Anna is exactly the right choice for the Smith family as alternate executor. She lives close to them. She has the time. She is responsible. Her brother would have been good for the job too, but he lives in Vancouver and is really busy.
Who should you appoint as executor of your estate?
Most people pick a family member, such as a son or sister. Other people pick friends, or close business associates. Some ask a professional adviser, such as family lawyer or accountant. Still others pick a trust company.
There are advantages to picking a family member. A spouse, child, brother, or other family member will know your affairs. They can clean out your house and identify family heirlooms. If they are a beneficiary, then they are interested in the outcome. They want to get the money out of the estate as quickly as everyone else does.
A family member may not be a good choice if your affairs are complex and he or she will not have the skills for the job. That might be the case if you have a business, or if the family members available to you are young and inexperienced. A family member may be a poor choice if you see the possibility of a fight among the beneficiaries.
Should the executor live in the same city as you do? It is generally more convenient. There can be a lot of leg work. An executor who lives outside of Manitoba may have to fly in and out more than once. Appointing an executor from a different province is possible, just inconvenient.
Appointing an executor from a different country is real trouble however. First, the executor will generally be forced to post a bond. That bond is usually placed through an insurance company. That by itself is a good reason to pass over someone outside of Canada.
There is a second reason. As a rule, an estate is taxed wherever the executor happens to reside. If you appoint a child who lives in the United States to be your executor, your estate will be governed by U.S. income tax laws.
Inside of Canada, that same rule can work to your advantage. If you pick a child who lives in Alberta, then any income earned on estate assets will be taxed in Alberta under lower tax rates. For some estates, the savings can be significant.
You can appoint joint executors to serve together or a single executor to serve alone. Which is better? If one person has all of the skills, then one person alone is generally a good idea. Having two executors doing everything together doubles the work.
Sometimes a team does make better sense. Different people bring different strengths to the job. One might know your business affairs and the other your personal affairs. Together, they can do a better job.
Every executor is entitled to a fee. Family members tend to charge less. Friends and extended family tend to charge more. Trust companies and professional advisers charge the most.
Fifty years ago, it was common to appoint the family lawyer to serve as an executor. Things have changed. Most lawyers will now refuse the job. Professional advisers are often too busy, and it is not their normal work.
Trust companies are a popular choice. They have professionals on staff that do nothing but administer estates. They are good at it. A trust company will charge significant fees, but you get what you pay for.
A trust company is an option only if your estate is going to be substantial. Many trust companies will not agree to serve as executor unless the estate is projected to exceed $500,000.
The Smith family is real but names were changed to protect identity.
Next month's column: The bizarre tale of the "knickerbockers trust."
John E. S. Poyser is a lawyer with the Wealth and Estate Group at the Winnipeg firm Inkster, Christie, Hughes LLP. Contact him at 947-6801 or firstname.lastname@example.org.