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Estate Planning Council Roundtable Discussion on Corporate Fiduciaries

CV TrustCo March 13, 2018

Our Steve Ivacko recently presented at the Estate Planning Council, Vancouver Chapter, together with BMO’s Lisa Finden.  The topic they were tasked with was ‘The Benefits of a Corporate Trustee’.  As expected, there was a bit of a back and forth on using a large bank as opposed to a local independent corporate trustee.  To not sound too biased, we thought we would post what both presenters could agree on – the 7 benefits of using an independent fiduciary.

Seven great reasons for an independent fiduciary

If these 7 reasons aren’t enough to keep you from personally acting as fiduciary, we’re not sure what would!

Personal liability for any mistakes you make

Wills usually indemnify executors for most reasons, but mistakes are typically not one of them.  If you have a read of the daily BC Supreme Court decisions, after divorce, estate litigation is next on the list and usually reads like this: a family member executor makes a mistake landing them in court where they are replaced with another family member (to repeat the exercise).  The estate is awarded an amount personally due from the former executor and the former executor fees get cancelled.

Criticism and challenges from family members

Rarely can a family member do a good job in the eyes of other family members.  As an example, a family member executor wants to get a tax Clearance Certificate and one of the beneficiaries wants an early distribution.  Months pass waiting for CRA with relentless pressure for a distribution.  Finally, the executor breaks down and distributes.  Clearance arrives with a previously unknown tax liability resulting in the executor gets stuck with the tax bill.  Good luck trying to recoup from family members who have already spent their distribution.  Independence would have been very helpful.

Inadequate time for task

Most people have a day job.  Let’s make it simple, the deceased lived on their own in a detached home with a cat.  Changing locks, dealing with relatives, who’s taking care of Sylvester?!  Now let’s layer on some complexity and you can get a feel for the time constraints: let’s assume that the deceased had a small business with 3 employees.  Who will open the doors tomorrow, pay the rent, pay the salaries and where are the check book and office keys?  It takes immediate action to get all of this in place – a business unattended will rapidly lose its value.  Try doing a proper job when you have a demanding full-time job, spouse and 3 young children.

Difficulty in dealing with financial matters

We have yet run into an estate that did not have some baked-in financial puzzle.  We enjoy the creative planning that is happening these days – multiple wills, alter-ego, joint partner and inter-vivos trusts.  Often though, the creative plan has not been fully executed or, frankly, is too cute.  We have seen estate plans that render an individual personally insolvent with the bulk of their wealth in some form of trust.  Who will pay their date of death taxes; was there fraudulent conveyance on an asset transfer?   More importantly, who will figure this all out?

Wrong location

This one is easy to explain.  Eric passes away with a BC based holding company that owns 3 rental homes, all of which he personally managed.  His executor brother lives in Ontario and now, on top of his full-time job he must now deal with a ruptured hot water tank in a cluttered basement.  I recall the joys of being a tenant when something breaks; get on the phone and call the landlord, problem solved.

Their desire and demise

We often see people appoint an executor when they are in their early 40’s without considering when the appointment will commence.  Their similar age 40-year-old accountant is honoured to take on this role.  However, he may have a very different view when he is 75 years old and living half of the year in Palm Springs recovering from a hip replacement.   I know this is a bit extreme, but we recently ran into a case where a gentleman passed away – his lawyer who drafted the will, the first executor and the alternate executor all passed away prior to him.  Remember, people pass away, corporations don’t.

Not a plug

This blog post is not a plug for executor services.  It merely re-iterates the realities and practicalities that an executor can run into that Steve and Lisa discussed at the Estate Planning Council session.

In the words of Red Adair:

“If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur.”