An executor is the person appointed to carry out the provisions in a will, including distribution of the estate. A trustee is the person appointed in a will (in the case of testamentary trusts) or other trust document (i.e., an inter vivos trust) to administer a trust for the benefit of other persons.
The role of executor of a will or trustee of a trust is often
thought to be an honour and a great privilege—after all,
these important roles reflect an idea of implicit trust in the
nominated individuals which allow them immense legal powers.
However, as will drafters, we often re-contextualize these roles
simply as a job, and like all jobs there are qualities that an
executor or trustee should ideally have, which may include:
financial literacy, knowledge relating to the testator or settlor
and beneficiaries, neutrality, geographic proximity, rationality,
and time availability.
In addition to the foregoing qualities, the determination of who
should act as your executor or trustee should include a careful
assessment of whether or not you should have multiple executors or
trustees. For example, a highly complex estate, including one that
spans multiple jurisdictions, may warrant multiple executors. In
contrast, including all your children as co-executors/trustees
solely to maintain fairness may not be the best choice.
Pros of Multiple Executors and Trustees
1 Built-in Checks and Balances
When multiple executors or trustees are appointed, they must act together. Third-party institutions, like banks, will often require the signature of all named executors to permit an action. Multiple executors or trustees are not only beholden to the document appointing them but to each other such that no action should be taken without consultation among all of them. Therefore, the risk of one individual going rogue or acting contrary to his or her fiduciary obligations, and in the worst-case scenario misappropriating estate funds, is reduced.
2 Varied Skillsets & Sharing the Work
With multiple executors or trustees, your estate or trust can
benefit from everyone's skillset. By appointing multiple
persons with distinct aptitudes, you can better ensure that
specific aspects of your estate or trust will be managed
appropriately and by those genuinely interested and skilled in the
task.
You can also appoint an individual to carry out specific tasks,
such as a digital executor to manage your digital assets (e.g.,
social media profiles, cryptocurrency, computers, websites). A
technologically competent person may ease the administration of
your estate. These benefits are even more apparent if the
individuals you appoint are professionals; a family member who is
also an accountant or a real estate agent brings his or her
expertise to the table without needing to hire third-party
professionals.
3 Inclusion of Corporate Trustees
In Canada, the big six banks each have trust subsidiaries that act as executors or trustees along with several non-bank owned private trust companies. Clients are often wary of using trust companies in these important roles because of the assumed impersonal nature of a corporate entity. However, by appointing co-executors/trustees you can have the benefit of a family member or friend looking after more personal matters while a trust company handles the day-to-day matters and financial and accounting tasks, easing the burden.
4 Residency of the Estate or Trust
At law and specifically for the Canada Revenue Agency (CRA) an
estate is considered a trust. All trusts are deemed to be resident
where their real business is carried on, which is where the central
management and control of the trust actually takes place (generally
where a majority of trustees/executors reside).
If you would like to have a non-Canadian resident solely act as
your executor or trustee, you would be placing the central
management and control of the trust outside of Canada. Therefore,
the trust may be subject to tax consequences in a foreign
jurisdiction and/or lose the tax benefits it may have in
Canada.
Multiple executors or trustees help in such cases, as you can
appoint a non-resident co-executor/trustee along with Canadian
resident co-executors/trustees (including a Canadian trust company)
to ensure the controlling mind of the trust remains in Canada.
Similarly, including a power in your document to allow executors
and trustees to add additional co-executors/trustees provides added
flexibility to ensure this planning mechanism is available for your
trust at the relevant time should there be a need.
Cons of Multiple Executors and Trustees
1 Conflict and Delays
Multiple executors or trustees means multiple opinions. While a
well-drafted will can provide express direction on certain matters,
on others an executor or trustee will need to exercise his or her
discretion or make a decision. If those who you appoint must act
together, there will be inevitable delays when there is
disagreement on how to handle a matter.
Conflict management provisions may be included in your document,
such as a majority rules provision which allows a majority decision
to be made as binding, as opposed to a unanimous decision or a
right of veto to one or more specific executors or trustees (often
with protections for the dissenting co-executor/trustee).
But in some situations, these provisions can become convoluted and
regardless a delay in administration occurs. Further, if you name
all your children to act, you may think they will get along but
when you are not there to supervise, things can often fall apart
and in the worst-case scenario result in estate litigation to
remove a co-executor/trustee.
2 Fees and Compensation
In Ontario, executors and trustees are entitled to be
compensated, the amount of which can be stated in the will or trust
document, otherwise it will be necessary to obtain beneficiary or
court approval of compensation. By appointing
co-executors/trustees, the amount of compensation provided may need
to be increased to ensure that all individuals receive a sufficient
amount—which is a cost borne by your estate or trust.
If a trust company is to be appointed, it is imperative that you
negotiate a fee agreement, which can be incorporated into the will
or trust agreement or provide that your other co-executors/trustees
may negotiate such fees at the relevant time before appointing a
trust company.
3 Practical Difficulties
As mentioned, co-executors/trustees must act together. This can
become difficult if they are not all located in the same
area—physically attending the bank or other institutions to
sign documents can be impractical. Although the digital age allows
for meetings to take place or documents to be signed virtually,
many executors are surprised that wet signatures or in-person
attendance at a financial institution for identification purposes
is still often required. Coordinating meetings among individuals
can often become its own challenge.
Every estate is different, so an assessment of the pros and cons
of incorporating multiple executors or trustees in your estate plan
should be made on a case-by-case basis. Generally, the more complex
or high-value your estate or trust, the more likely it will benefit
from the advantages of having multiple executors or trustees.
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.