Should You Consider a Corporate Executor?
A growing number of boomers are facing the deaths of parents, siblings and long-time friends. Many are being asked to take on the responsibility of being executor of an estate.
BMO Financial Group conducted an online poll targeting Canadians aged 45 and older with investable assets of $500,000 or more (including real estate). It revealed that 85% would appoint a family member as the executor of their will and 7% would appoint friends.
It’s a trusted position, often considered a great honour, and most people want to appoint someone close to them.
Boomers underestimate executor duties
It’s not easy being an executor. Most people don’t appreciate how complex, demanding and time consuming this can be at an emotional time. Unanticipated problems do arise, and the time and effort required is always greater than it may first appear.
The study showed that almost half of Canadian Boomers appointed as executor have experienced administrative complications. And a third had emotional or legal problems. But, despite the difficulties of the role, 65% said they wouldn’t hire a professional to help them or weren’t sure if they would.
Choosing the right executor is a key step in estate planning. Ensure the executor you appoint is equipped to handle the task and is willing to act on your behalf.
Why you should consider a corporate executor
A corporate executor can provide you with peace of mind knowing that your estate will be settled efficiently and responsibly by an experienced team of professionals. They can be found at financial services firms and the trust division of your bank.
Here are a few reasons it may be right for you:
- Your family situation is complicated, e.g. second marriages, children from previous relationships.
- You don’t know anyone who has the time or right skill set.
- Your family doesn’t live close to you.
- Your finances are complex.
- You want to set up an ongoing trust for minors.
- You anticipate disputes over assets.
- You have a business that needs to be wound up.
- You hold assets in another province or country.
A corporate executor or trust company provides continuity for things like long term trusts or financial care for disabled beneficiaries. If the trust officer managing your estate or trust account is unable to continue, the trust company is still the executor and can assign an appropriate person to your account.
You could appoint a corporate trustee to serve as co-executor of your will along with a family member or a friend to ease some of the burden and provide support.
They can assist as much or as little as you desire. You could take advantage of their expertise on specific issues only, or simply hand the entire job over to the experts.
Corporate executor compensation
Corporate executors have a fee schedule that includes a minimum fee for the services related to administering your estate and based on the gross value of the assets passing through your will.
A typical fee schedule is:
- On the first $500,000 – 5%
- On the next $500,000 – 4%
- Excess over $1 million – 3%
A minimum fee is generally $15,000 plus tax.
In addition to executor fees, there might also be charges for preparing tax returns, providing business advisory services (for a private corporation or small business) real estate commissions, investment management and reasonable out-of-pocket expenses. There might also be corporate executor fees if your will sets up a testamentary trust and names a corporate trustee.
You might be able to negotiate fees especially if your investments are held in a financial institution affiliated with the trust company or consist primarily of a principal residence. It doesn’t hurt to ask.
Also, ask the corporate representative what services are included. They might include estate planning, asset and will review, an estate consultation – as well as administering your estate after death.
Hiring a professional may seem expensive, but the fees could be well worth the cost in cases involving large, complex or potentially contentious estates.
Related: How to Minimize Probate Fees
The bottom line
When you are appointing your executor, it’s important to appreciate the amount of work you will be asking the executor to undertake and not underestimate the responsibility. Think it through before making the final decision.
Some people delay writing or updating a will because they don’t know who to name as the executor, or when naming a family member or close friend is not an option.
The BMO study found that only 1% of Canadians over 45 have appointed a trust company as the executor of their will.
The fact is, you might be doing your family and friends a big favour by relieving them of the burden altogether.