Insurance is a fundamental component of estate planning and in our field we often review existing wills or make referrals to lawyers to draft or revise wills for clients. Perhaps one of the most significant tasks in authoring a will is the appointment of an executor.
I’m amazed at the lack of care in the selection process. Perhaps a lot of this has to do with education, and we as financial advisors really need to do a better job ensuring an adequate selection is made. Quite often clients will appoint their spouse, children or friends… just because.
The executor of your will has a tremendous amount of responsibility to not only ensuring your assets are gathered and distributed according to your wishes, but to assist in the minimization of tax consequences as well as pay off any indebtedness.
Sally, your childhood friend knew everything there was to know about you and knows exactly how you’d like for your lifelong savings to be dispersed amongst your loved ones. Although she’s a sweetheart, Sally has never had any experience settling an estate. Moreover, she hadn’t filed her own taxes in the last couple of years, is terribly unorganized, and is extremely busy in her own right trying to establish her career and raise a family.
Perhaps your estate consists of your home, a rental property, a RRIF, maybe even some business interests. Would you still be confident in Sally’s action (or inaction) to file your estate’s terminal tax return, collapse your retirement account, etc, etc? Probably not.
Many individuals quickly nominate their spouse. However, what if those business interests were fairly complex and your spouse was ill-equipped to handle the many transactions involving your business and estate? Or perhaps you’d had children from a previous marriage, and nominating your current spouse might create conflict when you pass.
Also, be prepared and have a backup. If Sally were to have smartly realized she wasn’t the right one for the job, or if she was out-of-province at the time of your passing, having named an alternate executor would have been a smart idea too.
Regardless of the size of the estate, choosing the appropriate executor whether it be a family member, friend, or a professional executor, is very much a personal choice. You worked hard building those assets over a lifetime! Ensure your executor doesn’t erode your estate and consult your lawyer on recommendations in the selection process.