The article “Who to name as executor when family members aren’t an option?” was originally published in MoneySense on February 21, 2023 . Photo by Cottonbro Studio from Pexels.
It’s not always possible or beneficial to name a family member or close friend as executor in your will. Here’s when you should consider a professional or trust company.
“We are told to have a will, but what do you do if you have no family, or if you do, they reside overseas?
To our surprise, we learned that the big Canadian banks offer executor and power of attorney (POA) services. It’s not well advertised on their websites.
We have interviewed two banks. The fees and structure were very similar. We are still drafting papers with the lawyer and including the bank.
Our executor died recently, so with great urgency we needed to redo our will and POA. By picking an institution, first death as an alternate to surviving spouse and second death, doing everything, we feel we have covered what needs to be covered.
I would love to read anything on using a Canadian bank as your alternate executor, alternate attorney, executor and/or attorney.” Gwenna
Our team member Maria Tanel is a P1 paralegal licensed by the Law Society of Ontario, notary public, and commissioner of oaths. She has over 25 years of experience working with executors to manage their estate, wills and deal with probates.
Naming an institution as executor or power of attorney
Every adult Canadian should have a will that is valid and up-to-date. The primary party to name in a will is the executor, who is ultimately responsible for carrying out your final wishes and distributing your estate.
For most people, their executor is their spouse. If you have adult children, one or more of them may be the natural replacement executor. For people who are single or without children, the decision of whom to appoint as executor can be more difficult. So, I can appreciate your dilemma, Gwenna.
The role and responsibilities of a person named in a power of attorney
You can name any other family member or friend as your executor, but some people do not have a natural first or even second choice. The same challenge can exist when deciding who to name in a power of attorney, personal directive, representation agreement or mandate. These are province-specific documents that appoint someone to make financial or health care decisions on your behalf.
A power of attorney can be used if someone is incapacitated or otherwise unable to make decisions on their own. It is valid during the person’s life, after which, a will becomes the governing document upon that person’s death.
When someone is named in one of these documents, they do not need to literally do all the work on their own, Gwenna. They can hire professionals to assist them, ranging from lawyers and accountants to investment advisors and other financial professionals. So, it may be less important that the chosen person has all the skills necessary to manage your finances themselves and more important that you consider them responsible and capable enough to seek out the help they may need.
There are options to name a professional in your estate documents. You can name an individual professional, or you can name a trust company. There are dozens of trust companies in Canada, and they are the only legal entities permitted to hold property in trust as agent or executor. Each of the banks owns trust companies and offers trust services. Unlike individuals, trust companies do not die, move abroad or change their mind.
Should you name a non-resident in your estate documents?
Naming a non-resident to act for you in your power of attorney or will, Gwenna, can create complexities. Securities regulations may impede their ability to manage your investments. It may also be difficult to deal with your affairs from abroad. There may also be income tax reporting or other country-specific implications of their role as a non-resident. They may also need to obtain an estate bond, which is effectively an insurance policy required to mitigate the risk of their not carrying out their duties properly.
As a result, a trust company can be a good option if there is not a natural family member or friend to choose or if these individuals are not Canadian residents. A trust company can also be a good choice if your financial affairs are complex or contentious.
The downside to naming a trust company
A drawback of naming a trust company is the cost. A trust company will typically require a signed fee agreement and may want specific wording inserted into your estate documents. Mind you, the compensation may be similar to what a non-professional may be entitled to under the applicable provincial fee guidelines. So, arguably, there may be a better value to naming a trust company for the same cost, depending on whether or not the individual or individuals you are considering are beneficiaries.
Some assets may be able to avoid passing through an estate and reduce the estate’s complexity and cost. Registered accounts like registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs) can have named beneficiaries, as can an insurance policy. Jointly held assets may also pass directly to a survivor.
But there can be risks and drawbacks to naming beneficiaries directly; you may have more control over your estate by naming it as beneficiary and allowing it to deal with things through your will. Joint ownership, especially with non-residents, can also be risky unless it is with a spouse.
In summary, Gwenna, deciding whom to name in your estate documents can be difficult, especially in situation such as yours. Naming a trust company may be a good fit in your case.
Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.
