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Real estate is a common asset in Canadian estates—but it can be the most complicated for executors to deal with.

Many duties come along with caring for a property and, on top of that, executors need to balance the needs of beneficiaries against the liabilities they assume while selling the property.

More responsibility, more work

Real estate assets are part of the vast majority of the estates that Sandy Abley deals with. “Sometimes it’s recreational property, sometimes it’s bare land,” says Abley, associate counsel at Harper Grey LLP in Vancouver. “But often it’s the principal residence.”

Selling and distributing financial assets often involves little more than filling out the appropriate forms, but Abley points out that real estate typically involves a lot more responsibility and work for executors.

“Think about being a homeowner and all the things you’re responsible for: lawn maintenance, security, fire insurance, redirecting the mail, paying property taxes, or special condo assessments,” she says.

The executor is also the legal spokesperson for the property. “And it’s not for yourself; it’s for others,” Abley says. That means executors must be accountable, making them liable for any oversights.

As for selling property assets, Abley believes much of that job depends on the judgment of the executor. “You need to make sound business decisions,” she says. That could include deciding whether to use a real estate agent and to obtain a professional appraisal, as well as figuring out whether to list a property quickly or wait for the court to make an official grant of probate—which, as Abley points out, could take a few weeks to a few months, depending on how busy the courts are.

“You are balancing your responsibility to the beneficiaries who want the best price, because it means more money in their pockets,” says Abley. “But you also have to weigh and balance the risks you have to manage on behalf of the estate and yourself.”

Where to start?

Lisa Daly, partner at Cox & Palmer in St. John’s, Nfld., also finds that executors struggle with real estate assets. “It’s more intimidating than bank accounts,” she says.

When assets have a specific dollar value, like a bank account, they’re easier to distribute. But real estate differs because executors have to worry about several factors. “You have a fiduciary duty to get the best price for the creditors of the estate and the beneficiaries, and that brings up a lot of minefields,” says Daly.

For instance, beneficiaries often want their money sooner rather than later, Abley warns. But “the responsibility of the executor is to achieve the best price for the property they can on behalf of the beneficiaries, while reducing risk for the estate and for themselves.”

To do that, get a professional valuation. Obtaining an independent appraisal by a third party—either from a qualified appraiser or a real estate agent with deep knowledge of the region—can prove an executor has performed his or her fiduciary duty as well as secured the best price possible for a property.

What if beneficiaries don’t want to shell out for a formal appraisal? “Get them to sign off on the property’s price,” Daly suggests. “You can have all the evidence in the world that you’re doing the fiduciary duty to the best of your ability, but you just don’t want to end up having to say that in court. I would certainly make sure the beneficiaries are always in the loop.”

If an executor finds herself in over her head, Daly has this piece of advice: ask for help.

“Find out if the person had a lawyer, had an accountant, who dealt with their affairs, because they’re the best ones to help you through this,” Daly says. “They know probably more than you.” As experts have illustrated, muddling through can have disastrous consequences.

Common pitfalls of dealing with real estate

No appraisal

Without a professional valuation of the property, beneficiaries and creditors could claim the executor failed to fulfill his/her fiduciary duty to secure the maximum sale price.

Foreign property

Selling property in a foreign jurisdiction can involve complex tax and legal regulations. Failure to follow the rules could expose the estate and the executor to serious liability. For example, a Canadian-domiciled estate selling a vacation property in Florida will have to submit a U.S. tax return, pay a 15% withholding tax on gross sale proceeds*, and pay U.S. capital gains tax within strict deadlines—or risk IRS penalties.

Signing disclosures without full knowledge

Signing a Property Condition Disclosure Statement (PCDS) or similar document in order to secure a quick sale without having knowledge of a property’s problems (leaky roof, crack in the foundation, oil tank in the backyard, etc.) could lead to personal liability, even long after the estate has been settled.

Doing more renovation work than necessary

Repairing or rejuvenating an old property can help it sell faster and at a higher price. But if an executor fails to recoup the cost of that work, she could be forced to make up the difference out of pocket.

*A previous version of this story stated the withholding tax was 10%, which only applies to dispositions before February 17, 2016. After that date, the FIRPTA withholding is 15%. Return to the corrected sentence.

James Dolan is a Vancouver-based financial writer.