Common sense easily persuades us that every adult needs an up-to-date will. Without a will, provincial laws outline how an estate is to be settled, which may not reflect your wishes. Outdated wills may not allow for changes in:
- family circumstances such as a new child;
- a death of, or a divorce from a spouse;
- a new marriage; a new family business succession plan or buy-sell agreement;
- a designated charitable interest; or new tax laws.
While drafting a will, carefully consider the magnitude of responsibility you confer on the person you choose to represent you after you are gone––your executor.
Your executor will administer your estate––your final net worth––in accordance with the provisions of your will. Here are some of the essential qualifications of an executor. Ask yourself the following critical questions in relation to how his or her abilities and potential performance as your executor may affect your estate and your beneficiaries.
1. Is your executor ready to serve? A saying in the business world is, “give the hardest tasks to the busiest man.” However, executorship will take more than just time. Make sure your executor has a proven aptitude to manage assertively, to focus well to fully comprehend and complete detailed tasks.
2. Is your executor the same age as yourself? If so, similar consequences of ageing, illness, or incapacity may affect the prompt execution of your affairs according to due process, possibly incurring losses to your estate.
3. Does he or she possess financial knowledge? How knowledgeable will the executor be when it comes to settling taxes and succession duties, valuing assets, or networking with and delegating to professionals such as your accountant? It is important that your executor has some understanding in these areas. You want your legacy to endure as your executor side-steps the potential quagmire of tax sinkholes.
Consider using life insurance to fund your estate tax liabilities. This could allow for your heirs to keep certain assets that otherwise may need to be sold just to pay the taxes in your final estate. Final taxes can bungle an otherwise generous estate plan, making it difficult for an executor to navigate within the parameters of your will.
You may have accrued some debts if your estate is complex or face a large final tax bill. If a child is left a business asset with loans or outstanding debt, consider using life insurance to pay off all of your debts before anything is bequeathed.
4. Is there a history of fiscal responsibility? Executors may become liable for oversights or mistakes that could effectively cause losses to your estate. Carefully consider the position you place your executor in, especially if he or she is a friend or relative, and is not used to rigorous financial scrutiny. Unintentional negligence and a resultant lawsuit may occur due to an honest error or omission. Could you imagine the beneficiaries of your will bringing legal charges to bear upon your executor, the same person to whom you initially entrusted your estate?
5. Is he or she able to exercise impartiality among your heirs? An executor cannot be prejudiced, for example, favouring a son as opposed to a daughter whom he or she may consider undeserving, despite the will’s call for equality. Personal bias cannot influence your executor’s thinking.
Consider equalizing your estate by using life insurance. For example, if you know that one or two of your children would prefer to keep a preferred asset in your estate such as a cottage, while one would prefer to sell it, you could develop a plan to pay out the less interested heir his or her share using the cash proceeds from a life insurance policy specifically to balance the gifts equally. This could make your executor’s work easier and reduce quibbling or hard feelings among your children.
Strategic life insurance concept by Glen R. Jackman, Editor of AdviceonMedia