The first blog in my executor series, discussed the concerns the Globe and Mail had in respect of the estate tax system and in particular, some of the issues surrounding the Paul Penna estate. The problems associated with Mr. Penna’s estate, highlight the importance of considering a corporate executor in certain circumstances.
In my second blog, I discussed the duties and responsibilities of an executor. These responsibilities can often overwhelm the appointed executor(s); which again leads back to today’s guest blog on whether a corporate executor is the best choice for estates that will have unsophisticated executors?
Today, in the final installment of this series, I have a guest blog by Heni Ashley. Heni is a lawyer with over 20 years experience in the estate and trust industry, who brings a unique perspective to this issue. I thank Heni for her contribution and her advice and guidance on the prior two blogs.
Is a Corporate Executor the Right Choice? (By Heni Ashley)
I have read Mark’s two prior blogs and the Penna estate article with great interest. The Penna estate, in my opinion, was just the type of situation where a corporate executor should have been considered.
What exactly is a corporate executor? Corporate executor services in Canada are available through incorporated trust companies, which are typically subsidiaries of our national banks.
Had Mr. Penna appointed a corporate executor, his bequests would have been carried out and the estate’s finances would have been tracked diligently and accurately.
In my opinion, a corporate executor provides an estate with the following:
1) Professionalism, knowledge, expertise. Knowledge in the area of estate, trust and tax law is invaluable, as is expertise in asset gathering and valuation, property management, investing and accounting.
2) Impartiality. A corporate executor can manage conflicting interests (i.e. second marriages), difficult personalities and bring an objective, unemotional approach to the estate administration.
3) Availability. The corporate executor is always there. There is no need to worry about an out of town executor, or an executor dying or becoming incapacitated or physically unable to carry out the task.
4) Ease of administration. There is no worry about unduly burdening a family member, friend or associate as the job of an executor can be difficult (depending on the size of the estate and the personalities of the beneficiaries) and time-consuming (depending on the nature of the assets).
5) Continuity/permanence. A corporate executor can provide the continuity needed for certain family situations such as an ill or incapacitated spouse or minor or disabled children where there is a need for long term trusts and financial care.
6) Cost efficiency. The personal executor can charge the same fee as a corporate executor. Often a fee agreement can be negotiated with a corporate executor at the time that the will is drawn. Also, a corporate executor often eliminates the need to hire additional outside experts, which results in a cost savings to the estate.
Notwithstanding the above, had the deceased in the Penna case given thought to using a corporate executor, there are a few reasons why he might have decided against it:
1) Impartiality (which can sometimes be viewed as indifference to family): Some people are concerned that a corporate executor will be indifferent to the needs of the beneficiaries. This objection, however, can be overcome by jointly appointing a corporate executor together with a personal executor who can shed some light on the personal circumstances of a deceased’s family. The two executors can then act as a check and balance against each other. Another way to deal with this is to leave a detailed memo together with the will, explaining to all executors the reasons for certain bequests and discretionary powers (i.e. to help a child get established in business, to see a particular charity get off the ground, to provide the best of care for a sick spouse, etc.)
2) Knowledge: A testator (the person making a will) may have a knowledgeable professional relative, friend or colleague who is willing to act as an executor (although Mr. Penna thought he had such a person).
3) Cost: While a personal executor can take the same fee as a corporate executor, in many cases he/she will not take the maximum fee because he/she feels it is excessive (the fee can be as high as 2.5% of the assets coming in and 2.5% of the assets going out as well as a fee on income earned by the estate and a care & management fee).
I would suggest it does not make sense to engage a corporate executor in the following circumstances:
1. Where the estate is very small,
2. Where there are only a few well defined beneficiaries,
3. Where the gifts are all outright (i.e. no long term trusts to be administered), and
4. Where the assets are all very straightforward (e.g. one or two bank accounts or brokerage accounts, no real estate).
In summary, each situation is as unique as the individual parties involved. Some beneficiaries are never happy no matter what, whether it is with their bequest, with someone else’s bequest, with the choice of executor, the manner in which the estate is administered … Often childhood jealousies surface to complicate matters – families can be difficult and the job of an executor is rarely an easy one!
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.
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