“There is an awful lot more to it than people realize – they often don’t understand how much work it really is,” says Lynne Butler, an estate lawyer, consultant, blogger and author of 10 books on estate planning.
Here are some helpful insights for handling the role of executor, from Canadians who have been there.
1. Know what you’re getting into
Understand the number of administrative duties involved and the legal liabilities up front to avoid any surprises later. Executors can have up to 70 administrative tasks to complete, depending on the estate. They include reviewing insurance coverage, closing financial accounts, investigating and paying debts, taxes and fees and distributing assets to beneficiaries. You can be held personally liable if you make a mistake that creates a shortfall in the estate. It’s best to educate yourself now about what’s involved before taking on the role to ensure you’re comfortable with all it entails.
Mark Goodfield, managing partner at Cunningham LLP in Toronto and author of The Blunt Bean Counter blog, finds that people often under-estimate the commitment. “People just don’t realize how all-encompassing a job it is,” says Goodfield, who has acted as an executor for several estates. “It can be an overwhelming job trying to find all of the assets, deal with the family and deal with the institutions.”
2. Ask for help when you need it
It’s always a good idea to be aware of administration costs, but keep in mind that trying to avoid them altogether could end up costing the estate more money. Attempting to prepare a tax return without the help of an accountant could mean missing out on eligible deductions or incurring interest if it isn’t filed on time. Trying to settle legal disputes without a lawyer, selling assets without appraisals or investing money with no guidance could create challenges for executors if they try to juggle everything alone. “Ensure you use the professionals around you — they will guide you through the process,” says Goodfield. Seeking out professional advice when you need it can help ensure things stay on track and give you peace of mind.
3. Keep the lines of communication open
Settling an estate can create family tensions or aggravate existing rifts. Executors will need to speak regularly with the beneficiaries and family members to ensure they understand the process and balance any potential conflicts of interest. “One of the things I run into a lot is people complaining they can’t get any information from an executor,” says Butler, who has acted as an executor in her role as a lawyer. “I always tell executors not to hide what they’re doing — it makes people speculate and creates suspicion.”
4. Carry out the will as it’s written
It might seem obvious, but sometimes executors can feel tempted to change unpopular or inconvenient parts of the will in favour of what they perceive to be fair. It’s important to remember that the role of an executor is to distribute the estate as it was set out in the will.
5. Deal with debts and taxes before paying beneficiaries
Investigate and pay off any debts, taxes and fees before proceeding with the distributions. It may not be easy to ignore pressure from family members who want their money immediately, but an executor who pays beneficiaries without having cleared all liabilities may end up being on the hook for paying them personally. It’s also a good idea to get a clearance certificate from Canada Revenue Agency, which states that any taxes owing, interest and penalties have been paid by an estate. You can apply for a clearance certificate or ask the accountant preparing the final tax return for the estate to send the application along with it. Without a clearance certificate, you could be responsible for paying any taxes due.
6. Take your time — within reason
Administering an estate will take at least a year — more likely 18 to 24 months — and it could stretch out longer if the estate is complex. Don’t feel pressured to make decisions you’re uncertain about. Take the time to understand the issues at play and their related impacts. At the same time, it’s prudent to keep the estate settlement moving forward. “Every year the estate is open, another tax return is required. Delays can be costly and problematic,” says Butler.
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7. Stay on top of the paperwork
Keeping good records is of paramount importance. If beneficiaries have questions later on, it’s important to be able to back up your decisions with proper documentation. “Record-keeping will assist the executor with keeping liability under control,” says Butler.
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