At some point you may be approached by a family member or friend to act as the executor of their estate. Do you know what to do?
Some people consider it an honour and personally gratifying to take responsibility for ensuring that their loved one’s final wishes are carried out.
Related: Are You Counting On An Inheritance?
But serving as an executor can be onerous and time consuming, even for those with a strong financial or legal background. In fact, many who have been in this role never want to do it again. I, for one, am strongly in the latter group as I have had this experience twice.
Your Responsibility as an Executor
A will is a legally binding expression of a person’s wishes for the distribution of his or her property. Your responsibility as an executor is to administer the legal and financial requirements of settling the estate to carry out those wishes.
You control all aspects of the estate’s administration – from identifying, managing, and protecting the assets – until they are distributed to the beneficiaries, or placed in a trust.
You are legally responsible to the beneficiaries. In a worst-case scenario, the beneficiaries and creditors can sue executors who act imprudently, or in violation of their duties. But, if you act honestly and to the best of your ability, you will generally not be held accountable.
Related: How To Assess Your Estate Plan
Before you heartily agree to being someone’s final representative make sure you understand what will be required of you and that you have an adequate amount of time and ability to devote to the task.
Preparing for the role
Sit down with the person who appointed you and go through the will to get a better insight into that person’s wishes.
Enquire about burial and funeral preferences.
Suggest an inventory of assets and liabilities be prepared as well as the location of the assets.
What is your knowledge in investments and tax matters?
You may be called upon to make investments on behalf on the estate. You may need to sell some securities to raise cash required for legacies, taxes and other costs. You will need to prepare estate tax returns.
You should be comfortable dealing with such matters even if you retain the services of legal, accounting and tax professionals to assist you.
This is a general list of some of the more common duties an executor must deal with.
- Locate and review the will. Determine if the will should be probated. If the estate is small and uncomplicated, probate may not be necessary, for instance if assets are held jointly and/or beneficiaries are named in such things as RRSPs and insurance policies.
- Make funeral arrangements. Estate funds can be used to pay for funeral expenses. The funeral home will provide copies of the death certificate. Get lots of copies. You’ll need them to close accounts, claim insurance and other death benefits, and change ownership.
- Determine if any family members have immediate financial needs.
- Meet with an estate lawyer who will represent the estate in all legal matters. Among other duties, the lawyer will arrange for probate of the will, which will give you the legal authority to act on the estate’s behalf.
- Notify all interested parties of the death. Notify government agencies, financial institutions, creditors, investment firms, insurance companies, utilities and landlord, if applicable.
- Inventory and take custody of estate assets. Establish value of assets from bank and investment account statements and real estate deeds, file life insurance and death benefit claims, apply for CPP benefits, list contents of safe deposit boxes and keep detailed tax records. Update home and care insurance. Collect any money owed.
- Open estate accounts.
- Pay financial obligations. Pay outstanding debts – loans, credit cards, utilities, etc.
- Complete final tax returns and obtain clearance certificate.
- Distribute the inheritance to the beneficiaries according to the will. Pay any legacies and charitable bequests.
- Make trust arrangements, if any.
- Close estate accounts. Prepare a full accounting of the estate’s administration and submit it to the beneficiaries.
Dealing with beneficiaries
Be prepared to act in an impartial and objective manner to best balance the needs of all the beneficiaries to reduce potential conflicts.
Related: How To Minimize Your Estate Costs
Because executor duties can be very time consuming (months or even years), you are allowed to charge the estate a one-time fee for your time – usually a percentage (2-5%) of the estate’s value.
Note, however, that any bequest made to you in the will may also be presumed to be your whole, or partial, compensation.
While it’s flattering to know that you are so highly regarded, you should think carefully before you accept the important role of executor, especially if you have never done it before. It’s a big responsibility.
Seek professional assistance to help you carry out the duties, particularly if you don’t have the time or skill for the complicated tasks.
Don’t feel guilty if you feel you can’t take it on.