The majority of Canadians (78%) have no experience managing an estate, finds a CIBC poll.
Further, over 80% name a family member or friend as their executor; while dependable, these people often have no practical knowledge of the responsibilities associated with the title.
“If you appoint [someone] without the appropriate experience, it could cost your estate thousands of dollars, as well as months or even years of angst for your loved ones,” says Jamie Golombek, managing director, tax & estate planning at CIBC.
Help clients avoid making these three common mistakes:
1. Underestimating the time involved in administering an estate
The poll found 38% of Canadians thought estate administration could be completed in less than six months, while nearly two-thirds thought it would take a year or less. In reality, complications, tax errors and litigation can delay estate administration for months, or even years.
2. Choosing the wrong executor
The duties of an executor include funeral arrangements, determining the value of all estate assets and liabilities, filing individual and estate tax returns, collecting insurance proceeds, and accounting for the estate financial activities. Your executor will need to have the time and skills to deal with many parties, including lawyers, accountants, financial institutions, insurance companies, government agencies and beneficiaries.
3. Prepare your will and then forgetting about it
Review your will at least every five years. Changes that should trigger a review include marriage, divorce, birth of a child, or relocating to another province or country. For a smooth estate transition, keep good records and ensure your executor knows where to find your will. Too often, estate administration is delayed because a will or other crucial documents can’t be located.