Helping clients choose an executor

So, being prepared for this conversation is a way to help your clients as well as your business, says Phil Sawyer, principal of Sawyer & Associates Financial Services (which operates under the Investment Planning Counsel Inc. banner) in Sudbury, Ont. Sawyer works closely with clients to help them choose the right person for this critical role and then assists those executors in the administration of the estate at no extra charge. He holds a certified executor advisor designation, conferred by the Brampton, Ont.-based Canadian Institute of Certified Executor Advisors (www.cicea.ca); this designation equips Sawyer with the knowledge required to lead executors through the challenges of settling an estate.

“I get 100% loyalty with my clients because I’m doing something that not a lot of [advisors] are doing,” Sawyer says.

One key message Sawyer has for his clients is that an executor must be qualified and responsible enough to take on this enormous task: “It’s not an honour necessarily to be asked to be an executor. [The executor is] going to do a ton of work and [is] going to potentially take on a ton of criticism from beneficiaries.”

Choosing someone with basic legal and financial knowledge, Bernier says, is an advantage. In such cases, the executor can handle simple tasks such as meetings with the client’s banker or lawyer. Because these types of meetings are necessary, Bernier also recommends that a client choose an executor who lives in the same region as the client.

The most important qualification for an executor is that your client trusts the executor, says Hugh McLellan, a lawyer with Vancouver-based McLellan Herbert, a law firm that specializes in estate planning, estate litigation and elder law.

Your client should take location into account, according to McLellan, if the chosen executor lives outside Canada. If that is the case, the Canada Revenue Agency (CRA) would consider the estate to be a “non-resident trust,” which means the executor would have to apply to the CRA for a certificate of compliance, which would give the non-resident executor the authority to distribute the estate. But, McLellan adds, applying for this certificate can add to the complexity of an already challenging situation.

Another issue to consider is whether your client has real property, such as a house or land, in different provinces or countries. Estate laws can vary, depending upon the location. For example, some U.S. states require that a will be signed by three witnesses, while estate law in British Columbia, for example, demands only two.

If a will does not adhere to local law, the will would be disregarded by local authorities and the situation will be treated as if the client died without a will. “Any time that happens,” McLellan says, “there’s much more in the way of cost and delay in dealing with the estate.”

McLellan recommends that clients with real property in different jurisdictions have their wills reviewed by a lawyer in each locale to ensure its validity.

Naming multiple executors also should be considered, depending upon the types of assets involved. If the estate includes property that requires specialized knowledge, your client should seek someone with experience in that area, McLellan says. For example, if your client’s estate includes a valuable art collection, one executor with expertise in the art sector would handle the collection in order to put an accurate value on that property. Another executor might be named to take care of other, more typical assets, such as the home and bank accounts.

The idea of having more than one executor probably will come up if your client has children, Sawyer says. The vast majority of clients who are parents choose their grown children for that role.

This situation can be problematic if one son or daughter is not as responsible or knowledgeable as his or her siblings. Your clients must be open and honest about their children’s capabilities, as well as about the relationship these children have with each other.

If your client feels that one child is more competent but can work well with a sibling, your client may be comfortable naming more than one child as executor, Bernier says.

McLellan advises that your client choose the most capable child as the executor and name the remaining children as alternatives in order to prevent conflict.

Your client might even ask you to be his or her executor. For you to take on this role generally is considered to be a conflict of interest – or, at least, a potential conflict. The Mutual Fund Dealers Association of Canada‘s rules prohibit members from acting as a client’s power of attorney or holding a similar authorization (including executorship) except under certain conditions. The Investment Industry Regulatory Organization of Canada has a similar rule but is reviewing comments regarding whether advisors should have the power to act as clients’ executors, subject to specific conditions. (A decision or a request for further comments will occur this month.)

Rules for insurance advisors depend upon the provincial regulator. For example, neither the Financial Services Commission of Ontario nor Quebec’s Chambre de la sécurité financière specifically prohibits insurance advisors from acting as their clients’ executors, but both regulators do require the avoidance of conflicts of interest. The Insurance Council of B.C. also does not prohibit advisors from being clients’ executors but recommends that advisors avoid the dual role.

Sawyer takes a proactive approach. When the subject of executorship comes up, he states that he is unable to take on the responsibility himself because it would constitute a conflict of interest. His clients often respond that they were planning on asking him to be their executor.

Clients who prefer to have an expert manage this process can look to their accountant or lawyer. Another possibility is a trust company, which can be useful in administering a complicated estate involving assets such as a corporation or a large amount of property.

Clients should understand, Bernier says, that the process of settling an estate takes on a less personal tone when it is managed by a professional than if handled by a family member or friend. Clients who would like a more personal approach might consider a partnership between a family member and a professional. This type of arrangement would decrease the fees charged by the professional executor because the family member can handle the more routine tasks, Bernier says, while the professional can focus on the more complex matters.

So, short of acting as executor for your clients, you can be a valuable resource by explaining the options and providing advice. Sawyer invites his older clients and their executors to meet with him to discuss the client’s investments and ensure the executor knows where to find all critical documents. Sawyer also advises the executors to contact him if they have any questions when it is time to distribute the estate. “I’m troubleshooting the estate,” he says, “before it becomes an estate.”

Bernier agrees that advance meetings are an important service that adds value to the client/advisor relationship – and may result in the retention of assets and new business: “If you know the heirs and the executor of the estate and you’re involved in this situation, there is a greater chance you might end up keeping [management of] some of the assets that were devolved to the heirs.”

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