When a friend or family member asks you to be an executor of their estate, it's important to remember it's a role that comes with a lot of responsibility — and some risks.
An executor— known as a liquidator in Québec — administers a person's estate after they've passed away, based on wishes outlined in their Will and in accordance with all applicable laws. An executor can be a friend or family member, a trust company, lawyer or accountant, or some combination of the above.
If you've been named an executor — and aren't in the business of estate administration — you should be aware of the work involved, which can be both complex and time consuming.
Executors should also understand the potential legal and financial implications, says Elaine Blades, senior manager, Professional Practice Group at RBC Wealth Management, Royal Trust.
“For example, if you make an error that results in a loss to the beneficiaries, there's a chance you’ll be held liable for that amount," says Blades.
Below is some advice from Kaufman and Blades on what to expect if you've been named an executor — and where you can turn to for help.
How the job starts
The first step is to locate a copy of the deceased's most recent Will. Executors should be kept informed of where to find a copy, so they aren't left scrambling to locate it when the person passes away.
“And if it's locked away somewhere, or in a safety deposit box, make sure you have access to it," says Kaufman, noting that trust companies and other professionals generally hold these documents in safekeeping.
Once the Will is located, you’ll likely be required to obtain “probate”. Probate is the formal process of confirming the Will and confirming the authority of the executor(s). However, the probate process is not applicable in the province of Québec.
“Most financial and other institutions won't deal with you until you have a probated Will and that takes some time, so the process needs to start as quickly as possible," Kaufman says.
The executor also usually helps to arrange the funeral and ensure the family's immediate financial needs are met, especially if there are dependent children.
Valuing and safeguarding estate assets
The executor's role also includes valuing assets, which needs to happen as soon as possible, since that number determines how much has to be paid in probate fees.
Kaufman says this process often starts with reviewing the most recent bank and investment statements, and taking into consideration assets as well as debt. There may also be other assets to consider such as art and antiques, private company shares, intellectual property and crypto currency.
“You need to identify all of the assets, which can involve a little sleuthing, especially in the digital age," says Kaufman. “Depending on the nature of the assets, you may have to reach out to third-party professionals to help value them."
Executors should also keep records of those valuations, just in case applicable authorities such as CRA and/or beneficiaries request some evidence.
An executor's role also includes safeguarding the deceased's assets, which can include everything from making sure property bills and insurance are being paid on time, to ensuring a farmer's livestock is being fed.
Executors should act quickly to cancel all credit cards owned by the deceased and notify banks where they held accounts to have them closed. “Unfortunately, it's not uncommon for fraudsters to take advantage of the obituaries," says Kaufman.
Executors also need to apply for and collect the Canada Pension Plan (CPP) or Québec Pension Plan (QPP) death benefit, or survivour’s benefit, as well as apply for and collect life and other insurance benefits.
Tracking down and talking to beneficiaries
Another job for the executor is identifying all of the beneficiaries, which can be complicated in today's highly-mobile society where there are often multiple marriages and even estranged children. Where a Will names a class of individuals, such as "my grandchildren," the executor has to make sure everyone in that category is included.
“An executor has to make reasonable efforts to find all of the beneficiaries," says Blades, which may even involve hiring firms that specialize in finding people.
A prudent executor will communicate regularly with beneficiaries, keeping them updated on the status of the estate and eventual distribution of assets.
"Failure of an executor to communicate is probably the number one complaint they might get," says Kaufman. “In an estate context, no news is always perceived as bad news. If the beneficiaries don't hear from you, they may think something fishy is going on. For instance, it may take 24 months before the assets can be administered, but beneficiaries don't know that, which is why regular communication is important."
Administering the estate
Administering the estate — which includes everything from determining all assets and liabilities of the deceased, to preparing and filing final income tax returns and ultimately distributing assets to the beneficiaries and/or establishing testamentary trusts — can be a challenging and time-consuming responsibility. Some of the many tasks the executor needs to handle include: investing any significant surplus cash until the estate is finalized, helping to set up any trusts set out in the Will, cancelling CPP or QPP and other government benefits, handling the transfer of employment, health, pension and retiree benefits and returning government-issued cards such as a Social Insurance Number, passport, driver's license and health card.
Given the increasingly digital nature of our lives, an executor may also be tasked with administrative duties regarding social and digital accounts like e-mail, LinkedIn, Facebook, Twitter, etc.
Executors also need to deal with the Canada Revenue Agency (CRA), or Revenu Québec, on behalf of the estate. Kaufman says that includes locating copies of previous years’ tax returns filed by the deceased, completing and filing any outstanding tax returns, preparing and filing the T1 return for the year of death and, depending on the circumstances, certain optional returns, and, ultimately, getting the Tax Clearance Certificate from the CRA. A Tax Clearance Certificate protects the executor in the event it is subsequently determined that the deceased or the estate owes additional taxes.
Distribution of assets
The final step is the distribution of assets, which can be either very rewarding or stressful, or both, depending on how the Will is set up and the number of assets.
Both Kaufman and Blades say the executor needs to start by dealing with specific bequests in the Will, such as giving jewellery to a daughter, $100,000 to a specific charity or a cottage to a son or daughter. What is left after the payment of all debts and any specific bequests is known as the residue. The executor may be directed to distribute “outright” to a beneficiary or beneficiaries, or the executor may be required to transfer a beneficiary’s share into a testamentary trust.
The executor must also provide a list of expenses and any compensation they will receive for taking on the role and have each adult beneficiary sign off on the accounting, as well as sign a release form.
"It is incumbent on the executor to be ready to account to the beneficiaries and answer any questions they may have," says Kaufman.
From there, the executor can close the estate account.
Bringing in professionals
Given how complex, time-consuming and emotionally fraught the executor role can be, many people opt to appoint a corporate executor in their Will. Individual executors can benefit from this same expertise by retaining a corporate executor to assist them when called upon to administer an estate.
Not only can the professionals handle the complex details of settling the estate, including record keeping, tax and legal matters, as a neutral third party, they eliminate some of the stress that often accompanies the death of a loved one.
"Executors aren't expected to do this on their own," says Blades. "There is help out there."