So… you’re an executor

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This article was published 13/06/2015 (3807 days ago), so information in it may no longer be current.

If you’ve been named the executor of a will, you might feel honoured to be entrusted with the responsibility. Undoubtedly it is an honour.

But you could be in for quite a ride, too, because being an executor has the potential to be one of the most challenging tasks you’ll ever undertake.

“Very few people give much thought to the role even though many consider it ‘an honour,’ ” says Winnipeg lawyer George Derwin, a former deputy public trustee of Manitoba, responsible for managing the affairs of Manitobans unable to do so themselves.

But it’s a role worth considerable contemplation because executors’ actions can have profound outcomes on finances for the deceased, family members and even the executors themselves.

In most cases, you’re at least aware you’ve been named the executor.

The will’s maker has told you so. But preparation usually stops there.

“In 99 cases out of 100, the executor does absolutely nothing to prepare,” says lawyer John Poyser, who practises estate law and is a Free Press columnist on the subject.

This is often a result of naiveté on the part of the executor — and is probably also why many people agree to take on the role in the first place.

“The only people who don’t agree are those who have already served in the job and been bruised by how difficult it is.”

Yet if you have been ‘honoured’ with this role, prep work will pay big dividends.

Among the biggest missteps by executors is a “failure to communicate,” Derwin says.

“You could be doing a great job but no one knows because you haven’t communicated with anybody, and often estate litigation can occur when there is no dispute at all but the executor hasn’t informed anybody.”

And make no mistake: executors can be sued. They are liable for errors administering the estate. For this reason some executors buy insurance, he says.

“It’s one of the best-kept secrets in the world.”

Because estates can involve large investment accounts with hundreds of thousands exposed to market risk, Derwin says he has seen instances where executors are slow to take the reins and assets suffer significant losses as a result of their procrastination.

And it is possible for executors to be on the hook for losses if they cannot demonstrate they were dealing with the estate’s affairs in reasonable amount of time.

While these instances are rare, taking a proactive approach to being an executor is the best strategy.

“One of the things you might do if you’re named executor is to ask the person who has made the will whether he or she would put together a binder of important information,” Poyser says.

This dossier would include a list of financial assets, safety deposit boxes, family members and their contact information, real estate holdings and valuables such as jewelry.

Without this kind of information at hand, an executor’s duties can be much more difficult.

“The executor’s role is more like an archeologist,” Poyser says.

They have to dig through the deceased’s affairs to find clues to the whereabouts of important documents.

” ‘Is there a safety deposit box? I don’t know. Maybe I’ll go through every drawer in the house looking for a key to a safety deposit box.’ “

The more information at hand ahead of time the easier it is for an executor can “hit the ground running,” he adds.

Even without the ‘treasure hunting’, executor’s duties can still involve a lot of running around, says lawyer Caroline Kiva with Pitblado Law in Winnipeg.

Among executors’ many duties are organizing and paying for the funeral, dealing with the deceased’s assets and debts, filing the tax returns (and there can be more than one) and even advertising to claimants and creditors.

“That one essentially involves publishing a notice in the event there are any claims against the deceased so claimants and creditors have an opportunity to come forward,” she says, adding this can be accomplished by placing an ad in the local newspaper. “It really protects executors because if they distribute an estate without notifying potential claimants, they could be liable for paying those claims.”

Yet not all executors do this. While advisable, some believe they know the deceased and his or her affairs well enough to proceed with confidence that no unknown claimants or creditors exist.

One duty most executors must do, however, is to receive a grant of probate from the court.

“Probate is the process through which a will is proved to be valid or invalid, and confirms the appointment of the executor,” Kiva says.

At this juncture, the executor also provides a list of the estate’s assets and their value. The list determines probate fees, which must also be paid at the time of probate. Only assets passing through the estate are subject to fees, which in Manitoba are $70 on the first $10,000 and $7 per $1,000 thereafter.

The estate can cover the costs — though some executors pay out of pocket and are reimbursed later. But the fees can be substantial: $7,000 on a $1-million estate, for example.

In cases in which the spouse is still alive, assets generally pass directly to the spouse so probate is not required. In addition, an investment account may have a designated beneficiary so its assets also pass on to the beneficiary outside the estate and, again, are not subject to probate.

Yet executors are still responsible for filing the final tax return. Consequently, knowing the nature and value of all assets inside and outside the estate is critical because the responsibility to pay associated taxes ultimately falls on their shoulders.

“To protect yourself, you need to get a tax-clearance certificate from CRA that verifies all the taxes owing have been paid,” Derwin says.

Ideally, you want the certificate in your hands before distributing assets.

But this can take time so some executors distribute assets prior to receipt. If you go this route, Derwin suggests holding back a portion of the assets to help pay for any additional taxes owing.

All these aforementioned tips represent just the tip of the proverbial iceberg. Executors who want to avoid titanic missteps should hire professional help — such as a lawyer or accountant.

Another option is enlisting a trust company to help with the many duties.

Yet many executors do much of the heavy lifting themselves.

“They probably have a university education and feel they don’t need an expert,” Derwin says, adding it’s not advisable.

While an estate may not appear large enough to require professional help, don’t assume its complexity and value are correlated.

“Someone may just have cash in a bank account, a house, a car and personal effects that may be worth a lot, but it’s not complicated,” Kiva says “Whereas, someone may have a very difficult family situation and the assets are a lot less — and it’s very complex as a result.”

Long story short: executors beware, Kiva adds.

“It’s not a job to be taken lightly.”

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