Today is a group writing project conducted by a few blogs on the topic of estate planning. I’ve written about The Benefits of a Professional Executor today, but the following bloggers have written articles about estate planning as well please feel free to check them out:
The Quest for Four Pillars wrote: “My last will and testament”
The Million Dollar Journey wrote: “Why you need a will and the basics of estate planning”
The Financial Blogger wrote: “Common mistakes in a will”
Thicken My Wallet wrote: “5 myths about wills”
The Canadian Capitalist wrote: “Getting your wills done through your lawyer”
…and now on to my contribution:
The Benefits of a Professional Executor
When you are creating your will (or updating it) you should probably consider your choice of executor carefully. The job of an executor is not a trivial one and in some cases can be very complex and time consuming. Since many people choose a close and trusted person to fill the role of executor, chances are pretty good that this person will also be emotionally affected by your death as well. The loss of a loved one can affect some more than others, and there is the possibility of impartiality and emotional drain of being in the middle of any potential family quibbles.
An alternative to choosing someone close to you is to hire a professional executor – for example a trust company. They can assign a designated trust officer who has years of experience in settling estates and final affairs in a very efficient, and impartial manner. An alternative arrangement is to ask the trust company to act as co-executor or to provide estate assistance services for the non-professional executor.
I think readers of this blog know me to not usually talk about my employer, but in this case I will make an exception. Scotiatrust is under the umbrella of BNS and provides a wonderful service for our clients through a team of dedicated will and estate planners. As you may know, executors may be entitled to collecting an executor’s fee. In exchange for naming Scotiatrust as executor of the estate, the will and estate planners will assist in the full blown will and estate plan and additionally review it every three years for no other charge than the executor’s fee which they will receive later. (Note – they can work in conjunction with your lawyer in the preparation and execution of the will, and sometimes they have net worth thresholds for this service.)
I’m years away from having a complex estate plan (I’m 30, not married, no kids), but as my situation develops, I would not think twice about engaging a trust company to act as executor for my estate. Asides from the reasons listed above, the trust company has continuity. They will be around when I die. I can’t necessarily say that about any individual I know. To me, paying a professional for this service is money well spent – knowing that my wishes will be carried out with all the i’s dotted and the t’s crossed, and knowing that I wont be leaving potentially onerous amounts of tedious work for a loved one who may not be as financially “involved” as I am.
Question Preet, how much does a professional executor cost on average?
I surveyed some people in the know and they suggest 2.25 – 4.5% (fee starts at the high end and tiers down based on larger estates). The fee is also dictated by the size, complexity and expertise of the executor. The good news is that the trust company will generally sit down and give you a quote and walk you though the process first. There actually are guidelines and the courts can request that the executor provide reason for the fees charged. This can be avoided if the testator makes a specific provision to the executor in the will.
2.25% to 4.5% would be an annual fee, right?
@ CC – No – that would be a one time fee based on the probatable assets in the estate taken when the estate is settled.
If there are any trusts that require trust management going forward there may be an annual fee (negotiated in advance) and generally it would be 0.7% to 1.5% per annum based on the assets in the trust. But this is separate from the executor’s fees.
That’s pretty reasonable. I think most people give their executor 5-10% of their estate. We indicated 5% for ours.
Preet – are there minimum estate sizes for this type of service?
@ FP – I believe the maximum fee an executor can take is 5% (unless specific provisions are made in the will). Also see this post for why you might not want to take an executor’s fee.
As for the minimum estate sizes: yes, the younger you are the larger they would like to see the estate to be in general. I have been told by some people that the reason for this is that you can change who your executor is down the road after they have done much of the planning work for you, thereby getting cut out of their fee they were expecting down the road. A larger estate is less likely to change the arrangement (as the estate can be more complex and you may feel that a professional is the only way to go). Conversely, if you are very old or very sick, the minimums DROP. While the fee may be ultimately lower, the chance of them getting it is higher.
I am in my 70’s, an engineer by education but have acted as executor for several relatives. I found it to be an easy straight forward task requiring no special expertise but these were not complicated estates. In a few cases a trust company was involved but there primary interest was to wind up the estate as quickly as possible and collect their fee even though it was not in the best interest of the clients in my opinion.
@John – thanks for your contribution. Certainly part of the process of choosing an executor would require careful consideration, not only as to whether one will choose someone they know versus a trust company, but also the capabilities of each. Curious as to who the “client” is you are referring to (not the actual identity): do you mean the beneficiaries? or the deceased? If a trust company’s job is to carry out the wishes of the deceased in a timely manner then they will have fulfilled their role I would think.
I had a single friend who had to use the bank for power of attorney as she was too ill to do this herself….they were less than inefficient, it was a total nightmare for her. She needed help to get into a care facility and sell her home and assets. She had lovely things and the person they appointed could only find someone who at first did not even think it was worth doing an estate sale in the end they found someone who carted off the furniture and I don’t think there was proper remuneration at all. The move that had been arranged for the things she was to keep was poorly planned and timed and although she lived in Hamilton and was moving to another destination in Hamilton, the person at the bank chose a mover in Toronto who had to travel to Hamilton and of course charged the travelling time!There were many other inefficiencies, too numerous to mention and of course she was too ill to report or do anything about.
Thank you for sharing your story Laurelie – this is certainly a potential pitfall.