Dear Nancy,
I am in the process of updating my will and changing my executor. I don't have any children so I am relying on a close friend to administer my estate. I was planning on making her a beneficiary anyways, but do I still take into account that she would be entitled to the executor fee? There is more than just the one beneficiary, if that makes a difference. Signed, Robert
Dear Robert,
The executor is entitled to charge for the administration of the estate. Typically, as a guideline, the fee is 2.5 per cent of assets in and assets out or disbursed. If the estate is administered for a period of time there can be an additional fee of two-fifths of 1 per cent of the average value of the estate.
The duties of the executor are numerous. An accurate accounting and record keeping must be kept for all estate assets. Appropriate tax filings and a final clearance certificate from Canada Revenue Agency must be obtained.
It is important that you choose an executor that will likely outlive you, is trustworthy and capable of following the directions in the will. You are relying on your executor to administer the estate according to their wishes. They must be willing and able to carry out your funeral arrangements so it may be a good idea to discuss your wishes prior to your death.
You can choose to make a specific bequest to the executor. This will allow the executor to receive the funds as an inheritance rather than an executor's fee. The executor's fee is taxable as income. If the executor is also a beneficiary they usually do not take the executor's fee as well. If you specifically note the bequest is in lieu of the executor's fee, this may cause CRA to still have you declare it as income.
What can seem as a minor change to your will should be carefully thought out. Seeking advice from your estate lawyer, an estate specialist and a tax specialist is the ideal. There may be nuances that can make a big difference to your decisions.
Nancy Woods, CIM, FCSI, is an associate portfolio manager and investment adviser with RBC Dominion Securities Inc. To ask her a question, send an e-mail to asknancy@rbc.com or visit her web site at nancywoods.com
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