The Choice of Personal Representative - Hull on Estate and Succession Planning #147
Listen to The Choice of Personal Representative
This week on Hull on Estate and Succession Planning, Ian and Suzana look in more detail at choosing a personal representative and how to minimize tension when doing this.
If you have any comments, send us an email at hullandhull@gmail.com or leave a comment on our blog.
The Choice of Personal Representative - Hull on Estate and Succession Planning #147
Posted on January 13th, 2009 by Hull & Hull LLP
Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag that will provide information and insights into estate planning in Canada. From the offices of Hull & Hull in Toronto, here are Ian and Suzana.
Suzana Popovic-Montag: Hi and welcome to Hull on Estate and Succession Planning. You’re listening to episode 147 of our podcast on Tuesday, January 13th, 2009.
Ian Hull: Hi Suzana.
Suzana Popovic-Montag: Hi there Ian, how are you today?
Ian Hull: Great, thanks.
Suzana Popovic-Montag: That’s good.
Ian Hull: Please feel free, of course, to start this off because we’ve already got two or three e-mails since the New Year at hullandhull@gmail.com.
Suzana Popovic-Montag: Or feel free to visit our daily blog at estatelaw@hullandhull.com as well.
Ian Hull: Well Suzana, we finished off talking about our resolution for 2009 and that was to consider avoiding the fight and how we can avoid it and you came up with the top 10 reasons why fights happen. So we now are well armed with our protection and our coverage is on and the insurance is in place. The last item that we talked about at the end of our last podcast was the choice of personal representative. And I thought it would be helpful today to spend some time on this podcast to give it some more detail because it tends to be, first of all, a big part of our contentious practice. And it tends to be probably the most or almost the most vicious litigation that you get involved with, which is another bad thing: (a) because nobody wants vicious litigation; and (b) because vicious litigation means a lot of zeroes with legal fees.
So what is it about the choice of personal representative that really brings out, or what are kinds of issues that come from that job, that brings out a fight later in life?
Suzana Popovic-Montag: Well Ian, I think that, certainly from my experience, these fights mostly are most contentious, or most emotional, when they involve family members. And so it’s not when there’s a professional trustee necessarily that’s in place but its when, for instance, a parent has chosen one of several children, or one of several siblings. And so there’s that whole, you know, ostracization of the rest of the family that sort of gets people’s backs up, I think. And so that, in addition to the fact that it’s a very thankless job in and of itself, just seems to set the tone for a very nasty fight.
Ian Hull: Okay, so you’re saying then the choice of the representative is fundamental to the ultimate potential battle. And if you can see it coming, it’s worth avoiding.
Suzana Popovic-Montag: If you can, for sure. Because what the choice of an executor is, it’s that person that you’re entrusting to, someone you’re putting your utmost trust to administer your estate. So now that you can’t do it yourself, you’re saying to this individual, I’d like you to take care of my family and to distribute my assets in accordance with the terms of my Will. And that’s a very, very strong obligation that’s imposed on someone and it also means that a lot of people are going to feel that they weren’t worthy of the job.
Ian Hull: So what are some options to help diffuse that pressure, because you were saying that choice of one child over another and so forth. What are some of the things that you have seen that helps, not eliminate, but diffuse the tension that comes from the choice?
Suzana Popovic-Montag: One of the easiest things that comes to mind is to have people actually know that they are going to be chosen or named as the executor and to have the other family members know that that was the choice and the reason for that. Because that, as you say, diffuses the whole surprise aspect of being suddenly learning that one has been chosen over all others. And it also leaves people with the opportunity to understand why that choice was made.
Ian Hull: Well that’s good, I mean it ties back to you one of your comments in the last podcast and that is, good communication.
So we take our…we have some good communication and we talk about also, I’ve seen some success with the choice. Sometimes it pays, literally pays, to pick an independent trust company or an independent tax accountant or advisor or someone separated from the family to do that. That helps. Sometimes it pays to pick, if you’ve got a small enough family, maybe pick everyone and say you’ve all got to work together and you’ve got to live with that. Sometimes it doesn’t. Sometimes you put in a majority clause that says well I’ve got 3 kids. If you guys don’t get along, 2 out of 3 can vote you out. I’ve seen some real tensions arise when there’s 5 or 6 executors in larger families, but again, not impossible. So there’s sort of several options in that regard.
So, alright, we’ve got two points that I think we’re thinking of in terms of the choice of personal representative and the problems that can arise. The first you’ve told me about is the choice of the person, him or herself, or the institution. The second part, for the last part of this podcast, let’s talk about what is the sort of one pressure point issue that we see the most, causing the most litigation, when you’re dealing with a fight over the choice of executor?
Suzana Popovic-Montag: Well that, I think, Ian, you’re eluding to is the fight over compensation because I think that is, you know, when it all comes down to it, it’s all about the money. That is the fight is over the fact that the executor is being alleged to have claimed too much money as compensation for the work that he or she or it has done during the course of the administration.
Ian Hull: And the classic scenario there is really, it comes down to the Court sort of saying well, what is the complexity of things? How much time and effort did you put into it? And a lot of the executors that we see in the fight aren’t getting themselves prepared for that. They’re not seeing the train wreck coming. They’re not taking the careful notes of their efforts. They’re not docketing their time. They’re not keeping all of their paperwork, so to speak. And so they’re leaving themselves exposed. And one of the easiest things that we find to diffuse that tension, we identify the problem. But the solution is getting good advice at the outset. So if you’re picked as an executor and you’ve got the job, rush, don’t walk, run to see an advisor and get professional advice on how to be a good executor.
Suzana Popovic-Montag: That’s right. And that’s so important because it is a job that you wouldn’t necessarily know the fiduciary obligations or the other expectations that come with that appointment. And you want to make sure right from the get go you know what’s expected of you because especially in very tight family situations, whereas you know I suggested earlier, one of the siblings is chosen over the others. There’s this view that that individual is being favoured because they’re getting an extra claim on the estate for that compensation amount. And no one will acknowledge or necessarily realize how much work is actually involved in that. They just think it’s a very easy job to administer an estate. And that individual who’s doing the day-to-day stuff is going to look for compensation and needs to be able to justify it so that we can avoid or at least diffuse those situations as much as possible.
Ian Hull: Well that’s terrific. I think we’ve really touched on the basic problems that can come out of personal representatives and the choice of the personal representatives, and the train wreck that can get created by that choice. And really we just wanted to make sure that we didn’t gloss over that from…we felt it from our first top 10 summary, we wouldn’t want to leave that one open.
So that’s great. We would remind everyone, of course, that we look forward to your feedback at hullandhull@gmail.com.
Suzana Popovic-Montag: And our daily blog is posted at estatelaw@hullandhull.com and we welcome you to read there as well. Thanks very much, Ian.
Ian Hull: Thanks Suzana.
You have been listening to Hull on Estates and Succession Planning by Ian Hull and Suzana Popovic-Montag. The podcast you have been listening to has been provided as an information service. It is a summary of current issues in estates and estate planning. It is not legal advice and you are reminded to always speak with a legal professional regarding your specific circumstance.
To listen to other Hull & Hull podcasts, or leave any questions or comments, please visit our website at hullestatemediation.com.
