My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned.

Monday, August 15, 2011

Speak to your Executor-surprise only works for birthday parties, not death

In my blog series on being named an executor (So you want to be an executor, You have been named an executor, now what? and Is a corporate executor the right choice?) I discussed many of the issues an executor may face. In the second blog noted above, I talked about the overwhelming responsibility one assumes upon being named an executor and the obligation I feel you have, to discuss a person’s appointment as executor of your will, with them. In today’s blog I want to expand on this topic further.

I have dealt with numerous estates where the executor(s) floundered, notwithstanding the fact they were provided direction. Where an executor(s) flounders or spins their wheels, the ultimate beneficiaries suffer in two ways: (1) Their financial entitlement is often delayed months if not years, and (2) that entitlement may be reduced because of poor investment decisions or non-decisions made by the executor.

Where an executor is in over their head, I place the blame solely upon the deceased. Many people do not take the proper amount of time to consider the personal characteristics of the executor(s) they have selected. What I consider most objectionable is that many people never provide the executor(s) with the courtesy of notice of their potential appointment. In addition, many do not even attempt to meet with their executors to discuss their potential duties and whether they feel comfortable being named as an executor. Jim Yih discusses the characteristics he suggest you consider in an executor is this blog

As noted above, I consider the personal characteristics of a potential executor to be of the utmost of importance. I would suggest a potential executor should (1) have some financial acumen, (2) not stress easily, and (3) be somewhat anal.

At the risk of stereotyping, I have been involved with a couple executors who were more artistic than financial in nature and they were overwhelmed with the position. In my opinion, the reason they were overwhelmed was that their personal characteristics were the complete polar opposite of those characteristics I recommend an executor(s) possess. Years ago I had a very high strung person named as the executor of an estate and they essentially shut down for over a year due to the stress of the job and the estate sat in limbo.

This is not to suggest that an artistic person cannot be an executor or a co-executor with a financial person, but I would suggest that before naming such a person, you sit down and explain the duties of an executor to ensure that they feel they can handle the job.

In many cases, people name their children as executors. I have no problem with doing such; however, you must look at each child’s personal characteristics and the sibling dynamic to determine whether they can handle the job as a group or whether you have to name only one or two of your children as executors. I think many people would name executors from outside the family if the potential executor fees did not approach up to 5% of the estate; however, in some cases, paying the executor fee is worth the independence gained by having an arms length person administer the estate, despite the associated fees. 

I have observed so many executors who were in over their heads, that I am now considering offering my services as an executor, or some kind of executor assistance to my clients, but I digress.

The take away from today’s blog is: (1) you must seriously consider your selection of an executor and their personal characteristics and (2) once you have made your selection, I would strongly suggest you discuss their appointment with them.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

6 comments:

  1. Hi, Mark

    Most people do not realize the amount of work required to be an executor. With proper accounting and legal advice, the job can be made somewhat easier. However, many of my executor clients often complain to me that had they known what they were getting into, they would have declined to act. It should be noted that an executor named in a will is not obliged to act;he or she can renounce the position. But once a person takes any step as an executor , for example making funeral arrangements or notifying creditors, it is too late to renounce.
    Executors also face potentially huge liabilities if they do not do a competent job. I recommend to my executor clients that they look into obtaining executor's insurance which is a relatively new product that has been introduced. See www.erassure.com

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  2. Charles, thanks for your informative comments. I recently read about executor insurance, so thanks for providing the link.

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  3. hello...my mother passed away 2 wks ago. her will named my 3 sisters and i as co executors. my three sisters have banded together to exclude me in all matters to do with her estate. they made all the arrangements, divided my mothers personal affects and withdrew her money from her account. this was all done within 2 days of her passing. i have not received a copy of the will, nor do they intend me to. i received nothing from her tiny estate, not even a momento. they denied me anything of hers, also my 2 daughters were denied a momento also. they asked for a pair of glasses and 1 of her nightgowns. i am at a loss as how to handle this greediness and what seems to me to be a blatant disregard for the law. i don't know what to do next! can you give me some advice? (the lawyer who held her will has refused to do the estate. i found out from her that all 4 of us are equal co executors)...thanks, brenda

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    1. Hi Brenda, I am sorry to hear your story, although I have seen this happen before and it is not that unusual in different variations. I am not an estate lawyer, but if you had an entitilement under the will, your sisters appear to have broken the law and you should seek out an estate lawyer for advice. Unfortuantely, if the estate is not large, the cost could become prohibitive. However, I would pay for at least an initial consultation to understand your rights as a beneficiary and the remedies you may have under the law.

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  4. My roommate has just discovered her grandmother named her as executor of her will. Her grandmother died in September 2011. She's obtaining a copy of the will and is working with the family lawyer to find out what's happened, but she has no clue what's already happened to the estate. Is she held liable, even though she was never notified (her extended family ceased contacting her after her father (her grandmother's son) died a few years ago)?

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    1. Sorry, this is a legal issue and beyond my expertise. Your roommates lawyer should be able to advise her and if not, she needs to engage an estate lawyer.

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