable of having this discussion? Well, it can avoid a lot of hassle, but a lot of also of potential litigation.
And seeing that also in terms of being able to have that discussion, because let’s say the parents are in their sixties and seventies, they can still, if they’re in a relatively good health, have this discussion when they’re 90, 92, 93, it’s too late. It’s just too late. So it’s a discussion which has to take place sooner rather than later. And unfortunately, people tend to procrastinate and get to the point it’s too late. And when students too late, or if people lose capacity, it’s done, once a person has lost capacity, especially can no longer make a will, but nobody can make a willl because an attorney for property has got a lot of power, but has not got the power to make your will.
But once the person has lost capacity, it’s over, unfortunately. So yes, please have that discussion likely over a dinner. Or over a cup of coffee in the most relaxed environment that will make things so much easier for the executor. Whoever is the person with this operation.
Bob Simpson: So what you’re really saying is the best time to have this discussion is, is now, or that, you know, to use, our tagline here, that people should really think outside the box and not wait until they’re in the box to make these major decisions.
Nicholas Meyer: As you say It’s better not to wait till you are in the box to have that discussion. Now, the timing is a very good question. I must say. And obviously you cannot have a discussion with young children, but parents tend to underestimate, I will say the capacity of their children because children realize quite quickly, especially with a teenager, that they have a relatively good lifestyle, but at the latest in their early twenties, they have capacity of having that discussion.
So typically when you have young adults, Oh, and you have parents who are still relatively young. This is a perfect timing too, to say this have the discussion and the parents saying, well, this is what we would like to do. We would like to appoint a X, Y, or an entity or professional executor, or whomever is the executor.
And we would like also to share the estate as follows as it’s quite often where all the assets to the surviving spouse and then upon the death of the surviving spouse to the children, but to make it clear. But if there is gift for charities, that should be clearly a mentioned if there’s intention to give, uh, no cash of small cash legacy to a nephew, for example, that should be mentioned because they will get to know it one way or the other.
But if beneficiaries learn the content of a will, when the testator has passed away. It’s the worst time better to have that clear and clearly set out while everybody’s alive in good shape. Absolutely. No doubt about that.
Bob Simpson: Yep. So just in, in recap then Nicholas, what I hear as a couple of things, you know, going back to the big words that, that you discussed.
Which were duties, responsibilities, liability? Is it an honor or is it a burden? Sounds like it is a lot of work. It could be, an executor and, that you really need to give a great deal of thought before you’re in the box about, who you want to have as your executor and whether that that person is capable of.
So, thanks for sharing this today, Nicholas, and thanks to everybody for tuning in to this episode of Plan your estate outside the box. We hope that you found information valuable. If you have questions or suggestions for future topics, we’d love to hear from you. Send us an email at info@estatestewards.com.
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