What will you do?
The Mah Investment Group - Feb 08, 2023
When it comes to writing and updating your will, there are a number of important decisions to be made.
It’s a new year, the perfect time to tackle important planning issues with fresh energy. And when it comes to writing and updating your will, there are a number of such issues to address. To help you navigate them and make the best decisions, we recently organized a candid conversation between our very own legal eagle, Marissa Mah, and Andreea Muth, a lawyer who supports our clients in the areas of succession and estate planning.
Today is Part One of that conversation, which focuses on the many pitfalls of choosing executors, along with powers of attorney, and when to update your will.
Andreea, thank you very much for speaking with me today. Since you are a lawyer who does considerable work in this subject matter area, I am really looking forward to this conversation. Let me start by asking a really straightforward but crucial question for the benefit of our audience: What is a will?
A will is a document that sets out a person’s intentions for how their assets are going to be dealt with after they die. It differs from a power of attorney, or POA, in that POAs are intended to be effective while you are still alive and more importantly, if for some reason you become incapable.
A will is intended to capture what you want to do with your estate and who your beneficiaries will be. There are any number of ways you can divide your assets among beneficiaries, such as family, friends and charities. The will also articulates who the executor is going to be – the person who will manage that process, including paying taxes and other debts, and doing things we might consider mundane, such as cancelling credit cards and shutting down or otherwise managing someone’s digital assets, but can become such daunting tasks if clear instructions are not left behind in the will.
Picking the right executor is so incredibly important and is very often an immediate burden that people place on their children.
I always tell our clients that being an executor is an enormous responsibility, and to not necessarily choose their children. My father, Edward, asked me to be his executor in fact, and I said no. I am a former lawyer, and I said no because the responsibility is so important, has so many legal and accounting issues, and quite frankly, is not something I would want to undertake while grieving the loss of my father. My father understood completely.
People think it is an honour to choose one or more children as an executor, but that puts them in a position of taking on a lot of responsibility, of taking a lot of action, when they are grieving. Some clients want more than one child to be executors: they think the kids are not going to fight, but having passed, the client is gone and can no longer mediate. So, they are quite possibly setting up the children for conflict and for their relationship with each other to fall apart.
As much as people think it is an honour, it is a burden.
There are maybe a few minutes of honour in it, when you realize that this person trusts you to such a degree, but then for the remaining time it takes to administer the estate – which could span more than a year – it is a burden. It is not like the movies when everyone gets together in a room and there is a single reading of the will and that’s it. There is a lot of administrative complexity, such as applying for probate, and just the basic but arduous process of reporting assets and having to distribute them.
As parents, we can have a rosy picture in our minds of how we would like our kids to be. But even in the best relationships, ones with a lot of respect and love between the children, when the parents pass, it becomes a time of grief and reflection. If you have named more than one of your children as executor, sometimes the executors can redirect some of their feelings into the process, making it more painful and difficult.
I find that people who have been executors of their parents’ estates understand much better the complexity of the situation. Appointing multiple children as executors can be risky (even when they seem to get along well) if the real reason they keep the peace is only for the parents’ sake. The children will have to make so many decisions together, like attending meetings with lawyers and accountants together, and you are just setting them up for battles if they use the process to work through frustrations they’ve kept silent for years (or even decades).
Consider that even if they agree on everything, they still have to attend multiple meetings and accomplish a range of tasks in lockstep, and it becomes an administrative burden and logistical challenge for them.
And what situation are you creating if you have multiple children and choose one or more as executor, but not others? It becomes very easy for the child or children not chosen to second-guess everything – “I would have done this and that” – which is very easy to do when you are not in the executor’s shoes. The executor, of course, is grieving while having to take care of their own lives and their own families, all the while having to manage the estate.
This is not to say that you should never choose a child or children as the executors, but only that it should be done on a solid understanding of the relationships and work involved. When it seems this might not be a workable solution, a good alternative to choosing a child is to choose a family member who has not been as intimately involved in your life, or a friend, even though many of our clients want to keep things inside the family. This adds a layer of impartiality onto the executor’s decisions, as the executor will not see any benefits from their choices.
Another option is to use a completely neutral third party, such as a trust company. The trust company can perform the function of managing the children and mediating between them and becoming a calming influence. You can even appoint a trust company and your child or children as joint executors, requiring them to work together. Again, in that situation, the neutrality of the trust company can be calming.
My view is that much of the same thought process we apply to choosing an executor should be applied when choosing a power of attorney. Do you agree?
Yes. A power of attorney – whether it be a POA for personal care or a POA for property – is for when you are alive. It is about designating a person to manage your assets and health care when you are still alive but unable to do so yourself. Who is the best person to do that for you? As with an executor, being a power of attorney is a very serious responsibility that can bring some burden with it.
Back to wills. Under what circumstances should someone update their will?
There are the big events in life: when you get married or divorced, have children, and grandchildren. When it comes to marriage, something people do not always think about are common law relationships because they arise over the passage of time. If you have been living with someone in an intimate relationship for a year or more, there is most likely a common law relationship there.
Other milestones that may not be planned, but at which time someone really should review their will, would be changes in the medical history of not just you, but your spouse, children and grandchildren. If someone you love receives an adverse diagnosis – say cancer or a long-term disability, for example – and it needs to be managed and funded for the longer term, your will can ensure they are still taken care of after you are gone.
How frequently should people consider updating their will?
We advise our clients that they should be looking at their wills roughly every five years. Major life events should always trigger an immediate review. Something will have changed during that period, and it is so important to update your will accordingly.
Andreea, thank you so much for talking with me today! And for supporting our clients with your expertise.
My pleasure. I am always happy to help.
If you would like to discuss creating or updating your will, or if you have any questions at all on the subject, please contact Marissa Mah at firstname.lastname@example.org or 1 416-945-7051.
Andreea Muth has a general corporate and commercial law practice, with a focus on business owner estate planning with Pallett Valo LLP, the largest law firm in Peel Region. She advises business owners and private corporations on the structure and implementation of corporate reorganizations, mergers and acquisitions, as well as comprehensive business succession planning. This includes will and estate planning, and the use of family trusts.
Combining her unique blend of corporate/commercial law and estate planning experience, Andreea sets up structures that are tailored to each client’s specific estate and business needs. Clients also appreciate her ability to explain complex issues in everyday terms.
With foresight and expertise, she helps clients looking to sell or exit their businesses plan the departure, including strategies for using family trusts and estate freezes. Keeping their family goals in mind, Andreea helps clients understand the implications of maintaining their children and grandchildren in their business and provides options how each family member can contribute meaningfully.
In addition, she advises her clients on general corporate and commercial matters like business structuring, including sole proprietorships, partnerships and incorporations, general contract drafting and negotiation, and overall management of asset and share purchases and sales.
Andreea believes in the importance of continual learning, both for herself and other lawyers. As CPD Liaison for the Ontario Bar Association Business Law section, she organizes continued professional development for Ontario business lawyers. She is also the newsletter coordinator for the Toronto branch of STEP, helping to bring relevant trust and estate planning content to over 1,000 practitioners in the GTA.