woman-contemplating-will

The role of the executor is not to be chosen—or accepted—lightly.

For most Canadians who have prepared a will, the executor was one of the least considered parts of the plan. The vast majority of testators pick a family member or friend, even if this isn't the wisest choice.

If you have clients wondering who to name as their executor, or have themselves been named as an executor of an estate, there are a number of aspects to the role that they should consider.

Executors are usually appointed because the testator trusts them. Testators are confident they will carry out their wishes as expressed in their will. While it's an honour to be so highly regarded—and administering a loved one's estate can be quite rewarding—being an executor can also be timeconsuming and stressful.

A lot of work

What exactly does the role entail? An executor (or estate trustee with a will, in Ontario) is responsible for administering the deceased's estate and distributing the property in accordance with the terms of the will.

Where the deceased dies without a will, or intestate, an administrator (or estate trustee without a will, in Ontario) performs a similar role, but must follow the provincial intestacy rules with respect to the distribution of the deceased's property. This article focuses on executors, but much of the information can also apply to administrators.

The executor's role generally begins with locating and reviewing the deceased's will and ends with the closing of the estate accounts. To reach the final step, an executor must discharge a number of tasks. While a great many tasks or duties are common to all estates, the exact number will depend, among other things, on the nature of the deceased's assets (type, location, value) and terms of the will. There are checklists for executors available online with lists ranging from two dozen to 70-plus tasks, depending on the degree of detail provided.

Other duties are more complex and may require special expertise.

Such duties include:

  • Obtaining probate, where required
  • Obtaining valuations for all estate assets and ascertaining cost base for capital assets
  • Preparing an inventory of assets and liabilities
  • Ensuring all valid estate debts are paid and receipts obtained
  • Ensuring all debts (mortgage, rent etc.) owed to the estate are collected
  • Reviewing any relevant contracts, including: domestic agreements, shareholder or partnership agreements
  • Considering potential for claims against estate and applicable limitation periods
  • Determining which, if any, assets are to be transferred in specie (in its present form) and which are to be converted to cash
  • Preparing interim and final estate accounting
  • Preparing interim and final releases from beneficiaries

An executor also assumes a number of responsibilities in respect to the income-tax obligations of the deceased and the estate.An executor is responsible not only for filing the deceased's terminalT1 (year of death return), but also any unfiled returns for previous years.

When the death occurs before April 30 in a given year, the executor is often responsible not only for the year of death return, but also for the prior year's return. Depending on the terms of the will, the executor may be responsible for filing annual T3 trust returns as well.

Where the deceased owned foreign property or was a citizen of another country, such as the U.S., additional filings may be required in the foreign jurisdiction.

An executor has a duty to maximize the value of the estate. As such, an executor should consider filing additional optional returns, where a reduction in the overall tax liability, and therefore benefit to the estate, would result. It is incumbent on the executor to be aware of available income-tax exemptions and elections for the same reason.

Other key concerns

The mandatory tasks and expertise required should be kept in mind by both testators wishing to appoint the best candidate and also those who have been named as executor. Our work with both testators and executors over the years suggests there are three other key areas of concern: time commitment, potential for personal liability and potential for family conflict.

  1. Time and availability

    Administering even a relatively simple estate with no ongoing trusts takes considerable time. Estimates generally range from 18 months to more than two years. While the executor isn't working full-time on the estate during this period, he or she is still on the hook during this time.

    Estate administration is often bookended by two key events: obtaining letters probate and obtaining final clearance from CRA. Each event can take weeks, sometimes months to finalize.

    Geography is a related concern. Many duties must be handled in person. Dealing with the deceased's residence and personal effects is perhaps the best example. An out-of-province, even out-of-town, executor will face additional challenges when trying to perform the required duties.

  2. There are legal responsibilities

    The more sophisticated the testator and executor, the more likely they are to be aware of the responsibilities and potential liability an executor assumes.A breach of trust, error or omission resulting in a loss to the estate may result in personal liability to the executor. The fact that an insurance product is now available to protect executors from such risk clearly underscores the validity of this concern.

  3. Family disagreements can occur

    The potential for family conflict is also a major concern.Conflicts can arise when families try to organize a loved one's estate.The continued growth in lawyers and firms specializing in estate litigation speaks to this concern.

The grieving process

The effects of grief should be taken into account. Testators tend to appoint people close to them to be their executor—the very people likely to experience the most grief. The work involved in settling an estate may simply be too much to ask of those closest to you.

Accepting the appointment

Named executors should give sober thought to what the job entails before accepting the role. While applying for probate is the clearest indication of acceptance, it is not the only test.

People may be deemed to have accepted the role if they begin to act in respect of the estate. If named executors have "inter-meddled" in the estate, they may be presumed to have accepted the appointment.

Acts which have been held to constitute inter-meddling include making inquiries in respect of the deceased's assets and liabilities and taking steps to protect estate assets. So, although no one is compelled to accept the role, once an executor starts acting, a court order is required to relieve him or her of the role.

Choosing the right executor

Testators should give due thought to their choice of executor by carefully considering the obligations the role entails. Choosing someone you trust is only one part of the equation.

Expertise, willingness, availability and, depending on the situation, independence and objectivity are equally valid considerations. Encourage clients to consult with their proposed executors. And named executors should ensure they know what is involved before stepping into the role. Once you're in, it's not easy to get out.

Help is at hand

Both testators and executors should seek professional guidance at both the planning and administration stages. The best planning advice may be to appoint a professional corporate trustee.

Where an individual has been named as executor, it may be in the best interests of the estate, the executor and family harmony to retain professional assistance to help them take on the role.

Elaine Blades is Director, Estate and Trust Products and Services at Scotia Private Client Group.

Find More resources on executorship

Executor duties burdensome

By Staff
"The majority of Canadians appoint family over friends as the executor of their will, according to a BMO Financial Group study."

Choose your executor wisely

By Doug Carroll
A $24-million estate devolves as a result of an unscrupulous executor.

The responsibilities and liabilities of an executor

By Daniel Dochylo
"Executors can find themselves responsible for managing assets with a potential to fluctuate in value and/or managing assets for an extended length of time."

Legacy or executor fees

By Jamie Golombek
Are amounts received by the executor from the estate taxable executor's fees, or should they be considered a tax-free legacy from the estate?

Originally published in Advisor's Edge Report

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