next steps / infowizard

This article appears in the May 2022 issue of Advisor’s Edge magazine. Subscribe to the print edition, read the digital edition or read the articles online.

Executors have one year, generally starting from the date of death, to gather the deceased’s assets and administer an estate before having to make distributions. This period, a rule under common law, is known as the “executor’s year.”

After the executor’s year, beneficiaries — particularly a “legatee” beneficiary set to receive a bequest or a specific gift under the estate rather than a residual share — can compel executors to begin paying out estate assets.

The executor’s year gives executors breathing room to administer the estate, but “with the expectation, which is also in common law, that they have a duty to get going,” said Tom Junkin, senior vice-president of personal trust services with Fiduciary Trust Canada in Calgary, part of Franklin Templeton.

During the executor’s year, an executor will identify and gather estate assets, pay estate expenses and debts, and file tax returns.

The timeline tends to become contentious when beneficiaries become frustrated with what they see as an undue delay in distributions, said Caroline G.S. Kiva, an estate lawyer with Thompson Dorfman Sweatman LLP in Winnipeg.

If a beneficiary brought a court application, a judge would consider how effectively and diligently the executor had administered the estate, under the presumption that estate assets should be gathered, and legacies paid, during the executor’s year.

With most estates, executors can collect assets and pay out bequests, if not residual shares, within the first year after the deceased’s death, Junkin said. However, estate administration today takes longer than in years past due to several factors.

For example, depending on where the deceased lived, there may be a backlog of several months before an executor is able to obtain a certificate of probate from a provincial court. Further, if the deceased died owning property — say, a vacation home — in another province or outside Canada, it may be necessary to obtain probate and/or other necessary clearances for that property from the other jurisdiction as well, Kiva said.

Executors also need to wait for clearance from the Canada Revenue Agency that all tax liabilities related to the estate have been paid. This step protects them from personal liability should further liabilities arise, but will also delay distribution.

In recent years, stricter regulatory requirements, including stronger privacy legislation, have further delayed estate administration, Junkin said.

Finally, most provincial statutes prevent executors from distributing property in an estate until a set period has passed to provide time for parties to make a claim against the estate or to challenge the will. For example, under British Columbia’s Wills, Estates and Succession Act, executors are prohibited from making distributions until 210 days after the granting of probate, except when a court authorizes an earlier distribution or where all beneficiaries and certain other parties agree.

Such statutory restrictions against early distributions don’t prevent executors from gathering assets and otherwise preparing for distributions, Junkin said, but they “do work against you” in terms of paying out gifts within the executor’s year.

Legatee beneficiaries set to receive a cash bequest are entitled to interest, paid by the estate, on the amount starting one year after death until they receive the gift, even if factors beyond the executor’s control caused the delay. This rule is to protect legatees, who, because they receive a fixed amount under the will, are disadvantaged relative to beneficiaries receiving residual shares, Junkin said.

“The residual beneficiaries don’t care how long [estate administration] takes,” he said, as the executor, under estate law, must keep estate assets invested. Residual beneficiaries will therefore receive any growth in the value of the estate.

However, “the cash legatee is waiting for the money and can’t earn anything on it” until they receive it, Junkin said.

Beneficiaries receiving non-cash bequests, such as land or publicly traded shares, are not entitled to interest on their gifts even if distribution is delayed beyond the executor’s year.