Planning by Lisa Financial Solutions

An Executor Checklist – A Few Things to Consider

Wow, you’ve been asked to be an executor (or liquidator in Quebec) – what a great privilege… or is it? Before you say yes to this momentous role, here are a few things that you should consider.

Although it’s certainly important to consider the duties and responsibilities that this role would entail, it’s equally as important to determine whether you have the ability or even the desire to perform these  functions. This decision becomes even more tricky when the assets in question include business assets or assets in other jurisdictions.

Beyond having administrative duties (more on that below), an executor is a fiduciary who has moral and ethical duties to act honestly, reasonably and in the best interests of the beneficiaries. You, as the executor, hold the estate “in trust” for the beneficiaries and you must remain impartial, avoid conflict of interests, not comingle estate property with your own, or use estate property personally. An executor is typically expected to complete the administration of the estate within one year (often called the “executor’s year”) but this may not be possible for complex estates or estates subject to litigation.

You could be compensated and the amount may be stated in the will; in the absence of a remuneration clause in the will, your executor compensation may still be paid but may be subject to court approval. However, if a trust company is selected as an executor, fees will typically be charged based on a fee agreement prepared at the time the will is executed. Trust companies are a good option for complex and/or estates that may be ongoing for a period of years.

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Your duties as an executor

So, what are the main duties you will need to perform as an executor?  While not an exhaustive list, some of the key duties include:

Locate the will – in many cases, the will is retained by the lawyer who prepared the will but sometimes clients retain the will.  If this is the case, hopefully the deceased has informed you as to its location – maybe a safe or filing cabinet in the deceased’s home, maybe a safety deposit box (which could cause issues since the financial institution may require a probated will to grant authority to access the safety deposit box).

Funeral – You will need to review the will or any letter of wishes to determine whether funeral arrangements have already been made or whether there are any specific instructions. The funeral is your  responsibility and you must ensure that the funeral expenses are paid even though, if you are not a family member, the family will likely take the lead in the planning. If you don’t have access to bank accounts of the deceased’s estate yet, you can sometimes get the necessary funds from a beneficiary or pay the amount yourself and get reimbursed later from the estate (or sometimes from the Canada Pension Plan death benefit). 

Probate – Most provinces have some version of probate fees. There are provincial forms that must be completed and getting legal advice for obtaining probate is often needed. Probate is necessary to prove that you as the executor have the authority to deal with the assets of the estate. Probate fees and laws vary by province. In some provinces, multiple wills are used to reduce probate by segregating assets that require probate (such as non-registered investment funds and bank deposits) from those that do not require probate (such as private corporation shares). This strategy is most often used in B.C. and Ontario. There are also certain assets that are not subject to probate because they do not pass to the estate. These include proceeds from life insurance policies or registered plans paid to a named beneficiary and jointly-owned property that passes by right of survivorship.

An Executor Checklist – A Few Things to Consider

Locate and deal with beneficiaries – Locating beneficiaries should generally be simple, especially if you are a family member acting as executor. It can, however, be difficult in some cases if there are minors, those who lack legal capacity, non-residents or children of unmarried parents who may not be known to the rest of the family. Beneficiaries are owed a fiduciary duty and can therefore challenge an executor’s actions and fees. Disputes among beneficiaries can arise, which can put you in a difficult position and, on occasion, in the middle of litigation. Regular ongoing communication with the beneficiaries is recommended to avoid questions and challenges in the future.

Ascertain assets- This task can be the most time consuming. Usually, the largest asset of the estate is the deceased’s house. Unless the house has passed by right of survivorship, your job is to ensure both the house and its contents are secure. This usually means creating an inventory of the contents, making sure there is adequate property insurance and possibly changing the locks. You should locate banking information and notify banks and other financial institutions about the death, which usually means providing a probated will and death certificate.  

You as the executor may also need to ascertain the deceased’s digital assets, which may require determining passwords! For more information on digital assets and what they are, see this article, Protecting Your Digital Assets, and watch this short video SMART TALK… about digital assets.

If the deceased had business assets, then it looks like your job just got a little more complex. Hopefully the deceased had a succession plan in place for the business. In this case, you should consult with the deceased’s professional advisors regarding the plan and also discuss possible post-mortem tax planning. If not, you will have to implement a plan to manage the business interests as soon as possible. Advice of professional advisors will be paramount here.

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Determine liabilities- The deceased’s old tax returns should be located to determine what has been filed and if there are any outstanding taxes. Canada Revenue Agency has some resources that are helpful including What to Do Following a Death and What to Do When Someone has Died. Additionally, you should consult tax advisors regarding post-mortem planning, graduated rate estate status and filing additional terminal year returns. The other known liabilities like mortgages, promissory notes, funeral debts, etc. must also be determined. You should ascertain if there are any contingent liabilities such as family law claims. If you as the executor fail to pay known liabilities, you are personally responsible; therefore, it is prudent for you to advertise to notify potential creditors.

Distribute estate property – The deceased’s will sometimes contains bequests to beneficiaries, after which the residue is distributed to the residual beneficiaries. Sometimes assets are left in trusts for beneficiaries and you as the executor may be the trustee for these ongoing trusts or other individuals may be named as trustees.

If there are illiquid and liquid assets, this can lead to beneficiary disputes. You may have to liquidate certain assets in order to make distributions to the beneficiaries. With respect to personal assets, hopefully the deceased’s will describes how they are to be distributed. If not, you will have to determine a process for beneficiaries to claim personal assets – this is often the most emotional process and disputes between beneficiaries often arise that you must be prepared to handle. Before making the final distribution from the estate, you should get a tax clearance certificate from the Canada Revenue Agency (and Revenue Quebec).  The certificate ensures that you are not personally liable for any unpaid taxes or other amounts under the Income Tax Act (or the Taxation Act of Quebec). In addition, you should get a written release from the beneficiaries that they have received their full share of the estate. In some cases, it is necessary to get a court-approved passing of accounts to approve estate distribution and your compensation. Again, legal advice should be obtained.

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An executor’s commitment

Being appointed as an executor to someone’s will, is in fact a privilege and shows the great respect and faith that person has in you and your ability to fulfill their final wishes. It also comes with a lot of responsibility, can be emotionally draining and, as can be seen from the duties outlined above, can be a significant time commitment. For smaller or simpler estates where family members are the executors and the beneficiaries, the role may not be as complex or time consuming, but even with smaller estates emotions can run high with respect to certain assets. Communication between the proposed executor and the person preparing their will is important so that the testator’s wishes are fully understood.  Communication with the beneficiaries during the planning stage is recommended as a means of reducing potential disagreements after death. And of course, professional advice is paramount.