Should you manage your client's estate?

Should you manage your client's estate?

Should you manage your client 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.)

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  • Brian D 2014-02-10 12:23:06 PM
    IIROC Dealer Member Rule 43 (See IIROC Notice 13-0162) will restrict most instances where an advisor would act as an executor for a client.
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  • Bob Thompson 2014-02-10 12:26:52 PM
    Most firms prohibit their advisors from taking on the role of executor except for family and due to potential conflicts of interest that is the best course for any advisor. There are professional executors available
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  • Myron Neufeld 2014-02-10 4:45:22 PM
    Our experience suggests advisors are taking on the role...our advice: 1) ensure an 'estate specific' investment plan is completed; 2) limit exposure to conflict of interest by having another party manage assets; 3) know and understand that as the personal representative of the estate your liabilities extend well beyond investments so protect yourself accordingly.
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