All wills require an individual to administer them. These administrators are referred to as estate trustees. Many know them as executors.
Second marriages are becoming more common as a result of divorce or the death of a first spouse. This raises interesting questions for the selection of an estate trustee. Who do you choose? Your second spouse, your children? All of your children, or only one or two of them? Perhaps a close family friend might be more appropriate? Clearly, the selection process can be burdensome.
It is common for a testator, or the person who makes the will, to leave their second spouse as a beneficiary in their estate. Where there are children of the first marriage, it is also common to leave them as beneficiaries. This can create a delicate balancing act!
In the case that the testator wishes to leave the majority of their estate to their own children when they may have promised the same to their previous spouse, the present spouse is certainly affected and strains and tensions can result.
Many lawyers advise testators to create a spousal trust commonly called a qualifying testamentary spousal trust. This means that the value of the estate, or at least part of it, is held in this trust. The surviving second spouse receives the interest earned on the trust money and, on their passing, the capital of the trust goes to the children of the first marriage. Often there are encroachment provisions permitting a surviving spouse to receive some or all of the capital of the trust.
There are complicated tax rules dealing with spousal trusts which I cannot address in this article for the sake of brevity. If you are interested and would like more information, I would be pleased to discuss this and other issues with you.
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So, who do you appoint as your estate trustee in these circumstances?
If you choose the present spouse… and provide that they can not only receive the interest but some or all of the capital, there exists an inherent conflict between the spouse and the children of the first marriage. This would permit the spouse to encroach on the capital and receive potentially the entire estate, cutting out the children. The sort of conflict this would provoke would not be in the best interests of the testator.
If you appoint the children of the first marriage… to the exclusion of the present spouse, the same conflict exists – in reverse. That is to say, the children would not be open to giving any part of the capital to the surviving spouse as this would diminish the amount which they would otherwise receive on the spouse’s death.
In this situation, it is unwise to appoint the spouse or the children as estate trustees for the reasons above. It is not farfetched to imagine a situation in which the parties are in conflict. It might also not be long before one or all of the parties ask for the court’s help. As any court costs might reduce the actual value of the estate. The longer the matter drags on in court, the less the estate will ultimately be worth.
While it may be true that using a third-party estate trustee (family friend, lawyer, accountant, etc.) as opposed to a first spouse or child of a first marriage might increase the estate administration costs, it is otherwise a wise expenditure of money to avoid the potential of future estate litigation and family discord.
This article is not intended to be relied upon as legal advice but only to give the reader an overview of the law in Ontario. You need to consult your legal representative to determine the best procedure in your particular circumstances.
