Performing the duties of an executor can be complex, time-consuming work.
Instead of asking a close friend or family member to take the job, it sometimes makes sense to hire a professional. But when?
Complexity and conflicts
Cynthia Kett, principal at Stewart & Kett Financial Advisors in Toronto, says many of the estates she deals with don’t use a professional executor. “If there are a lot of assets in joint name, and everything is rolling over to a surviving spouse outright, that kind of estate would not need a professional executor,” she says.
What kind of estate does?
Kett says it depends on estate complexity, not size. “A house worth $2 million and a bank account—that might not be a complex estate in Toronto,” Kett points out. “But in Kamloops [B.C.] or somewhere a house is worth a lot less, there might be a private corporation or shares in a local business. That becomes complex even though it’s not worth as much.”
Kett says complexity can take many forms: assets that require detailed valuation or tax planning (private corporations and farmland are two examples); minor or disabled children who must be provided for through trusts; or estates with heirs in different jurisdictions.
Another reason to hire a professional: a history of familial conflict. In such situations, a professional executor can function as a referee for siblings, spouses or other family members who may be apprehensive of another family member acting as executor.
“If there are three children and they don’t get along, you don’t want to appoint all three [as executor],” Kett says. “Say one of them knows a lot about finance, but if you appointed that one person alone, the other two might be resentful or distrustful, so then you appoint an independent third-person executor to balance that conflict.”
Another possibility: appoint a professional to be co-executor with a family member or close friend. “It makes a good combination,” says Kett, who has acted as a professional executor. “They can handle things like cleaning out the house and getting rid of stuff, which wouldn’t make sense to pay somebody like me to do. We are both jointly responsible and require our joint sign-off on everything. But it’s a better use of time, expertise and money.”
Why would I pick you?
Andrew Geisterfer, a partner at Masuch Albert in Edmonton, agrees that professional oversight isn’t required for every estate—as long as the executor knows when to seek help. “If you’re smart enough to say, ‘Ok, now I’m in charge, but I’m going to seek advice,’ then you’re smart enough to be an executor,” he says.
Geisterfer says this sense of humility is a litmus test for anyone wondering whether to hire a professional executor or keep the job in the family. “You’re going to want to ask, ‘Is the family member I’m naming as my executor capable of dealing with these things or smart enough to go and get help?’ ” If not, your client should hire a professional.
And Geisterfer says to shop around. “Interview people,” he says. “You’re going to want to say, ‘Why would I pick you?’”
In-depth technical expertise is one obvious answer. “Look at people who have experience dealing with the kinds of assets you have in your estate,” Geisterfer says. But consider relationship fit as well, which means clients should find someone they feel confident about.
Further, Geisterfer says local is better. “You want someone in the vicinity, because they’re familiar with the [regional] economy,” he says. “Finance and real estate in Toronto is much different than it is in Saskatoon [or] Edmonton.”
While every estate is different, Geisterfer says one piece of advice applies to all testators: plan early. “Twenty years ago when I started my career, I would have said, ‘Don’t worry about [taking your time],’ ” he says. “But all you need is one tragedy across your desk—a young family—and you realize the importance of proper planning now.”
Four scenarios to go pro
Family and friends live elsewhere
Appointing an out-of-province executor is often impractical and, if the executor comes from abroad, can expose the estate to non-resident tax. You may even need to post a bond for someone outside the country.
The estate is complex
If the estate holds assets requiring in-depth valuations or tax planning, it makes sense to seek expert advice. Examples: shares of a private corporation, cross-border assets, farmland and rental real estate.
There are minor or disabled children
Assets held in trust for children often require professional oversight, at least until the children demonstrate their ability to manage money.
The family feuds
If there’s a history (or the possibility) of conflict among children or other heirs, appointing a neutral third party can diffuse potential disputes.