Has a family member or friend asked you to be an executor of their estate? It’s important to know that the role comes with a lot of responsibility and some risk.
“There’s a lot more to being an executor than people realize,” says Lynne Butler. Butler is an estate lawyer, consultant, blogger and author of 10 books on estate planning. She says people often underestimate how much work it really is.
What is an executor?
The executor of an estate is the person who administers a person’s estate after their death. In Quebec, executors are known as liquidators. An executor can be a friend or family member. It can also be a trust company, lawyer or accountant, or some combination of the above.
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Tips to help you get started as an executor
Here are some helpful insights for handling the role of executor, from Canadians who have been there.
1. Know what you’re getting into
Being an executor can be a difficult and time-consuming responsibility. Executors can have up to 70 administrative tasks to complete, depending on the estate. This includes:
- Reviewing insurance coverage.
- Closing financial accounts.
- Investigating and paying debts, taxes and fees.
- Distributing assets to beneficiaries.
As the executor of a will, you have personal liability. This means if you make a mistake, you could end up paying the bill for any financial or legal claims. It’s best to educate yourself now about the role of executor to ensure you’re comfortable with all it involves.
Mark Goodfield finds that people often under-estimate the commitment. Goodfield is managing partner at Cunningham LLP in Toronto and author of The Blunt Bean Counter blog. “People just don't realize what an all-encompassing job it is,” says Goodfield. “It can be an overwhelming job. You have to find all the assets, deal with the family and the various institutions.”
2. Seek professional advice
Once you have all the documents, you’ll have a better idea of how complicated an estate may be. At this point, you may want to seek advice from professionals whose expertise can help prevent costly mistakes. These professionals include lawyers and accountants.
“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. It will also give you peace of mind.
3. Keep the lines of communication open
Settling an estate can create family tensions or aggravate rifts. Executors will need to speak regularly with the beneficiaries and family members. This is to ensure they understand the process and balance any potential conflicts of interest.
Butler, who's acted as an executor in her role as a lawyer, says lack of communication is a common complaint. “I often hear from people saying they can’t get any information from an executor,” says Butler. “I 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 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 right away. But an executor who pays beneficiaries without having cleared all liabilities may end up paying them personally.
It’s also a good idea to get a clearance certificate from the Canada Revenue Agency. This certificate 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. However, 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,” 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, it’s important to be able to back up your decisions with proper documentation. “Record-keeping will help the executor with keeping liability under control,” says Butler.
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