One of the first things to consider in preparing a will is who will handle your affairs on your behalf once you are gone. This person is known as your executor (executrix if female) or as your estate trustee.
In deciding whom to choose, you want someone:
* you trust
* capable of dealing the large amount of administration / paperwork involved
Often the choice is obvious – it will be the same person as your beneficiary. For instance people will often choose their spouse as their executor.
It is also a good idea to consider who would be a good backup executor if your first choice of executor cannot act.
You can appoint more than one person to act as executor – for instance, all of your children. In this case, all executors must made decisions jointly, but the tasks that need to be done can be shared. You should only do this if all of your executors get along well; otherwise, this is a recipe for disaster.
Your executor is responsible for:
* Your funeral arrangements and the payment of those expenses from your assets;
* Locating all of your assets
* Caring for your assets until they are sold or distributed
* Obtaining probate
* Preparing tax returns and paying any taxes owing
* Paying off any bills, loans, or debts you owe
* Distributing your assets as set out in your will
The job of an executor normally is not particularly complex. However, it is time consuming, and does involve a lot of legwork and attention to detail.
Executor Compensation
Executors (female plural is executrices) are entitled to compensation for their work. Typically, they receive 2.5% of all assets collected, and 2.5% of all assets distributed, so essentially 5% of the value of your estate.
If there is ongoing management of the estate (for instance, holding funds in trust for children), there is a management fee of and 0.4% per year of the value of the funds managed.
These fees are guidelines that are normally followed, but can be adjusted upwards or downwards based on the complexity of the estate.
If an executor is the sole beneficiary an estate, it does not normally make sense to take compensation, as that converts an inheritance, which is not taxable, into income, which is taxable.
You can also set out the terms of your executor’s compensation in your will.
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