A lot of effort in personal finance is expended on urging people to get a will, a vital detail for all parents and people with assets that will survive them. But having a will is just the first step. You also need to choose someone to execute the will for you after you die.
Picking an executor is a bigger ask than many people realize because of the workload and decision-making required. Plus, there are people who don’t have children to act as executors, or feel their kids aren’t up the job. Corporate executors are a potential solution, but the cost of using them is a black box to many people.
Here’s a Q&A on corporate executor and probate costs that I did with Barbara Amsden, a financial industry veteran and author of How to Laugh at Death and Taxes: What Willmakers, Executors, Heirs, and Beneficiaries Need to Know. You may remember Ms. Amsden for an earlier Q&A on whether to have joint accounts with adult kids, or give them power of attorney.
Q: I hear a lot from seniors who have no children or younger relatives they feel comfortable asking to be their executor. Do you recommend a corporate executor, i.e. a bank’s trust division, in these cases and, if so, what is the cost?
A: It’s not just seniors without children or young relatives who are thinking about a corporate executor because of the work and risks now involved in managing an estate.
A corporate executor may not be possible or reasonable for smaller estates – some corporate executors may only act where assets are valued at over $500,000 or $1-million, and the generally higher cost of a corporate may not be something in beneficiaries’ best interests. Example costs of an executor: A flat fee of $15,000-$20,000 on a smaller estate.
On the other hand, a corporate executor may be essential if the estate is large, family dynamics are challenging, there are multiple legal structures, property is in more than one jurisdiction, or there are other complications. I’d recommend in this case a blended approach. By blended, I mean formally incorporating a relatively newish option – an estate monitor – with the corporate executor.
Estate monitors have informally existed before, but make more sense now as seniors are increasingly aware of how demanding being an executor is and either don’t want to burden family or friends with executor tasks or worry that children and younger relatives don’t have the skills, time, or discipline to effectively do what’s necessary.
The monitor would be a person trusted by the senior, and who is named in the will. The will specifies what the monitor can and can’t do. For example, they can’t make decisions or sign for the estate, but they can keep in touch with beneficiaries and prod for action or answers if the corporate executor is not acting promptly.
Q: How big a deal is having a will go through probate, and how likely is it to be required? What about the cost?
A: Having a will go through probate can be a big deal: It takes time, it’s increasingly onerous, and it costs money for a professional (not required but worthwhile for most) to do the detailed paperwork to file a probate application. Probate fees, called an “estate administration tax” in Ontario, can be high.
Probate is the law if the deceased died without a will, or one can’t be found; if there’s a dispute, the will’s validity is challenged, or there’s no executor named; if estate assets exceed a certain value that varies by province; if there’s real property like land or a cottage involved; or if there are beneficiaries, such as children, who can’t provide legal consent.
Probate is unlikely to be required if estate assets are valued at less than a certain amount excluding real estate held outside the jurisdiction; held jointly in a way that will transfer to the other owner; or are in the form of pensions, registered plans, and insurance policies with a designated – named – beneficiary. The most common exception to a probate requirement is the case of the assets of a first spouse to die that are transferred to the surviving spouse.
Even in the cases of smaller-value estates, financial institutions holding the deceased’s accounts now almost always require probate before they’ll release money. They don’t want the risk of a later will being found, a successful challenge to an executor’s appointment, or third-party lawsuits that amounts were paid out without authority.
Also, executors are within their rights – and wise if there are significant assets or battling beneficiaries – to insist on probate. A probate certificate gives them legal protection from complaints of estate mismanagement, and questions about the will’s validity, or their authority to act.
As for probate costs, a 2021 CanadianLawyerMag.com survey shows a national average of probate legal costs (excluding probate tax or fees paid to the government) of $4,561, to which would be added out-of-pocket expenses. Probate fees run from nothing in Manitoba to flat low rates in the territories and certain provinces. For example, probate fees range from $30 to $525 in Alberta and the territories, with other provinces ranging from less than 1 per cent up to Ontario’s 1.5 per cent of estate values over $50,000. No probate fees are charged by B.C. and Ontario on estate amounts below $25,000 and $50,000 respectively.
Q: What are some steps you can take to make life easier for your executor after you die?
A: While some may have the “what do I care, I’ll be dead” attitude, it’s good to remember that making things easier for your executor also avoids delays and problems for your heirs and beneficiaries.
The first and minimum step is having a clear, written will that is legally binding, signed and witnessed. It must also name good executors who know the location of and can access the will when needed. I’m a very strong advocate of having more than one executor because, if an executor renounces the role or dies, or if a single executor does not have some of the skills and time that two or more executors working together bring, the estate settlement process will cost more and take longer.
The second step is collecting contact information for everyone the family or executor will need to reach; making personal preferences clear, assembling a growing flotilla of information like account numbers and passwords, etc.; and, clearly identifying the location of items that are bequeathed.
The third step is repeat steps one and two. Your will needs to be reviewed and may need updating. You may also need to start thinking about naming a younger executor or adding another or alternate executor, as well as changing beneficiaries to the next generation.
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