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Odette Morin

Odette Morin

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How much should you pay an executor?

exec fees

Being an executor is a big job. It involves lots of responsibility, pressure and risk. It’s not a job you’d expect someone to do for free. So how much should you provide in your will for the executor’s compensation?

Even if executors are family members or beneficiaries, it is a good idea and in some cases a legal right to be paid. It’s a difficult, complex job and can take a year or longer. Someone deserves to be paid for that work.

While executors are entitled to be paid in all provinces, most only require that compensation be “fair and reasonable.” Others provinces outline a range of 3% to 5% of an estate’s assets, based on five factors courts have historically considered. See the five factors below.

The percentages are only a guideline. Think about complexity when deciding on a fair compensation. If the executor has to deal with foreign real estate or an operating business, it may warrant more compensation; an executor handling assets at a single institution may require less. For a complex estate you would probably want to appoint a professional trust company as executor. They too will cost in the 3%-5% range.

Compensation is considered taxable income. So, the testator could assign the executor a gift from the estate (generally not taxable) instead.

It is best to specify a percentage instead of a set dollar figure. You will likely pass on in many years and therefore want the compensation to be relevant in current dollars.

By law, testators are entitled to fair and reasonable compensation, to be determined after duties have been fulfilled. At that time, the executor would provide beneficiaries with a full account of costs incurred, assets managed, taxes paid and compensation owing, which beneficiaries must approve before receiving their portions.

Here are the 5 factors that courts look at in determining whether compensation is fair and reasonable.

Estate size

Usually, the larger the estate, the more compensation the executor gets.

Responsibility

Disbursements with complicated instructions, or assets which if disposed expose the executor to personal liability, entitle him to more.

Time spent

The more time the executor spends performing duties, the more compensation he gets.

 Skill and ability

If the estate requires the executor to draw upon special skills or abilities, she gets more compensation. Conversely, if the estate is so simple that anyone could administer it, she gets less.

Results

Executors who add value to an estate or make savvy asset management decisions are generally entitled to more compensation.

Canadians may be spending too much on cars

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We all have this love story with our cars. Let’s face it, we spend a lot of time in our cars and it is a reflection of who we are for many. Take Terry and me for example, we drive this perfectly fine 8 year old Lexus with just over 66,000 km and are thinking about the next car we will possibly buy next year. “Terry, I love this car”, I told him this morning again. “Do we really need to get a new one yet? It only has 66,000 km. Isn’t it ridiculous to change it already?” Well, the car will be 9 years old next year and here comes all the rationalizing about the need to get a new one.

When it comes to consumer debt in Canada, most reports focus on the high costs of homes and mortgages across the country. But a new report from Moody’s Investors Service suggests trends in the auto sector are also troubling, read more here.

http://business.financialpost.com/2014/10/23/canadians-may-be-buying-too-much-car-moodys-sounds-alarm-on-bank-auto-loans/

In fact, adds the outlet, the report shows “bank auto lending has grown at a compounded annual rate of 20% since 2007,” and “vehicle loans have jumped from $16.2-billion to $64-billion” over the last seven years.

The problem is not so much that we want or need a new car, the problem is that too many can’t afford what they buy. Buying the luxury car on credit is not a smart move if you have other debts and can barely make ends meet. The line between a need and a want is too often blurred.

A car is a depreciating assets, one that depreciate very fast as soon as you get it out of the dealer. Keeping your car a long time, like 10 or more years, will be as close to an “investment” as you will ever get when cars are concerned.

As for Terry and me, we have not decided yet what car we will buy and when. For now, I’m happy driving the car I love and saving monthly for the next long-term car purchase.

CRA wants to know what is happening in your bedroom and it is not just to be nosy.

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You may be receiving a new questionaire from CRA regarding your true nature of your relationship.  CRA wants to know what is happening in your bedroom and they have a good reason.

Here is why? There are all kinds of tax advantages to be considered spouses.  Some disadvantages as well however.  But in many cases, to be considered spouses, especially with the new “family tax credits” and at retirement with the pension splitting advantages, it may mean several hundred or thousands of tax dollars saved.  CRA want to make sure that you are indeed common law spouses, not just roommates.

Here a link to an article written this week about this.

http://business.financialpost.com/2014/11/07/heres-why-the-cra-wants-to-know-whats-going-on-in-your-bedroom/#__federated=1

 

Do you really need a financial planner?

Next week is Financial Planning week. The Financial Planning Standards Council has put together this great slide show which may help you understand why it may make sense for you to have a financial planner. 85% of survey respondents report high level of financial well being when working with a planner. I like hearing that! Find out more great stats here in this short slide show.

Here is the link.
http://www.slideshare.net/FPSC/heres-the-plan?utm_source=slideshow02&utm_medium=ssemail&utm_campaign=share_slideshow_loggedout

Beware Canada Revenue may be closer then you think.

Got a fancy new car? Doing a major renovation to your home? Eating at a lavish new restaurant? Why not let all your friends know what you’re doing by posting this to your social media accounts?

CRA monitors social media websites like Facebook for people who boast about their income or assets and they make sure everything has been properly declared.

You can read more here.