What does an executor do?
An executor "executes" your will, carrying out the terms of your will and administering your estate. An executor is responsible for collecting assets; satisfying debts; filing income tax returns and paying all taxes owing; paying legacies (cash amounts provided in your will); carrying out specific bequests of property, such as real estate and personal effects; and distributing the remainder of your estate to those entitled under your will.
Executors and trustees: what's the difference?
The executor role is confined to "settling" the estate, whereas the trustee role applies if there are continuing trusts under the will (as opposed to an outright distribution). The trustee role includes managing any trusts under the will until they terminate in accordance with the terms provided by the will. The trustee looks after investment management, income and capital distributions, annual tax compliance, and maintaining accounts for each trust. You may appoint one person to act as both executor and trustee, or you may want to choose different people for each role. When choosing an executor, there are specific legal and tax considerations as well as qualitative considerations. Bear in mind that a will only comes into effect on death. So long as you are capable, your will can be changed at any time to reflect your objectives. Throughout your lifetime, your will may change to reflect your changing situation – and your choice of executors.
Legal and tax considerations
AGE:
An executor must be, at a minimum, the age of majority. There is no
legal upper age limit unless a will provides one. It's
important to ensure that your executors are sufficiently
financially mature, for instance, when considering appointing a
younger person to the role. If your potential executor is of
advanced age, you will want to consider their ability to carry out
the role in the future.
NUMBER OF EXECUTORS:
The number of executors will often depend 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 that person
is able to carry out the role. Where there are multiple
beneficiaries, having more than one executor is generally
advisable, for risk management and financial accountability. Having
at least two executors ensures that there is continuity should one
executor die or not be able to complete the administration of your
estate. Having multiple executors allows you to build a
well-rounded executor team: some with technical and financial
skills, others with knowledge of, and relationships with, the
family and beneficiaries.
DECISION-MAKING:
Where more than one executor is appointed, the legal rule is that
all executors must unanimously agree on any decisions. To
facilitate decision-making (and avoid deadlocks), your will can
include a majority decision clause to allow for majority rule. This
provision can also include a requirement for one or more named
persons to be in the majority, effectively giving them a veto.
REPLACEMENT AND ADDITIONAL EXECUTORS:
Your will can also provide a mechanism to name replacement
executors to ensure there is always a sufficient number to allow
appropriate succession of the executorship. Your will can also give
a specific person the power to appoint additional executors.
COMPENSATION:
Each Canadian jurisdiction allows for executors to claim
compensation, but the amount is often not fixed and is subject to
court discretion, and this can result in disputes and legal fees.
It is important to consider whether there should be express
provisions in your will to deal with compensation. If you wish to
compensate your executor, you should state the amount of
compensation, whether this is determined through a formula, a fixed
amount, an hourly rate based on time spent, or a combination of
these approaches.
NON-RESIDENT EXECUTORS:
Complex issues arise under Canadian tax rules if an executor is not
a Canadian resident. The tax residence of an estate is considered
to be where its "mind and management" is, which is often
– but not necessarily – where a majority of executors
reside. As well, if an executor is not a Canadian resident, some
jurisdictions require a bond or other security to be posted to
protect the beneficiaries. This bond can, in some cases, be reduced
or dispensed with. It's important to get legal advice to
address these considerations. There are also issues with U.S.
resident executors being able to give instructions on investment
accounts with certain Canadian financial institutions if they
aren't licensed to provide investment advice to a U.S. resident
under U.S. securities rules.
Other considerations
CHARACTER:
In appointing your executors, you are giving them full control over
all that you have spent your lifetime building. You want to choose
someone who is trustworthy, impartial, and fair.
BUSINESS RELATIONSHIPS:
A business partner may not be an appropriate choice if they have an
economic conflict with your estate and its beneficiaries. An
executor must act only in the best interests of your estate and its
beneficiaries. Business and financial acumen are important, and
some or all of your executor team should have these skills. Equally
important are willingness, interest, and availability to take on
the role of executor.
FAMILY RELATIONSHIPS:
In appointing their children to be executors, many people assume
that the siblings will all work together. But realistically, power
dynamics often change after parents die, and fractiousness can
arise among family members. Having a neutral executor who is not a
family member may be a solution. Neutral executors can include a
family friend or one or more professional executors, such as a
professional adviser or trust company.
In conclusion
There's no license or qualifying course to become an executor, and yet the role has enormous responsibility, as well as liability. It's becoming increasingly complex, given changing laws and tax rules. Choosing your executors requires you to keep in mind a number of factors. Making a careful, informed, and thoughtful choice will give you the peace of mind that you have done your best for your family and those who will be your beneficiaries.
Previously published in Queen's Alumni Review (circ. 130,000 hardcopies).
Originally published May 2020.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.