Much has been written about the importance of making a Will to ensure your estate is administered in accordance with your wishes, and benefits those whom you wish to inherit your property. However, your choice of executor, or estate trustee, as the role is now called in Ontario, is just as critical. Your estate trustee is the person or persons appointed in your Will to administer your estate and carry out your wishes. Your estate trustee has many duties to fulfill, as Justin de Vries recently blogged about. The decision should not be taken lightly, and should be discussed with the lawyer you have retained to prepare your Will. Here are ten things to keep in mind when making your selection.
- Your estate trustee is a fiduciary: This means your estate trustee is in a position of trust towards your beneficiaries, must put the interest of beneficiaries ahead of their own and must act in good faith. Choose someone with the right character to take on this duty.
- Your estate trustee is accountable to your beneficiaries. Your estate trustee may be called upon to account for their actions in administering your estate. Choose someone who is trustworthy, reliable and financially responsible.
- Your estate trustee should reside in Ontario: It is easier for your estate to be administered by someone who lives close by. In addition, a non-resident estate trustee may be required to pay a bond which is typically twice the value of the estate.
- Your estate trustees should be able to work together: You may choose to appoint more than one estate trustee, such as some or all of your children, your spouse and children, or perhaps a professional trustee and a family member. When appointing multiple estate trustees, consider the dynamics and the possibility for conflict between your estate trustees, how decisions must be made between them, and whether decisions require unanimity or a majority vote. Your Will should be drafted accordingly.
- Your estate trustee should not have an acrimonious relationship with your beneficiaries: Consider the relationship between your chosen estate trustee(s) and the beneficiaries of your estate, and whether any pre-existing tensions could be exacerbated upon your death, and/or the fact that your estate trustee may also be a beneficiary of your estate. If you are concerned about a potential conflict, it may be prudent to reconsider your choice of estate trustee.
- Your estate trustee is entitled to take compensation: Unless your Will provides otherwise, an estate trustee’s compensation is calculated as 2.5% of receipts (all value received by the estate, including assets as of the date of death), 2.5% of the disbursements (all payments out of the estate, whether to pay liabilities or to distribute to beneficiaries), plus 2/5th of 1% of the average annual value of the assets as a care and management fee.
- Your estate trustee may renounce the appointment: Consider the possibility that your estate trustee may be unable or unwilling to act as your estate trustee upon your death, and may renounce the appointment. As such, you should consider discussing the appointment in advance with the person you choose to confirm whether they are agreeable to the appointment.
- You should appoint alternate estate trustees: In the event your estate trustee dies before you, or is unable or unwilling to act, you should consider the person or persons you wish to act instead.
- Your choice of estate trustee should have regard to the length of the administration: If your estate will involve a lengthy administration, such as where trusts are to be established of long duration on behalf of a minor or other beneficiaries, consider the age and stage of your chosen estate trustee and whether they are wiling and able to take on duties that may last for years.
- Your choice of estate trustee should have regard to the complexity of your estate: If your estate is uncomplicated, a trusted lay person should be up to the task of administering your estate. If your estate involves significant transfers of wealth, tax issues, trusts, corporate assets and/or foreign assets, then a professional trustee may be better suited for the role.
Administering an estate is no easy task and much work is involved. Ultimately, a prudent choice of estate trustee should give you the peace of mind that your estate will be in good hands upon your death.