It is not uncommon for individuals to name a family member or a good friend as the executor (referred to as “estate trustee” in Ontario) of their estate. However, acting as an executor is not always an easy or enviable task; in fact, many executors come to rue the day they ever agreed to act. I like to remind executors of the old adage that “no good deed goes unpunished.”
The primary duties of an executor is to locate and gather in the deceased’s assets, pay the deceased’s debts (taxes being the most notable), and distribute the remaining estate assets according to the terms of the will (or, if there is no will, then according to the distribution scheme established by provincial legislation). If more than one executor has been appointed, they must act unanimously unless the will provides otherwise. The expectation is that most estates are administered within 12 months – what is referred to as the “executor’s year.” However, in modern times where it often takes more than eight months to receive the probate certificate, completing the estate administration within a year is impossible for reasons beyond the executor’s control.
An executor is a fiduciary (i.e. a person in a position of trust) and, as a result, held to a higher standard. Executors must account to the estate beneficiaries for their actions and can be held liable to the beneficiaries if they breach their fiduciary duties. As a result, it is often necessary, and prudent, for an executor to retain professional help – a lawyer, an accountant or a trust company – to help ensure that the estate is administered properly.
An executor’s principal duties consist of:
- Making funeral arrangements for the deceased;
- Looking for the deceased’ last will and any codicils (amendments) that may have been made to it and keeping such documents in a safe place;
- Locating all the important documents and papers of the deceased and keeping them in a safe place;
- Locating and making an inventory of the assets of the estate;
- Preserving the assets of the estate and maintaining appropriate insurance on real estate, vehicles and other assets of the deceased;
- Advising third parties of the death of the deceased;
- Informing the beneficiaries of their entitlement and reporting to them on the progress of the administration of the estate;
- Applying for a certificate of appointment of estate trustee (i.e. probate) if appropriate;
- Keeping a detailed account of the estate assets, receipts, disbursements and investments and providing this information to the beneficiaries;
- Realizing (i.e. converting to cash) the estate assets unless the will directs otherwise; and
- Investing the assets of the estate prudently until they are distributed to the beneficiaries.
An executor is entitled to be compensated for the (often time consuming) work performed. However, compensation it is not an automatic right and the executor will, in all likelihood, have to justify the amount received. Not surprisingly, compensation is often a sore point between executors and beneficiaries.
An executor is personally liable for the debts of the deceased and the estate up to the value of the assets distributed by the estate trustee. For example, if the executor paid out $10,000 to one of the beneficiaries before paying that estate debt to CRA for $15,000, the executor would be personally liable to pay $10,000 to CRA if there were not enough assets left in the estate to pay the debt. Therefore, the executor must make sure that all debts are paid before distributions to beneficiaries.
Nevertheless, an executor may make an interim distribution to beneficiaries while holding back enough funds in the estate to cover possible future taxes and other liabilities of the deceased. Upon payment of all taxes, satisfaction of all other liabilities, and receipt of a clearance certificate from the Canada Revenue Agency, the final distribution to the beneficiaries can be made.
Before any interim or final distribution is made, each beneficiary should sign a release – a partial release in the case of a partial distribution or a final release in the case of the final distribution. If a beneficiary refuses to sign a release, the executor should commence a court application to formally pass their estate accounts in court.
An executor must avoid conflicts of interest, remain neutral, and maintain an even hand among the beneficiaries: an executor cannot prefer the interests of one beneficiary over another. Finally, an executor should regularly report to the beneficiaries on the administration of an estate, respond to any reasonable inquiries by the beneficiaries in a timely manner, and be ready to account for their actions to the beneficiaries.
