Should you manage your client's estate?

Taking on the role as executor can rake in some extra cash. But should an advisor get mixed up in divvying the inheritance? One Toronto advisor doesn't think so ...

Should you manage your client's estate?
Financial advisors should be wary of taking on the role of executor of a client’s estate, believes one Toronto advisor – even in the very few cases where it’s allowed.

But, it is an added service advisors can profit from.

Under the Trustee Act, an executor has the right to charge a fee for managing an estate. “A trustee, guardian or personal representative is entitled to such fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the estate, as may be allowed by a judge of the Superior Court of Justice,” says the act.

Guidelines for executor’s compensation, established by the courts, include: 2.5 per cent of the capital receipts, 2.5 per cent of capital disbursements, 2.5 per cent of revenue receipts, 2.5 per cent of revenue disbursements and 2/5 of a one per cent per year management fee on the gross value of the estate. Other factors to consider include: the size of the estate; the care, responsibility and risks undertaken; the time inputted; the skill and ability necessary to manage the estate; and the successful administration of the estate.

Though generating some additional revenue may be appealing, should an advisor really become engrained in what is inevitably a family affair? This advisor doesn’t think so.

“At the end of the day, from a standpoint of the family rift, staying out of it is probably the best thing,” says Wayne Leacock, a Toronto advisor with the Investor’s Group. “There are other people who will be more qualified to be the executor especially when it comes to splitting up inheritance.” (continued.)


But, what if a client insists you are the right person for the job?

Leacock says that, regardless of this, he would candidly explain why he felt he was not the suitable person for the role.  “I would give them my honest opinion and feelings on that situation. I would spell out for them what that might mean down the road,” he says. “Sometimes there’s enough conflict between how things are going to be designated in a will without them (the family) fighting with the executor.”

Leacock, instead, would advise his clients to consider their own lawyer or accountant, or would recommend them to at least three third-party providers from his roster of referrals. Only if a client lacked confidence with his referrals, would he consider taking on the role.

“I provide at least three names so they can do their due diligence. I leave it up to them to make that decision,” he says. “If they decide that they are not comfortable working with any one of those people then at that point, I may consider it (the executor role).” 

Leacock does admit, however, that there may be situations where the advisor is the best candidate such as if a client is elderly, has no children or extended family; or has underage children. Taking the decision out of the courts' hands may also be a priority.

"At the end of the day, if you look into the future, (the client) has chosen someone they can trust or they know will be looking out for the best interest of the family after their passing," says Leacock. "That’s really the biggest thing."

In most instances, both the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association (MFDA) prohibit advisors from acting as executors to client estates.

Would you consider being, or are you, the executor of your client's estate? Tell WP your thoughts in the comment box below.

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