Choosing the Right Estate Trustee
When making your Will, one of the most important decisions you will make is who to appoint as the estate trustee.
The role of an estate trustee is not a simple one. Upon your death, the estate trustee will be responsible for finalizing your affairs, protecting the assets of your estate, and distributing those assets in accordance with your wishes as set out in your Will, among other things. The estate trustee is tasked with the prudent administration of your estate, including satisfying the beneficiaries with respect to the assets that have flowed through the estate, investing or maintaining undistributed estate assets, and ensure that all the debts and obligations of the estate have been met. By accepting the role to act as an estate trustee, the estate trustee ultimately takes on the risk of potential personal liability if he or she fails to meet his or her obligations.
In many ways, choosing an estate trustee should be similar to interviewing for a job opening. Given the job that the estate trustee will be tasked with, it is important to carefully evaluate your candidates to ensure that the person or persons you ultimately choose will be capable of the work required for the successful administration of your estate.
Here are some things to consider when choosing an estate trustee:
As you will be charging your estate trustee with the responsibility of collecting and managing the assets of your estate for the benefit of its beneficiaries, the appointed estate trustee must be someone who you trust will exercise a high degree of integrity in carrying out those duties.
2. Two estate trustees may be better than one
When giving consideration to the size of your estate and the breadth of the tasks that your estate trustee will have to undertake, it may be prudent to appoint two estate trustees who will share in the responsibility of administering your estate. Appointing two trustees may also provide a means of checks and balances with respect to your estate, as the estate trustees will be required to make decisions jointly.
If you decide to appoint two estate trustees, it is important that you assess whether the two estate trustees will be compatible and should be able to administer your estate without allowing their emotions to govern how they do so. If the people you select are unable to get along, the potential conflict between them can have a negative impact on the administration of your estate and its beneficiaries.
If more than two estate trustees are selected, the Will should provide a means in which to prevent a deadlock in the decision-making, which could ultimately delay the administration of your estate and may even lead to court involvement. From a practical perspective, it is generally not recommended to appoint more than three estate trustees as the whirlwind of opinions and the varying schedules of each person could result in the inefficient administration of your estate.
3. Willingness and availability
You should let the person you are considering to act as your estate trustee know that you are considering them. You may surprised to learn that someone you believed would be willing to act as your estate trustee is actually not interested in the job. It is better to determine this at the outset rather than have the appointed estate trustee renounce shortly after learning of his or her appointment.
The person you appoint should also be available both in respect of proximity and the amount of time they would have to dedicate to the administration of your estate. If all of your assets and beneficiaries are in Ontario and the person you are considering lives in British Columbia, the administration of your estate will be challenging, although not impossible. Similarly, in considering your options, a person who is just starting a career, or works significant hours may be unavailable to commit the time and care required for the successful administration of your estate.
4. Canadian resident
It is becoming more common that adult children move to the United States for school or work. While your children may be the most obvious choice of estate trustees, if your children are residents of the United States, thought should be given to appointing someone else to do the job. Having a resident of the United States acting as an estate trustee can impact the residency of your estate for tax purposes, which can result in negative tax treatment of the estate, require the estate trustee to post an administration bond before he or she will be able to deal with the assets, and report to the United States government with respect to the assets under their administration, among other things.
5. Financial literacy and ability to keep records
The person you choose to be an estate trustee should have some degree of financial literacy. If your estate trustee will be selling estate property, instructing investment advisors, or making decisions about your business, it is important that he or she be capable of making prudent financial decisions that will maximize the value of the the assets for the beneficiaries. You do not want to choose someone who has demonstrated spendthrift tendencies or an inability to manage his or her own finances.
The financial side of the administration of your estate also requires that the estate trustee be organized with the ability to keep meticulous records of his or her dealings with estate assets. These records will be used to provide a detailed accounting to the beneficiaries and may be used to justify the compensation claimed for acting as estate trustee.
If in reviewing the above factors you are unable to decide on a good candidate to appoint as your estate trustee, you may wish to consider appointing a corporate trustee to be your estate trustee or co-estate trustee.
If you require help in deciding who should be your estate, we can help you review your candidates in light of above the factors.
Feel free to reach the author at firstname.lastname@example.org or (905) 276-0415.
This article is provided for general information purposes and should not be considered a legal opinion. Clients are advised to obtain legal advice on their specific situations.