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Canadians with no children or siblings must consider estate planning alternatives. Here’s why trust companies can be a good option.
I am a 60-year-old single woman with no children. I am an only child and have no siblings, nieces or nephews. I have a lot of friends and most of them are my age. I am planning to update my will soon and I am considering naming a trust company (if that is the correct name) as the executor of my estate. I am trying to figure out how to select a reputable company, what to look for and how it works.
—Michèle
When people prepare their power of attorney (POA) or their will, they tend to name family members as their attorneys or executors. A spouse is a natural first choice, followed by one’s children if they are old enough. Siblings are good options as well. In your case, Michèle, it is tricky, and you must consider alternatives.
A power of attorney, personal directive, mandate or similar estate planning document names someone to make financial and health care decisions on your behalf. The role generally comes into effect if you can no longer make decisions on your own due to a health issue or loss of capacity.
Someone who acts as your POA can generally make any decision other than a testamentary one, like preparing a new will.
In Canada, an executor is someone who is responsible for administering the final wishes in your will and distributing your estate to the beneficiaries. Your will takes over when you die, at which point, a power of attorney no longer applies.
An executor is a person named in your will who will be responsible, after you die, for making sure that your assets are distributed according to your wishes and that your estate is settled properly. This includes a wide range of activities, from filing a final tax return and cancelling your credit cards to giving away your jewellery or collectibles, and selling your home and investments.
Read more from the MoneySense Glossary: What is an executor?
Investment advisors have been asking their clients to provide a trusted contact person (TCP) for the past few years. As of this year, Certified Financial Planners (CFPs) are also obliged to ask their clients to provide a TCP. A friend would be a good choice for this role, Michèle.
A trusted contact person differs from someone named in a power of attorney. They are an authorized person whom an advisor or planner can contact and share personal information with under limited circumstances, such as suspicion that someone is being financially exploited through fraud, coercion or unauthorized transactions. A TCP may also be contacted due to concerns about mental capacity as it relates to financial decision making.
If you do not have a family member, or you do not have a family member who is a good choice, you might decide to name a friend. One challenge as you age is that your friends tend to be a similar age as you. Being 70 years old and having a 70-year-old attorney or executor has obvious drawbacks. So, you would be right to think twice about this, Michèle.
You can name a trust company, which is a legal entity that can manage assets on behalf of an individual. A trust company must act as a fiduciary (manages your money and/or property for you), putting the best interests of the individual first.
A trust company does not age or pass away like an individual, though a it could shut down, or more than likely merge with another trust company. Still, naming a trust company can ensure a level of continuity that naming a same-age friend may not provide for you, Michèle.
All the Big Banks have trust companies associated with them. Royal Bank has Royal Trust, TD Bank has Canada Trust, Scotiabank has Scotiatrust, BMO has BMO Trust, and CIBC has CIBC Trust. But there are several independent trust companies as well.
The fees for hiring a trust company or another professional may be higher than if you name an individual. Family members who are beneficiaries often act as attorneys or executors without compensation. In your case, Michèle, the peace of mind may be well worth the cost. It could also be more of a burden than an honour to name a friend.
A trust company may want you to sign a fee agreement and review your estate documents before agreeing to be named.
If you have a banking relationship, the simplest starting point for a professional trustee may be to consider your bank’s trust services. But, I would encourage you to speak to an estate lawyer as well to get their opinion based on their own professional experience with different companies in your province or territory of residence.
Estate planning can be complicated at the best of times, but when you do not have family members to name in your powers of attorney or will, you should consider a trust company.
Keep in mind that you can name a friend as the primary choice and a trust company as your second choice. That way, Michèle, if your friend is willing and able to assist at the time you lose capacity or die, they may still act in place of the trust company. With this approach, you will have the trust company as a backup plan at the very least.
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Very detailed direction.
One pointer:-
She can name the executors ( Trustees ) to act severally or Jointly.