Serving as an executor of someone’s estate involves taking on difficult responsibilities – usually at the same time the executor is dealing with the loss of someone close. As a trusted financial advisor, you can play a crucial role in helping these clients as they face the many challenges involved in settling an estate.
Indeed, from your client’s perspective, you can be a lifeline. “The advisor can fill that function of guiding [the client] at a time when [their] whole life is fractured and [they’ve] suddenly picked up a part-time job they didn’t really want,” says Keith Masterman, vice president of tax, retirement and estate planning at CI Investments Inc. in Toronto.
Whether a child of a recently deceased client has come into your office to talk about his or her parent’s portfolio or an existing client who has suddenly found himself or herself named as an executor after someone has died wants to consult you, you can provide information, advice, referrals and general support. It’s important to note that advisors usually are prohibited by regulation from serving as executors for their clients. However, you can act as a trusted source of counsel and guidance.
“Too many investment advisors miss that this is a great chance to build a relationship or to cement one, and just treat it as ‘I can tell you what the estate is worth and that’s it’,” Masterman says. “That’s so narrow-minded, because there’s so much you can do.”
One of the first things you can do for your executor clients is point out that they have the right to renounce the appointment as executor if they feel that they don’t have the time, the skills or are otherwise not up to the job. Not only does serving as an executor involve a lot of work, but executors assume personal liability in the role and could even be sued by beneficiaries if they feel the executor hasn’t done his or her job properly.
“They really should give [accepting the role of executor] careful consideration,” says Leanne Kaufman, head of estate and trust services at RBC Wealth Management, a division of Royal Bank of Canada, in Toronto. “While many people consider being named [executor] an honour, once they’ve completed the myriad tasks that are associated with being an executor, many people – when questioned if they would do it again – don’t put their hand up.”
Notably, if a client has already begun to act as an executor by taking on tasks such as signing documents and dealing with assets, he or she might be considered to have assumed the role and thus lose the right to renounce that responsibility.
“You can make the funeral arrangements and you can ask a few questions about what’s in the estate, and you’re still safe,” says Christine Van Cauwenberghe, assistant vice president of tax and estate planning at Investors Group Inc. in Winnipeg. “But you shouldn’t be identifying yourself as the executor [until you’ve made your decision].”
If your executor client hasn’t already contacted a lawyer, you should suggest that he or she do so, preferably a lawyer with a specialty in estates. Depending on the complexity of the estate – if the deceased owned a business or rental property, for example – your client may need to consult an estate accountant as well.
“There’s a lot more sophistication to estate planning, and that can lead to further complications in the settlement of estates,” Kaufman says.
Beyond estate lawyers and accountants, your client also may need to be referred to a variety of other professionals to help him or her administer the estate properly. For example, your client may require the services of a property manager to ensure that a vacant home is maintained or of an appraiser to value property.
“The advisor is in an ideal position to identify which professional can address an issue, and refer the executor to somebody who can help them,” says Mark O’Farrell, president of the Canadian Institute of Certified Executor Advisors in Brampton, Ont. You should develop a comprehensive set of trusted contacts to whom you can refer clients who are executors, he says.
You also can counsel clients against making common executor mistakes, such as not keeping proper financial records or not understanding which assets form part of the estate. “We’ve seen situations in which executors just start handing out personal effects and various items without properly looking at the will,” Van Cauwenberghe says. Actions such as these can lead to conflict if the item was designated specifically for someone else in the will. “You need to look at the will very closely.”
You also are well positioned to give advice on how to handle the deceased’s investment portfolio. To begin with, you can look over the portfolio and determine which assets can be safely retained and which should be liquidated as soon as possible in order to “de-risk” the portfolio.
“An executor has a duty to minimize risk [to the estate’s assets],” Masterman says. “An advisor can take a deep look at a portfolio, and say, ‘Your dad was holding some risky assets. I think you should sell them. And if you can’t sell them yet because you don’t have probate, you should at least inform the beneficiaries so they know the risk.'”
You can help to ensure that the estate is distributed in the most tax-effective manner, Van Cauwenberghe says. For example, if the will includes a charitable gift and the estate holds publicly traded securities that have large unrealized capital gains, the executor may be able to arrange to have those securities given to the charity instead of cash. Donations of publicly traded securities to a registered charity result in an inclusion rate of zero on capital gains, resulting in tax savings for the estate.
You also are in an ideal position to offer financial planning and investment advice to beneficiaries, as well as the executor, on amounts they receive through the settlement of the estate. “The most important role that a financial planner plays is helping the beneficiaries manage what, in many cases, is a large windfall – a large sum of money – that the beneficiaries might not be used to managing,” Van Cauwenberghe says.
However, you shouldn’t forget all the “softer” services you can provide to client executors. For example, you can offer families the use of a boardroom to set up a family meeting to discuss the estate, Masterman suggests: “People don’t live near each other anymore. There’s a death, and now everyone’s hitting this little town where the senior lived, and the family doesn’t have a place that’s convenient to meet. Offer your boardroom.”
Helpful advice, referrals and other services that you provide to your executor clients at this time will be remembered and appreciated long after the estate has been settled.
“Few people are executors for total strangers,” Masterman says. “[As an executor], you’re going through a hell of a lot of emotion, and you’re just looking for anyone to give you direction.”
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