How to appoint the right executor

Picking an executor is one of the most important decisions when your clients draft a will. Generally speaking, the executor implements your client’s last will and testament – his instructions and wishes. More specifically, this includes identifying and collecting assets; determining and paying liabilities, preparing and filing tax returns; paying taxes on time; and communicating with beneficiaries about the status of the estate’s administration, and the nature, extent and timing of receipt of their interest in the estate.

While clients can appoint anyone they want as an executor, the named executor has the ability to renounce or refuse to assume that role upon the client’s death. So, an alternate executor or executors should be named in that event.

Every estate administration varies in terms of complexity and the related responsibilities of the executors. An executor will also have to respond to and sort out any problems that may arise, including possible estate litigation.

So for that reason, a family member may not be the most appropriate choice to name as executor where there is likely to be litigation between relatives of the same or a different level over the will or over the value or control of a business.

The concept of having multiple and separate executors can be effective for those who have substantial family or business issues. If the client appoints more than one executor, they will either act together or jointly in respect of all responsibilities under the will. Or, the client can appoint separate executors for each area – but only as many as are reasonably necessary to attend to the estate or particular areas of concern in the estate.

The benefits of divvying up executor responsibility for specific areas are as follows.

• Your client’s estate and beneficiaries will get the benefit of particular expertise in that area;
• Your client will be able to meaningfully communicate his views and instructions on a variety of matters that exist or may arise in an area of concern to a person who is best able to address them after you are gone; and
• The executor of a specific area will be able to focus on that area and not be distracted by having to attend to all aspects of the estate’s administration.

Your client may, for instance, appoint one general executor responsible for administering all the typical or characteristic aspects of any estate administration. He could then appoint one special executor responsible for a specific area of concern. Having said that, while it’s possible to divide up or separate many responsibilities, there’s is only one estate, so there will almost inevitably be areas of overlap.

In a family context, having one specific executor to deal with a special needs child or an ill or disabled spouse may be necessary.

In a business context, a separate executor may be necessary for the need to try and substitute for the key person who was the testator and his or her role in the business; and a related need to manage the business to generate income or capital appreciation for the estate’s beneficiaries. Other issues could include the inability or undesirability of liquidating the business because of its nature, the economy or the testator’s interest in the business; devolution of the testator’s interest in the business to more than one person where not all of them work in the business or where they have different aptitudes or management roles, coupled with the desire to avoid or minimize conflict or litigation between them; and, to provide for effective interim decision-making and ensure the ultimate succession of control.

When appointing multiple executors, each with separate or special responsibilities, the will’s structure needs to ensure they can function co-operatively when necessary and independently otherwise. To that end, the client will have to define their respective roles and powers with some precision. In areas of overlap or joint responsibility, for instance, expenditures for special purposes that require access to general estate revenues or capital, care should be taken to provide for a means of breaking a deadlock in decision-making.

The client cannot assume a consensus will be reached between executors on every issue that may arise.

Deadlocks can be devastating to the course of administrating an estate, and costly if the will does not provide the means to break it, making it necessary to go to court to have it determined. Better to provide either for a majority clause, such that two of three executors will carry a decision in areas of overlap, or that one of several executors will be given a limited decisive vote or veto in such matters. It is also possible to require that your executors engage in mediation in an effort to resolve differences of opinion between them.

Of course, having multiple executors adds to the cost of the estate. Clients need to remember that executors are entitled to be paid for their work.

To help advise your client on such fees, many jurisdictions have an informal tariff or percentages that are applied to capital and revenue, along with a care and management fee also calculated on a percentage basis. In setting compensation for executors, bear in mind the common-law or statutory rules applicable where the client resides, as they relate to assets and whatever separate or special responsibilities the executors are to discharge. In the absence of making provisions for compensation in the will, it will either be determined upon agreement of the executors with the beneficiaries, or in court.

Whether you appoint one person or a trust company to be your executor, or multiple executors who must act together or each have separate areas of responsibility, the important thing is to appoint those in whom you can place the most confidence. You will need to be realistic about what can be achieved through your will and in selecting the persons with the necessary skill sets to implement it. If you can do that, you will have gone a long way toward ensuring your estate plan is realized.

Danny Dochylo is a partner at Borden Ladner Gervais and national chair of the Estates and Family Law Litigation Focus Group.