Wills and Power of Attorney

Cornerstones of estate planning

While there are several ways to ensure your estate goals are accomplished, two are considered cornerstones of estate planning and should be prepared by everyone. These are having a properly executed and current Will and appointing a power of attorney.

Wills

Many people delay writing their Will under the assumption that being young, or in good health or without dependants, justifies waiting. However, if your assumption is wrong, your beneficiaries will get what the province mandates. In addition, the absence of a prepared Will invariably causes delays and extra expense for surviving loved ones.

Beneficiaries

Careful consideration should be given to the value of your estate and those people you wish to benefit from it. Questions that should be considered are who should receive what, and under what circumstances. For example, should money be held in trust for a child until a certain age is reached?

Choosing an executor

Your executor is responsible for administering your estate according to the wishes in your Will. Not only should you choose a primary executor, but also an alternate (a contingent) if you are concerned whether an individual you may wish to appoint would be up to the task. You can also consider naming a corporate executor, such as Scotiatrust, to undertake this role for you.

The duties of an executor are many and complex, and the emotional strain can be high, so choose this person carefully. Letting them clearly know your wishes will give you peace of mind, and will allow them to act decisively during a potentially unsettling time.

Powers of attorney

A power of attorney (Mandate in Quebec) gives someone the authority to manage and govern your property and financial affairs while you are still living if you become incapable of doing so. There are also powers of attorney for personal care governing health and other life decisions. Everyone should have both. You will need to complete a legal document to appoint a power of attorney.

There are different roles a power of attorney can take on, over a limited period of time (i.e. during your absence on vacation) or in more enduring situations and with broader control (i.e. managing all of your financial affairs if you are somehow incapacitated).

Whatever stage of life you are at, Wills and powers of attorney are two cornerstones of prudent estate planning. They can help ensure that your worldly assets are properly cared for, and that the most important people in your life are properly considered at an important time. However, Wills and powers of attorney are also potentially complex legal documents that require the advice of specific professionals to implement properly.

The Butler / Laing Group has the knowledge, resources and team of experts to help you understand your options, and take action that gives you and your loved ones greater peace of mind.  Contact us at (604) 535-4749, or use our contact page.

Executor’s Compensation

(applicable in all provinces except Québec)

Whether you have been asked to act as the executor of an estate or you are considering who you should appoint as executor in your Will, it is important for you to understand how an executor is compensated before making your decision. This article will briefly outline the rules governing executor’s compensation in the common law provinces and the factors you need to consider when choosing an executor.

How much are executors paid?

Executors are entitled to compensation for the work they do in administering an estate. As a general rule, an executor is entitled to compensation equal to about 5% of the value of the estate. This is calculated as 2.5% of the assets of the estate gathered in and 2.5% of the assets distributed. This is a one-time fee. Where the estate is invested for a period of time – for example, where trusts are established for minor or disabled beneficiaries or for a spouse – the executor/trustee is also entitled to an annual fee based on the average value of the estate. Note that where there is more than one executor, the fee is generally shared.

Court oversight

The “usual percentages” may however be subject to court discretion. Generally at the conclusion of an estate (or from time to time during the administration of a long term estate), the beneficiaries will be asked to approve the executor’s compensation. Where the beneficiaries do not approve or cannot approve because of a disability (as in the case of minor or disabled beneficiaries), they can require the executor to “pass their accounts” in court. As part of the passing of accounts, the court will review the compensation claimed. The preparation of accounts in proper court format can be a complicated and time-consuming process.

The Trustee Acts of all provinces give authority to a court to award a “fair and reasonable” amount in respect of the administration of an estate. In deciding what is “fair and reasonable” the court will consider the following factors:

• The size of the estate
• The size of the estate
• The complexity of the estate
• The time expended in administering the estate
• The skill and ability displayed
• The results of the administration

The compensation claimed may be adjusted up or down based on this analysis. In some provinces, compensation is limited to 5% of the realized value of the assets. In other provinces, compensation may be governed by provisions in the Will itself. Trust companies, such as Scotiatrust, prefer to have compensation settled up front with the testator by incorporating a fee agreement into the Will.

Who pays?

Executor compensation is paid from the estate. Debts, funeral and testamentary expenses represent a first charge on the estate. Following the payment of specific gifts, the balance is called the residue. It is from the residue that the executor is compensated.

Executor vs. Estate Solicitor
The roles of the executor and the estate solicitor are separate, but complementary. Where the estate solicitor performs executor’s work on behalf of the named executor, the solicitor is entitled to be compensated by the executor whose compensation must be correspondingly reduced. The estate solicitor should keep a separate account for legal work done on behalf of the estate.

Choice of Executor

The rules governing executor compensation apply equally to lay individuals and professional executors. That is, whether you appoint a corporate executor such as Scotiatrust or a family member, the level of compensation to which each is entitled is comparable. While it is true that a family member may choose to forego compensation, many personal executors do wish to be compensated for the considerable time and effort involved in administering an estate and this sometimes leads to family disharmony. You should also be aware that compensation paid to an executor is considered taxable income in their hands.

Making an decision

Compensation is just one factor to consider when determining whether to appoint an individual or a trust company as your executor and when determining whether or not to accept an appointment to act as an executor yourself. Being aware of the complexities, duties and rules involved will allow you to make an informed decision.

Contact us at (604) 535-4749, or use our contact page.