Five Family Members as POA "Attorneys" and Executors

[Toronto Guy]

Could not find a Canadian forum that looks as helpful as this. I hope you folks as Commonwealth cousins can assist.

I am working with a lawyer to draft a will and power of attorney documents for property and for personal care. As currently drafted, each document names my wife as executor/attorney, and (in the event that she cannot serve) my two daughters, and in (the event that they cannot serve) my brother and sister.

I am slightly uneasy with each of these appointments. My wife has no interest in legal or financial matters but she wants to be named as my first choice for attorney and executor; my daughters are both in their 20s and also are not yet very experienced in these things; my brother and sister have much more experience and resources but live at a distance. They all get along well, I am sure that they would all agree to serve and that they would each have my best interests at heart.

So I am now considering appointing all five to work together right from the start. Each of them would also have the authority to act individually; I believe the term is "jointly and severally". I plan to get prior concent from each and to document for them my intent and expectations. In short: when the need arises, I would expect them to caucus by phone or Skype and decide who would do what. I would expect big decisions to be discussed by the group and small matters to be delegated to individuals. This will allow responsibility to be divided in accordance with the needs and abilities of the five people at the time. I would expect my wife and daughters to take on as much of the work as they are capable of, and to accept help and advice from my brother and sister wherever needed. Any of them could exclude themselves (I forget the legal term) if they felt unable to serve.

I do not anticipate disputes, but of course people can change. My generation risks dimentia (and there is some in both sides of the family). Our daughters personalities are still subject to change, for example as a result of career and life-partner choices. I intend to write that I expect the group to isolate or intervene with any member whom they judge to be not acting in my best interest.

I would very much appreciate comments and cautions concerning this approach. Do you know someone who has something like tried this? How has it worked out?

 

[Sarah J]

I am unclear about the exact laws in Canada. However, in Hong Kong and Australia (also common law regions) there can be a maximum of 4 executors. None of the executors can be less than 18 years old. In Hong Kong, the executors only act jointly (not severally), in Australia, jointly and severally is possible. If this is also possible in Canada (ask your lawyer about this), you can assign small decisions to be made "jointly and severally" and large decisions (listed) to be made jointly.

When the number of executors becomes large, it is very difficult to get things executed. This will especially be difficult when it comes to raising money quickly for payment of debts or mortgages, where the executors may need to raise the money by selling off assets. This is why there is the limitation on 4 executors. Further, the more executors you have on board, the more the estate will need to pay for them (an executor's fee) and make reimbursements.

If you are concerned about your wife's business/financial/legal expertise, you can appoint a lawyer or professional trustee to look after your estate, either as sole executor, or together with your wife. In any case, I suggest having a substitute executor(s) in the event your wife is unable or unwilling to act. Just to be very airtight, include a final sentence to the effect that "where an executor(s) predeceases me or is unable or unwilling to act, the remaining executor(s) shall be appointed as my executor(s) and shall have power to act jointly and severally in effecting my will".

 

[winston wolf]

There no perfect answer to your situation.
As you intend to write you expectations out this will be a great guide to whomever you appoint.
I wouldn't appoint all 5 as this is a recipe for disaster.

 

[Toronto Guy]

Thank you Sarah and Winston for your responses. I came to this idea only after careful consideration of the more traditional approach of naming a hierarchy of trusted people to act sequentially - if those higher on the list die or renounce. I appreciate that this idea is unconventional, which is why I am interested in opinion of experienced others before proceeding.

Winston, I would really like to learn more about the potential disasters inherent in this approach -- which was actually my reason for posting. Could you possibly point me to topics elsewhere on this site or suggest some key words I could use for a search?

Sarah, I will check if there is a limit in Ontario to the number of executors/attorneys that can be appointed. As they would be close family members, fees may not be an issue, though I would recommend that my brother and sister (who are not in direct line to inherit) be paid for their services if they wish.

Jointly and severally is indeed an option in our jurisdiction. Actually, my concern is mostly with power of attorney for property where my attorney(s) will need to manage our family finances while I am alive but incapable. For the POA, I intend to suggest that the group assign the responsibility to execute certain classes of legal and financial actions to single individuals: e.g. my wife might manage our bank account for daily living expenses and my brother might manage our investment accounts if and until one of my daughters has the experience to take it on. For the will, I expect that three or four will renounce to keep things simple.

I want avoid specifying exactly who and what because circumstances and abilities of individuals change. I would like these five closest family members to sort this out when the need arises. I know that this approach would not be viable in families where there are rivalries and personality issues, but I believe our family is blessed with high levels of trust, good relations, and good intentions, and also some good conflict resolution skills.

Sarah, any further thoughts would be most welcome.

 

[winston wolf]

My experience is bound to be skewed to the negative to some degree by years frequenting forums such as this.
Having said that getting 5 people to decide on a shared meal can be an ordeal. Imagine some of the big questions like when to sell a home or if life support should be withdrawn.
You have mentioned the EPOA's conferencing, but remember these things can drag on for years.
Sound like you will be vastly better prepared than most.

Good luck

My site isn't really an estate advise site and only discusses the Family Provision legislation I'm trying to get reformed.

 

[Sarah J]

Further to Winston's comments, even little decisions are difficult to make with 4 or more people at the helm. For example, will there be any minors or contingent beneficiaries? In this case, a trust will need to be created for them. Where should the trust invest? How much should the trust invest? When should the investments be changed? How should maintenance income be paid to any or all of the beneficiaries? How much? Will this disadvantage the other beneficiaries? If there is not enough allocated trust estate to cover mortgages, expenses, costs, funeral fees, debts and charges, then this will need to come out of the residuary estate. What should the executors sell first? And sometimes, they may need to sell a beneficiary's share to cover other costs. Who should be the beneficiary that loses out?

Then of course, there is power of attorney issues. When are you "too ill" to look after your own affairs? And what affairs? Health, financial, recreational and "lifestyle/life decisions". If you are critically ill, what treatments should you receive? Oftentimes, there are multiple treatment options with different risks and side effects (e.g. cancer treatments). Family members, even those with the best intentions and most cooperative will struggle to decide on these matters. In health and treatments, sometimes you will need to make quick decisions. Most times, these decisions will be extremely hard to make and there will be no "right answer". If family members as POA are disputing these decisions then it could delay treatment.

These are just some of the many difficult scenarios/questions I envision multiple executors/POAs will bring.

 

[Sarah J]

If you are concerned about appointing one or two executors/POA and then they predecease you or are unable or unwilling to perform, then there are ways around this. In fact, this is often done in Wills.

For example, appoint X and Y as your executors, acting jointly and/or severally. Should any of these two predecease you, or is unable or unwilling to perform, then you appoint Z and A to be your executors. If this fails and there are no suitable executors in the Will, the court will appoint one. There are priority rules in legislation as to who should be considered first. This is usually: your spouse, your children, your parents, your siblings, the issues (children) of your siblings, your aunts or uncles...

 

[Sarah J]

A Will will not fail on the basis that there is no existing or willing executor listed in the Will.

 

[Toronto Guy]

Thank you again Sarah and Winston for your comments. I gather that the complications of decision making with a group of five is the main concern you can see. Though, reading elsewhere on this forum, it seems to me that much litigation is a result of executors and POA attorneys who act without consent of all interested parties. For most decisions wouldn't it be better for the group to discuss and resolve matters before acting?

My brother and sister and I worked closely together first managing the property and personal care of both my parents, and later as their executors.. If the need arises in the next few years, I see them as being both a resource and a steadying hand for my wife and daughters who lack this experience. If the need to act is many years in the future, I expect my daughters will have matured to the point where the roles of attorney and executor would be less daunting - in which case I would expect my brother and sister (if they are still around) would simply step aside.

Your examples of the complexities of financial decisions, in my view, could be used just as well to argue the importance of achieving prior understanding and agreement from all the adults who are interested parties.

I have however found another concern offered by an Ontario lawyer on another legal advice website. He says: "... If more than 2 [executors] are appointed then you risk a situation where a minority of the executors are potentially liable for decisions made by the majority - no one would want to take on the job."
http://legal.advicescene.com/ca/question/1006873/joint-and-severally
Though I have also found further commentary suggesting this liability issue applies mostly to lawyers who are acting as co-executors.

Clearly this is complex, and I appreciate Winston's comment that there is no perfect solution. The five person solution I am considering, being somewhat unorthodox, is not well charted territory. I will continue to welcome further comment from you and others as try to find a good solution.

 

[Sarah J]

Hi,

If you believe naming five or more executors is the best option for you, then that is perfectly fine. It appears that you are clearly aware of the risks of delay, costs, disputes and inefficiencies of having multiple co-executors. As long as you are aware of these risks, then I would say you are well informed to make your appointment.

As for liability of co-executors. That may be the case where the executors act outside of their powers as laid out in the will, or the law or where they act before a grant of probate is issued. There are certain procedures that must be complied with before a grant of probate can be issued. Once a grant is issued, this is conclusive evidence that the named executors may deal with the estate and make necessary disposals (including funeral expenses and payment of debts and income maintenance). Each executor owes a fiduciary duty to the beneficiaries and must act in the interests of the beneficiaries as a whole. Therefore, if they breach this duty, they will be liable, either jointly or severally. The other co-executors, who bear no responsibility for the breach may then seek indemnity from the executor or executors that made the breach. However, this can only be sought in their personal capacity. Which means that if that executor becomes bankrupt or has no money to pay, the other executors are out of pocket. This is often costly and a difficult process where the responsible executors refuse to indemnify. The estate (on behalf of the beneficiaries) may sue any one of the executors.

Another thing to consider: if you have five executors, the law may require all five to sign off on papers, documents, applications and transfers. This will slow down the process significantly. However, this is a risk that you weigh against the benefits of having more than one executor.

If you do intend to have more than one executor, you should think about inserting a dispute resolution clause in the event disputes do arise between the beneficiaries. Also, might be worthwhile to include a notice requirement, similar to directors in a company, where executors are to be notified of important decisions made by other co-executors.