How to Draft a Will – 10 Steps to Choosing an Executor

Sep. 19

How to Draft a Will - Choosing an Executor

KEY POINTS

Protect Your Financial Legacy
Executors are the custodians of your legacy, responsible for executing your final wishes outlined in your will. They ensure your hard-earned assets are managed and distributed according to your desires.
Executor / Power of Attorney / Trustee
Understanding how these roles differ is essential to comprehensive estate planning.
Choose Wisely
Selecting the ideal executor demands careful consideration. You can opt for individuals, co-executors, professionals, corporate entities, or even a public administrator.
Evaluating their qualifications, potential conflicts of interest, and willingness to fulfill the role is pivotal in safeguarding your legacy.

Executor Value

You could spend over 100,000 hours working before you retire.

With so much time invested in your career, how can you ensure your hard-earned money is transferred to your chosen beneficiaries, in accordance with your wishes, upon your passing?

Enter the executor, center stage.

Executors assume a great responsibility when they agree to settle an estate. We delve into the important role they play in the estate administration process.

What is an executor?

An individual can appoint an executor within their will. In the absence of a named executor, the court will appoint a duly qualified individual to assume the role.

The executor’s role is to execute the instructions and fulfill your wishes outlined in the will. The executor's authority over your assets only becomes active after your passing; they do not have any control over your assets while you are alive.

The primary responsibilities of an executor include managing the deceased person's assets, settling debts, paying taxes, and distributing the remaining estate to the designated beneficiaries as per the will.

Executors are essential to ensuring that the testator's (the person that created the will) final wishes are fulfilled in accordance with the law. They must act in the best interests of the estate and its beneficiaries. This will require a diligent approach to the complex tasks involved in settling an estate.

The executor's role is just one of several critical roles in estate planning. Unfortunately, confusion often exists between the responsibilities of an executor, a power of attorney, and a trustee. The following charts have been created to provide clarity on these distinct roles.

Executor vs. Power of Attorney

An executor is not the same as a power of attorney appointed in a living will.

	Executor	Power of Attorney
Role	Appointed in the will to administer a person’s estate after death	Appointed in a legal document to make financial, legal, and sometimes medical decisions during the individual’s lifetime
Activation	Effective upon the testator’s death	Effective when the individual becomes incapacitated or unable to make decisions for themselves
Responsibilities	Distributing assets, settling debts, paying taxes, and carry out the provisions of the will	May include managing financial affairs, signing legal documents, paying bills, and making healthcare decisions
Scope	Commences upon death of the testator and confined to the instructions outlined in the will	Scope can vary from very broad to very narrow
Duration	Ceases once the estate has been fully administered and distributed as per the will	Remains in effect if the individual is alive and is incapacitated or unable to make decisions for themselves

Executor vs. Trustee

An executor is not the same as a trustee appointed in a trust document.

	Executor	Trustee
Role	Appointed in the will to administer a person’s estate after death	Typically appointed in the trust document to manage and administer assets held in a trust on behalf its beneficiaries
Activation	Effective upon the testator’s death	The trust and the trustee’s authority can commence during the individual’s lifetime or upon their passing depending on the type of trust
Responsibilities	Distributing assets, settling debts, paying taxes, and carry out the provisions of the will	Investing, asset protection, and distributing the trust’s assets as per the terms and conditions of the trust
Scope	Commences upon death of the testator and confined to the instructions outlined in the will	Scope can vary widely depending on the trust document
Duration	Ceases once the estate has been fully administered and distributed as per the will	The trust document will specify the duration which could extend beyond the settlor’s lifetime and covering future generations

Does the Executor Need to Be a Person?

Executors can take many forms. The testator must carefully discern the best suited type of executor for their estate.

Individual Executor

Often a family member or close friend is appointed in the will to administer the estate.

Co-Executors

The testator may appoint multiple executors to serve as co-executors. Each co-executor would share in the responsibilities and decision-making associated with the estate. This option may be preferable for complex estates.

Professional Executor / Executor Company

A bank or trust company can be appointed as an executor to manage the estate. Complex estates can benefit from their experience in investment management, taxation, asset protection, legal matters, and estate management.

Corporate Executor

A corporation or legal entity can be appointed as an executor. This option may be preferred if the estate has business assets that need to be managed.

Alternate Executors

The testator can name back-up executors in the event the primary executor is unable or unwilling to assume the responsibility when their services are needed.

Public Administrator

The court may appoint a public administrator if the will does not appoint an executor.

Now that we have clarified the nature of the executor, let’s go through the process of choosing an executor.

10 Steps to Choosing an Executor

Choosing a financial advisor is a significant and complex decision. Several key factors should be considered to ensure that your wishes are executed as desired.

Here are 10 important steps to take when selecting an executor:

1. Identify Priorities

An executor ought to be willing to take on the role and demonstrate trustworthiness, organization, and competence in finance, investments, taxation, legal matters, and administration.

2. Research Legal Requirements

Eligibility criteria can vary depending on the jurisdiction. Typically, it will encompass a minimum age falling within the range of 18 to 21 years old, and factors like citizenship and a police background check may also play a role in determining eligibility.

3. Partner Consultation

It is generally a good idea to discuss your choice of executor with your partner as it ensures you are on the same page and aware of each other’s wishes and responsibilities.

Differences of opinion may arise and investing time resolving these issues can mitigate potential future conflicts.

Start Early

Initiating this conversation well in advance is highly advisable. There's no need to delay these discussions until later stages; in fact, some individuals begin these conversations even before drafting their wills.

Compare Priorities

Each party will bring their own set of priorities, as discussed in Step 1. You may uncover significant disparities related to financial matters, legal considerations, asset distribution, and more. Additionally, you may find that the level of importance attributed to each priority varies between both parties.

Prepare to invest a substantial amount of time in collaborative decision-making. Achieving an outcome aligned with your will's provisions may necessitate compromise and an extended timeline.

4. Identify Potential Candidates

Create a list of potential executors. It may consist of family members, friends, or trusted professionals.

It's advisable to compile multiple names as circumstances can evolve and your primary executor may not be accessible when the need arises.

Assess each candidate based on the priorities established above. Maintain a written record summarizing the pros and cons of each candidate as they relate to your priorities.

5. Advisory Team

Effectively managing an estate often demands a diverse skill set that may exceed your executor's expertise, encompassing areas such as investing, taxation, and legal matters.

It is advisable to provide them with a curated list of recommended advisors who can offer guidance throughout the process. At your discretion, you may consider introducing the executor to your chosen advisory team.

Additionally, it's essential to ascertain that your chosen executor is comfortable collaborating with a team, when needed, to ensure the estate administration aligns with your envisioned outcomes.

6. Conflicts of Interest

It is critical to assess potential conflicts of interest. Consider the candidate’s personal and financial relationships with beneficiaries, as well as their own financial interests.

Avoid appointing someone who may have an actual or perceived conflict of interest that could compromise their impartiality in executing your estate and distributing assets.

For example, appointing a business partner may not be an ideal choice if the beneficiaries are family members. The actual or perceived potential conflict of interest may preclude your business partner as a potential candidate.

Such conflicts may also preclude them from acting as part of the advisory team discussed above.

7. Candidate Meeting

Role

Contact your selected executor and initiate an open discussion. It’s important to address their willingness and comfort regarding taking on this diverse responsibility.

Furthermore, discuss their availability to fulfill the role as it can be a time-consuming process. Their ability to devote sufficient time to achieve your objectives can be impaired by their geographical location (e.g., different city, state / province, country), work commitments, or other personal endeavors.

Compensation

Initiate an open and transparent conversation with your chosen executor regarding the fee they will earn for administering the estate. You will need to consider the scope of responsibilities and the estimated time commitment involved.

The compensation may be left for the court to decide, or it may be subject to negotiation with the beneficiaries, if the testator does not leave instructions regarding the fee arrangement.

A general rule of thumb is a fee equal to 5% of the estate’s value; however, such can vary depending on many factors including complexity of the estate. Family and friends may accept a lower rate or no fee at all.

8. Inform Beneficiaries

Your beneficiaries will be directly impacted by your choice of executor. It is advisable to meet with them and inform them of your choice of executor to avoid surprises or conflicts when the will is executed.

9. Documentation

Document your decision-making process and any agreements made as such may be required in future legal proceedings.

10. Review and Reassess

Circumstances change. Periodically review your decision to ensure it remains appropriate. Be willing to make changes, if necessary, to protect your estate and its distribution.

FINAL THOUGHTS

The executor plays a crucial role in the estate planning process by overseeing asset management, debt settlement, tax responsibilities, and the equitable distribution of assets.

Ultimately, the executor serves as the cornerstone in preserving your legacy and ensuring that your estate management aligns with your intentions.

Your estate plan should reflect your values, and choosing the right executor is pivotal to achieving these goals.