Being An Effective Executor with Melissa Best | E053

The obligations and best practices of estate administration.

In this episode of Financial Planning for Canadian Business Owners, Jason Pereira, award-winning financial planner, university lecturer, and writer, interviews Melissa Best, Founder of QuickEstate, a software that saves families time when organizing their estate. Melissa is here to discuss what it takes to be an effective executor, should the situation arise.

Episode Highlights:

  • 1:11 – Melissa Best introduces herself and her company.

  • 2:07 – What are the obligations of an executor?

  • 3:54 – Jason discusses the serious nature of being an executor.

  • 5:35 – Melissa expands on the liabilities, legal implications, and compensation for executors.

  • 7:20 – Jason and Melissa talk about the importance of dividing up duties rather than dollars.

  • 10:20 – Melissa explains how her company has been working with financial advisors all over the country.

  • 13:46 – How can executors effectively execute the estate?

  • 15:55 – Melissa and Jason discuss the aspects surrounding certain assets that make them so difficult to deal with.

  • 19:15 – How do the problems with family friction and litigation arise?

  • 21:00 – Melissa explains why, sometimes, lawyers and advisors drag things out.

  • 22:50 – Jason discusses where the drafting of the wills goes wrong.

3 Key Points

  1. First and foremost, an executor is responsible to conclude all of the deceased’s affairs, including financial assets, real estate, benefit programs, personal use assets, and service provider accounts.

  2. Many executors start at a position of disadvantage on account of not being educated of the responsibilities of being an executor nor even being informed that they are an executor.

  3. The family cottage tends to be one of the most difficult assets to deal with because of the taxes surrounding it and who gets to own it.

 

Tweetable Quotes:

  • “It’s a huge responsibility. It takes a lot of time and it takes an awful lot of organizational skills, and recognition that this is a serious fiduciary responsibility.” – Melissa Best

  • “One of the biggest problems for executors is they don’t even know they’ve been named...That is not an uncommon situation to start out on as an executor.” – Melissa Best

  • “The will only tells the executor who gets what. It doesn’t give you an ounce of capability in terms of dealing with all the various assets.” – Melissa Best

  • “Basically, at the end of the day, it comes down to get organized, get help, and communicate, really.” – Jason Pereira

 

Resources Mentioned:

Transcript:

Producer: Welcome to the Financial Planning for Canadian Business Owners podcast. You will hear about industry  insights with award winning financial planner and entrepreneur, Jason Pereira. Through the interviews  with different experts with their stories and advice, you will learn how you can navigate the challenges  of being an entrepreneur, plan for success and make the most of your business and life. And now your  host, Jason Pereira. 

Jason Pereira: Hello and welcome to Financial Planning for Canadian Business Owners. Today's show we're going to  talk about something in more detail than we have in the past. I've often alluded to the fact that being an executor on an estate is a massive pain in the butt and we're going to get into a little bit of that today,  but also discussion about how to effectively handle an estate should you ever be in that situation. And  for that conversation, I brought Melissa Best onto the show of QuickEstate to essentially talk about how  you can avoid some of these big precarious issues. And now here's my interview. 

Jason Pereira: Hello, Melissa, how are you doing? 

Melissa Best: Hi, Jason. Thanks for having me on your show this morning. 

Jason Pereira: No, appreciate it. Thank you for making the time. Melissa Best, tell us about what it is you do. 

Melissa Best: Well, I'm the CEO and founder of a software application called QuickEstate, which helps advisor clients  organize their affairs before death or disability strike. And it also helps their executors settle the estate  once they're gone. And what I'd like to share this morning are some of the challenges, the biggest  challenges facing executors and where advisors can play a role, active or passive in terms of helping  their clients overcome these challenges and in doing so, cement the relationship with client families and  maintain their position as the most trusted advisor to increase revenue. 

Jason Pereira: Let's start off by painting the picture of what the obligations of an executor are. We can start there and  then talk about exactly where the traps are just as you suggested. Someone passes away, they've named  me as the executor of the will. I have never done this before. I have no idea what I'm doing. What are  the obligations? 

Melissa Best: Well, the number one obligation of an executor is to ensure that they conclude all of the deceased's  affairs. That includes making sure that the assets that the deceased has are secured and that would  include everything from financial assets, such as assets under management at your firm, insurance  policies. We have a list in our software, 42 different types of assets, which come in the categories of  financial assets, real estate, including the principal residence and other real estate, whether it's owned in Canada or not. And then there's benefit programs to deal with. And then there's personal use assets,  which may include a wine collection or jewelry, et cetera. 

Melissa Best: Essentially if you look around your house and you think, what if I got hit by a bus tomorrow, who has to  look after all of my stuff? It doesn't just include assets and debts. It also includes all of your service  provider accounts. It's your Ontario Hydro account. It's your Telus internet account. It's all of that stuff  and it's a huge responsibility. It takes a lot of time and it takes an awful lot of organizational skills and  recognition that this is a serious fiduciary responsibility. When you're named executor, you're named as  a fiduciary. In other words, you have the legal responsibility to hold all of the estate's assets in trust,  guard the estate, value and make sure that the beneficiaries' interests are protected above all else. It's a  serious job. 

Jason Pereira: It is. And one that's taken far too lightly because the simple act of, oh, I'll just name them as my  executor. You really have no idea what you're signing someone up for 99% of the time. It is serious. And  as for the fiduciary burden, the reality is and people don't understand this and there is tons of case law  surrounding this. The legal obligations on you to make sure things got done right and that the right  people got the right money, it is, let's put it this way. If you misappropriate some of those funds, that's  considered different than normal theft. If you were to steal $10,000 from a estate and versus steal  $10,000 from someone just because the money is lying on the table, the legal implications of that theft  are far worse on the estate side, because you were a fiduciary. You were charged with a legal  responsibility to make sure stuff like that didn't happen. 

Jason Pereira: This is something we cannot be light about the obligations here. They're substantial. As Tom Deans said  in our previous podcast, the only appropriate answer when someone asks you to be the executor is no.  And if you can get away with it and if you can't, then you got to make sure that they're setting you up  for success and not failure. That's the first thing is the inventory. And then of course, it's all about  making sure it goes where it's got to go and then closing down all these accounts, which sounds small.  But let's just look at the worst case scenario, a disorganized hoarder or collector of things. I can't even  begin to imagine how much work that is. When you think of that down to, who do my books go to?  That's all residue of the estate. The beneficiary's got option to that. There's just so much to be done in  ending the person's affairs. 

Jason Pereira: Now that we've made everybody feel overwhelmed by it, let's talk about best practices for not being.  Actually, before we do that, I talked about some legal implications. Let's talk about one other thing  before we get there, the liability side of this and how they absolve themselves of it and the  compensation side of this, because that's one point that people don't discuss enough. 

Melissa Best: Yeah. Well, you've raised excellent points there. All of which are a 100% true. One of the biggest  problems with executors is they don't even know they'd been named. You could get a call from your  cousin saying, "Oh, my mom died. Your Aunt flora died and she named you as executor." And you go,  "Oh my God, I had no idea." That is not an uncommon situation to start out on as an executor. If that did happen, you have no idea who's involved, what's involved and where everybody and everything is. Right  out of the gate, you are starting out in a position of disadvantage just by not being informed and  educated. 

Melissa Best: First of all, informed by your Aunt Flora that, "Jason, you're a respected financial guy. I really trust you.  I've named you executor of my estate." And this is the number one mistake that clients make, they don't  tell their executors that they don't not only tell them their name, but also to acquaint them with the  terms of their will, who gets what, why they made decisions they did. And this happens all the time and  it's such an easy thing to fix. And I have tons of time for Tom Deans with his willing wisdom process. And  the foundation of that is to tell your family what's going on after you pass away. And for some parents,  that's a really big ask. They love to keep their cards close to the vest and think, well, I'm not telling Jason  how much money I've got. And this is really old school behavior. 

Jason Pereira: Let me take a step back on that because I've actually, so I actually just had a case where the client  outright rejected to do it whatsoever. Just like, okay. And a lot of that goes back to how their parents  viewed money. But I would say that it doesn't have to get into the dollars. This is the point I made to her  was this does not have to get in the dollars. This is about responsibilities and duties and who gets what.  Now yes, they can extrapolate and interpret certain numbers if that cottage is going to be split between  X people or these buildings are going to that person, they can do a ballpark number. They're not done.  But we under no circumstances have to get into the actual dollar amount. This is all about duties and  responsibilities. We can make them understand that, then we're already miles ahead of everybody else. 

Melissa Best: 100%. And what I've done when I developed QuickEstate, which consists of an organizer as well as an  executor, I did a really deep dive into the money because I spent 32 years as a financial advisor and I had  sort of a sub-specialty in estates and having watched so many families go through this awful process,  largely because they just don't know what's involved. We take the money very seriously and we do a  deep dive into the amount of details that you should organize before you pass away. Because every  detail that you record, whether you use our application or you use a notebook, makes things much,  much easier for the executor. At the end of the day, managing the money is the executor's number one  responsibility because that's in the interest of the beneficiaries, but also that's where you're going to get  sued. 

Melissa Best: And a lot of executors, even if they know that they've been named, when the person dies, they have no  idea where to start. And I put a lot of responsibility for this firmly in the laps of the financial advisory  community, the legal community and the accounting community, because what these clients have been  schooled to believe is that I've got a will, great. You got a will and how much life insurance do you need?  And that really is the tip of the iceberg because the will only tells the executor who gets what. It doesn't  give you an ounce of capability in terms of dealing with all the various assets. 

Jason Pereira: In fairness, the average person's understanding of what an estate plan is, is a will. And I always say that  estate planning is a process and you're confusing a product that is a result of that process with the actual process itself, which is not the same thing. Part of the process means extending beyond that. Like  you said, getting organized. And in addition to that, things like not just in also having those family  meetings. And I would say that the bigger problem with the industry is anyone who takes a product or  sales orientated position or look at their obligations to a consumer, sees no incentive in doing any of  that. And that applies to the lawyers as well. They're there to do the will, get out of the way, that's the  end of it. Unless someone's defining their entire service offering around the concept of comprehensive  planning and making sure that they make the person's life run as smoothly as possible, they're actually  not even going to see the need in most cases. 

Melissa Best: Well, you're a 100% right about that. And we've been dealing with advisors across the country now for  about four and a half years. QuickEstate started, I created it pen to paper in 2013 and in the last four  and a half years we've been dealing primarily with advisors. And I know that the stresses on advisors are  huge with all the new compliance and so many of them are trying to be all things to all people. And  frankly, a lot of them are failing because they don't seem to understand that if you're going to offer  estate planning or whatever other ancillary process that you're offering in addition to asset  management, life insurance, tax planning, you have to create a repeatable efficient process. In the  estate planning realm, we can look at where can the advisor step in at each stage of general estate  planning to make sure these problems don't arise? 

Melissa Best: And it does start with the will, making sure that not only the client has a will, but that will was done long  after your young son has grown up. That it's updated as needed. In the event of divorce or remarriage or  there's reasons to do that, which are pretty well known. But the advisor's role is not just to say, "Do you have a will?" But is it up to date? And who did you name as your executor? Because the tendency with  clients is to name their children as executor. And that's done again, just lack of education about what  comes in front of those children. 

Melissa Best: And a common thing is to say, "Well, I've got four kids and I don't want Johnny to be left out, even  though he's completely incapable on an organization or financial basis so I'm going to name all four."  And well, three of the four don't get along and people just don't even think past that. As an advisor, I  think it's really helpful if you have a substantive conversation, not only to educate the client about all  the work that has to be done, but who's going to carry it out. 

Jason Pereira: I would agree there. Yeah, I think a lot of, it's like any of these other things we fail to plan properly, it's  as doomed to failure. You just talked about some of the family dynamics issues. Family dynamics is  always the biggest variable in this I'd say. And more often than not, I also joke that estate planners have  some of the best stories because unfortunately, and most tragic. Because they get to see people at their  emotional worst, fight over things that have no material value, like they're fighting over the Ark of the  Covenant or something. If you really want to see people not get along, not get along worse, put them in  charge of an estate mutually or let them have some degree of discretion over what happens. It's just, it's  going to get worse. I always say the one way to make sure that your family hates you after you're gone,  is to leave an unprepared estate.

Jason Pereira: That aside, let's move on to effective implementation. We talked about just getting organized is the first  thing. Number of tools out there such as yours, also even something as simple as there's plenty of estate  record keepers on paper. That's not as elegant a solution or as good because that'll also be stale dated  in no time because people's lives change all the time. Effective implementation. If someone plans in  advance for giving all the information to the executor they're going to need to, the executor gets their  hands on that. What other pearls of wisdom do you have for them in terms of how they can effectively  execute the estate? 

Melissa Best: Well, it involves, as you just mentioned, taking an effective inventory and at the very least it's what do I  own? What do I owe? And where can it be found? And even if that's just making a note of, I've got an  RBC account on downtown or wherever it is, or I've got a BMO account here, my investment advisor is  there. That's the first thing. But it also involves knowing what to do with those assets afterward. As I  mentioned earlier, we've taken a deeper dive on the financial side. Not all the information has to be  filled out, but eventually it's all going to be needed by the executor. That includes things like the cost  base on assets. Sorting of the cost base on assets after person has passed away is a nightmare. And for  the advisor, trying to gather that cost base information is really useful because it may open the door to  some insurance services and tax loss selling, whatever. 

Melissa Best: It's not just the basics. The basics are better than having nothing, but it's also recognizing the amount of  information that the executor is going to need. And if any amount of that can be provided in advance,  that's great. You mentioned people fighting over things like an ashtray turning into the Ark of the  Covenant. That problem can be resolved by creating a personal effects memorandum, simply something  that the client types up or writes up saying, "I'd like Jason to get this and I'd like Sally to get that." And if  that personal effects memorandum is referenced in the will, it becomes legally binding. Otherwise it's  just a guidance point because at the end of the day, when you pass away, your kids are going to be left  with all your household belongings and hopefully they get along well enough so that they're not fighting  over the ashtray from Vegas that you got 20 years before. 

Melissa Best: That's again, it's just looking at everything that you've got under the microscope and saying, "Well, what  should happen with this?" Another asset that is very problematic and very common is the family  cottage. That's a difficult asset to deal with. It involves some conversations involving tax and how to  leave that. There's a few options, but none of them are great because if you agree. 

Jason Pereira: The best two options I ever heard from an estate lawyer at a conference were, as far as she was  concerned there's only two ways to deal with it. One, sell the cottage and disperse the cash. Two burn  the cottage to the ground, take the money from the insurance company, disperse the cash. Because at  the end of the day, and she was right, at the end of the day, it never ever fails to cause a conflict. I've  even got one case right now where the situation in the will is such that the way it was written was if one  sister is okay with the other sister owning it, and this is if sister A is okay with sister B owning it, sister B  can have it as part of their bequest of the estate. However, if sister A is not okay with sister B holding it,  it's getting sold.

Jason Pereira: Because there's just too much emotion, basically. One of them really wants it and the other one's just  like, I'm not ready to let you have it. That might change in the future. And if it doesn't change in the  future, then I'm sorry, I don't want this. And it is what it is. Cottages are the worst. Just people, don't  plan on leaving your cottage to your kids, unless you have one kid. That's the end of it. 

Melissa Best: Exactly. And there's some really cool things that you can do to plan around it, which I'm not going to go  into, but it's just the fact that you've thought about it. Another asset that people don't pay attention to  that's becoming more and more problematic are digital assets. If you pass away and your executor  doesn't know where your passwords are, it can create a major problem, obviously for banking and  financial passwords, but also things like Facebook and whatever rocks your boat in the digital world. And  most digital providers are not willing to let the executor have access. In the US, a number of states have  created new laws that require digital providers, the likes of which Apple and Yahoo have been sued  because they refuse to give the executor access, laws are now changing that, say if the executor needs  access, they can get access, but it's not in every state and there's very few provinces in Canada where  that even exists. 

Melissa Best: The legal, the lawyers and provincial bodies are still trying to figure that one out. That's an asset where,  write your passwords down somewhere, use a password protector. There's lots of them out there, a  digital vault for your passwords and tell your executor where your master password is and then the rest  is easy. There are problematic assets for sure. And it just involves again for an advisor, it's just a simple  conversation saying, "Bob, let's take a look at what you owe and what's going to happen with this when  you die?" And normally those conversations and this kind of assistance with estate organization, I  guarantee it puts you in the trusted advisor role. You become keeper of the list. And if something  happens, you're going to be leaned on to help the family and retain business, maybe gain some  business. It's pretty important. 

Jason Pereira: Basically at the end of the day, it comes down to get organized, get help and communicate really. 

Melissa Best: It really does. And when you look at the problems, the family friction and then eventually litigation, how  does that arise? Well, first of all, the executor doesn't know what they're doing. The executor has a busy  life of their own and they just don't have time. It starts out saying, "Oh, I got to settle mom's estate. I'm just too busy this month." Two months later, your siblings are calling saying, "Hey, Jason, what's going  on with mom's estate?" And you're like, "Oh, I've been so busy." The next calls are, "Where's our  money?" The lack of trust just magnifies the longer this process takes. And if the executor is not getting  onto it, doesn't know what they're doing, not getting help and not communicating with the  beneficiaries, then you're going to have problems and big problems. And the only people that are  winning in this game right now are the lawyers. 

Melissa Best: I always say the difference between getting a divorce and settling an estate is that with a divorce,  there's only two people fighting. With an estate, it can be the whole fandamily. And believe me, these  estate lawyers are charging a fortune now, not only to do probate applications, but to get involved in  settling the estate and family friction. And a handful of them are really good, but most of them are paid  to drag it out as long as possible. They make more money that way. And I think they often cause more  problems than they bring solutions. Plus, a lot of lawyers just want to be involved in the legal side. A lot  of them don't even want to take on estate administration. And the bank owned trust companies are... 

Jason Pereira: Charge a fortune for it. 

Melissa Best: The lawyers and the trust companies just charge scandalous amounts. And in fairness, if the person died  disorganized and if there's family friction and if it's messy, it is going to take more of their time. But the  dollars to results ratio are pretty low. And that's another reason why I created a QuickEstate because a  lot of the task, most of the tasks involved in settling an estate are simple administrative tasks that you  could take care of faster yourself than calling the lawyer or the trust company, because they're going to  be talking to you as the executor saying, you think, oh good, okay. ABC Trust is going to do the work,  even though I'm the named executor. But guess what? That trust company or the lawyer is going to be  constantly calling you every week. "Jason, go find this. Jason, go get that." That's what happens and it's  quicker to do a lot of it yourself. 

Melissa Best: And we purposely designed our product to be primarily useful to advisors, but advisors can share it with  clients. And it's very, user friendly, it's simple. The instructions are clear and comprehensive. It allows  the lay executor who's had no experience whatsoever, to get started on the right foot with a roadmap.  They know what to do at every step and and encourages communication with the beneficiaries the  whole way. That's the solution. 

Jason Pereira: Yeah. I would also encourage people that a couple of professional commentaries there. One specifically,  I think the cost of administration I've seen this happen before, you go to the bank and they'll say, "Oh  no, we can handle that for you." Oh, great. Oh, I'm so relieved because this is so much work. I don't  know what I'm doing. And then you sign this contract and the fee schedule is buried somewhere in there  and you don't know what the estate's worth, but suddenly now you're paying five points of that estate  for someone to handle some administrative bureaucracy. And you're right. The dollars to results ratio  ratios I've seen on these, I've seen utterly simple estates, simple. It was just literally they had a pension  and a house and for no reason for the bank to get involved on this one. And yet they got 5% of a more  than $1 million home for handling some basic paperwork. It's painful. 

Jason Pereira: And then I would say two, I'll rewind this and say that where these things start to go wrong is in the  actual drafting of the wills themselves. The thing about wills is that most lawyers think, just about every  lawyer think they're pretty simple. Just take a template and you modify the template as necessary. The  problem is, is that and I will say this much, if you find a lawyer that's a do everything lawyer, bad option.  You cannot be the Jack of all trades in law. There's just way too much to know. And if this lawyer took care of your real estate, as well as setting up your corporation, as well as setting up a spousal  agreement, as well as, already every time you add another checkbox for what they do, you get more and  more skeptical as to how much they're able to do something effectively. Because the number of terrible  wills floating around there that people paid good money for is staggering. 

Jason Pereira: And I am currently dealing with one right now, which was after this six page will, after reading the first  four pages of it, I knew that the guy had no idea what he was doing. You very quickly learn in this  industry when you read enough of these things, to know which lawyers know what they're talking  about, which ones don't. Unfortunately, they tend to charge the same rate. 

Melissa Best: They do. And it's not unusual for, well, we always, first of all, tell people when it comes to wills or any  estate matters, use an experienced estate lawyer, not your buddy Bob who does real estate that you  golf with. An experienced estate lawyer. And I can tell you that the good ones are charging well over $500 an hour. Some of them are up to $800 an hour. Are you going to pay that guy 600 bucks, $500 an  hour for their assistant to call Ontario Hydro and say, "Uncle Fred is dead. Turn off his account." 

Jason Pereira: Bingo. 

Melissa Best: And they will do it. I completely agree that lawyers have a place. And if there's any point in the process,  as you go through our software, where the person should get legal advice, it's all over. Get advice from  an experienced estate lawyer. But one thing we do and this is, we got some great materials on our  website, including an article called Executors, Before You Go to a Lawyer. Don't even make an  appointment on an estate until you have all of this information collected, then go to the lawyer.  Otherwise it's going to be that back and forth and the same applies for a trust company. It's all about  being prepared. 

Melissa Best: And it's a tough subject. We've learned that people don't want to face their own mortality. And there's a  lot of people out there that think, well, when I'm on the other side of the grass, everybody else can  figure it out. But the problem is you leave your family in a terrible mess. It creates often permanent rifts  amongst family members that will never be resolved. And they don't remember you fondly. All they  remember is the frigging estate and how much time and trouble and grief it was. That's not how you  want to be remembered by your family. 

Jason Pereira: 100%. I've seen it happen. Before we wrap up, where can people find you, Melissa? 

Melissa Best: Well, our website is www.quickestate, one word, Q-U-I-C-K-E-S-T-A-T-E.ca. And there's tons of great  articles on there. There's links in the footnotes and under resources. We've got articles on executor  liability, choosing an executor wisely, before you go to a lawyer and many others. And if you're an advisor, contact us directly. I deal with the advisors myself, having been an advisor for 32 years. I know  exactly what the pain points are. And you can set up an advisor license where you can have an unlimited  number of organizer clients and the clients will get the executor toolkit as well. Quickestate.ca and I see  your assistant is calling the next meeting. 

Jason Pereira: If you mean my son, yes. He's going to be quiet for two minutes while I wrap this up. He's announced  that he knows how to do. He's announced how to basically add 10 plus 10. All right. Melissa, thank you  so much for taking the time. Appreciate it. 

Melissa Best: Thank you Jason. And all the best. 

Jason Pereira: That was today's episode of Financial Planning for Canadian Business Owners. I hope you enjoyed that.  And again, like I said, if you can avoid it, avoid it, but if you can't avoid it, make sure the person that  you're going to be the executor for is super organized. Consider leveraging tools like Melissa's and make  your life a lot easier because the cost of getting it wrong is substantial. As always, if you enjoyed this  podcast, please leave a review on iTunes, Stitcher or wherever you get your podcasts. And until next  time take care. 

Producer: This podcast was brought to you by Woodgate Financial, an award winning financial planning firm,  catering to high net worth individuals, business owners and their families. To learn more, go to  woodgate.com. You can subscribe to this podcast on Apple Podcasts, Stitcher, Google Play and Spotify  or find more episodes at jasonpereira.ca. You can even ask Siri, Alexa or Google Home to subscribe for  you.

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