Naming an executor to carry out the administration of an estate and the distribution of its assets is a decision many people take too lightly, says Clay Gillespie, vice president and portfolio manager at Rogers Group Financial Advisors Ltd. in Vancouver.

“The work, time and legal responsibility can be huge due to the advent of more complex tax laws in recent years,” he notes. “Make sure your client appoints an executor who understands the responsibilities and who is up to the task.”

A family member may not always be the best choice to act as sole executor, says Carol Bezaire, vice president of tax and estate planning at Mackenzie Financial Corp. in Toronto. The job is a demanding one, she says, that commences upon your client’s death and starts with arranging or approving the funeral in consultation with the beneficiaries. It then involves obtaining all benefits payable to the estate, settling the bills of the estate, preparing and filing income tax returns for the previous year or years, and a final return for the year of death.

Ongoing responsibilities also are demanding. An executor may be named as the guardian of minor children. “And executors are responsible to the beneficiaries of the estate for any mistakes they make,” she says.

Gillespie tells the story of an executor who found this out the hard way: “One of my clients was the executor of another client’s estate,” he says. “The will said half the estate went to Charity A and the other half to Charity B. The executor eventually sent out two cheques, but then Charity B said it wanted a full audited accounting of the estate. Because all the money had been disbursed, it cost the executor $5,000 out of his pocket for the accounting.”

A financial advisor who discusses estate planning with a client will first want to ensure the client has a professionally drawn-up will; complete, accurate financial records; and instructions on where to find these documents. The advisor will also want to suggest the client appoint as executor a person who can be trusted to carry out their wishes. The closest relative may not be the appropriate person. “And it’s best to name someone living in your client’s city to avoid running up huge courier bills,” says Gillespie.

Have your client ask the potential executor if he or she is willing to take on the role, Bezaire suggests. After the client’s death, the person named as executor can still refuse, Bezaire says, but once executors start the work, they are on the hook unless they become incapacitated. If your client’s executors find they need help, you can suggest hiring an “agent for executor” specialist at a trust company who can do the filings and provide legal advice.

“A solution that’s becoming increasingly popular,” she adds, “is for your client to appoint a family member as well as a professional such as a lawyer, accountant or an agent for executor. The professional’s fees will have to come out of the estate, but the cost could be well worthwhile.”

And your client should have a contingency executor named, in case the person named predeceases the client or is incapacitated at the time of the client’s death. “If there’s no contingency executor, the court would step in and allow a family member to apply to administrate the estate,” Bezaire says. “But this could take several months, during which time the investment portfolio would be in limbo.”

Professional administrators will charge a percentage of the value of the estate; non-professional executors are permitted to collect fees, which differ from province to province — except in Quebec, where they are entitled to compensation only if that is stated in the will. Executors’ fees in Ontario are 5% of the estate.

Financial advisors are often asked by their clients if they will act as executors. “It’s not a good idea,” Bezaire says. “There is the potential for perceived conflict of interest. If you are making commissions on the investments in the client’s portfolio, the beneficiaries may think it is not in your interest to speed up the payout. If a client has no family or friends to appoint, have him consider a corporate executor.”

“Why would you want to open yourself to legal liability?” Gillespie adds. “Your client trusted you with his financial affairs, but that person’s beneficiaries don’t necessarily have that same bond with you.”

@page_break@Financial advisors should know who the client’s executors are, Bezaire says, and offer their services to them upon the client’s death. “You will be able to tell them the steps to take and where to take them,” she says. “This will help build a relationship between you and the beneficiaries.”

And, she notes, advisors should ensure that their clients have everything in place to make their executors’ jobs as uncomplicated as possible. “The executor should know in advance where instructions for disbursement of personal effects and all other necessary documents are located,” she says. The executor should also have a copy of the will in advance so that he or she knows the client’s funeral wishes and can proceed with arrangements immediately after death.

“Have your client eliminate a lot of grief for the executor by sitting the family down and telling members who the executor is and why he or she was named, what the client wants to happen after death, including what kind of funeral, and who gets what personal effects,” Gillespie adds. “It’s the heirlooms that often cause the family quarrels: who gets Grandfather’s clock and the silverware.” IE