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. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. My posts are blunt, opinionated and even have a twist of humour/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, August 8, 2016

The Best of The Blunt Bean Counter - Speak to your Executor - Surprise only works for Birthday Parties, not Death

This summer I am posting the "best of" The Blunt Bean Counter blog while I work on my golf game. Today, I am re-posting an oldie (all the way to August, 2011) on speaking to your executor. Even though this post is five years old, it is still as relevant today and when I first posted it.  My advice: speak to your executor to not only inform them they have been appointed, but to let them know where you keep your financial information, so they do not have to play a game of hide and seek in administering your assets.

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 some 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 (you may be able to negotiate a lower rate); however, in some cases, paying the executor fee is worth the independence gained by having an arm's length person administer the estate, despite the associated fees.  

The take away from today’s blog is: (1) you must seriously consider your selection of an executor and their personal characteristics (2) once you have made your selection, I would strongly suggest you discuss their appointment with them and (3) provide them a summary of your assets (or at least where to find such a summary should you pass away).

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.

No comments:

Post a Comment