Ask the Money Lady,

I am in the process of getting a Will but am not sure who I should pick for an executor.  Should I use a family member or a friend?  Any tips?

Great question Colin.  A friend or a family member – it all depends? 

This will be the person who controls and manages all your assets that you leave behind and will have a legal obligation to carry out your estate plan.  Your executor will secure all your assets, make investment decisions if necessary and file your final tax return.  It is important for you to choose the right person to be your executor, and to consider the person’s competency and age, availability and location, trustworthiness and dependability.

Please do not chose an executor that does not reside in Canada.  This could have legal and/or tax implications depending on your provincial legislation.  Under Canadian tax law, an estate is considered to be a trust and we do not want the tax residency of a trust to be questioned if the primary management and control takes place by a non-resident.  This will trigger your estate being disposed of its assets as a non-resident, subject to capital gains tax, possible with-holding tax, loss of enhanced dividend tax treatments, and even being subject to the rules and regulations of the foreign country where your executor resides.  Of course, in situations where an estate is subject to tax in two or more jurisdictions, tax conventions and foreign tax credits may be available to reduce the overall tax burden.  Non-resident executors may also be restricted when it comes to investment instructions over the estate’s Canadian investment accounts since this can be viewed as the executor controlling foreign assets.  It may also require the executor to report this on their own personal taxes.  For example, a US resident who is acting as an executor of a Canadian estate maybe required to file various US reporting forms and it is a good idea to seek professional assistance to ensure compliance.  Another example is in Ontario.  If an executor is not a resident of Ontario or a Commonwealth country, the executor is required to obtain a bond.  The out-of-town executor could get a bond from an insurance company – but would have to apply and pay for this.  Legal, taxation and financial advice should always be considered.

Let’s face it, you worked hard for your money Colin, and the last thing you want is our government (or any other government) getting their hands on your estate.   No one would intentionally put their assets in jeopardy.  Speak to your advisor or estate lawyer to find out if the person you want as an executor is the right choice.

Good Luck and Best Wishes,
Money Lady

Written by Christine Ibbotson, Author of “How to Retire Debt Free and Wealthy”  Follow on Facebook & Instagram

Written by Christine Ibbotson, Author of “How to Retire Debt Free and Wealthy”  Follow on Facebook & Instagram

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