Do I Really Want to Be Mom and Dad’s Executor?
Of 14.8 million Canadians aged 45 or older, 99% intend to name a friend or family member as their executor.* Are you one of those family members? *(Stats Canada, BMO Leger Survey)
Agreeing to become an executor is a BIG decision. It’s comparable to decisions about buying a house or moving to another country. It takes research and careful thought.
Uncertainty is not unusual, especially if you have no experience. This article advises what to expect as an executor to help you decide if this role is right for you.
We’ll discuss:
- Executor requirements
- Executor responsibilities
- Required attributes
- Legal and financial risks
Requirements of Becoming an Executor
First things first, you must meet the basic requirements to be an executor.
- Legal Age – you must be 18 or 19 years old depending on the province
- Mental Capacity – you must be deemed mentally capable
- Residence – many provinces require the executor is a resident of Canada, but some stipulate nonresidents can be an executor with certain restrictions
- No Conflict of Interest – as executor you can also be a beneficiary, but you must not have any conflicts of interest
Knowing you meet these requirements simply means you now can turn your attention to the tough question you must answer next.
Will you do whatever’s required to honour the Will’s instructions with integrity, accountability, and fairness to all beneficiaries?
To better understand what it means to do whatever’s required, let’s review 3 key elements of the executor role.
1. Executor Responsibilities
Being an executor is an onerous job. Depending on the estate’s complexity, an executor can take over 500 hours of work effort and generally up to 18 months to settle an estate.
It’s like having a part-time job on top of your already busy work and family responsibilities!
Here’s a summary of the primary responsibilities you would perform. Many of these tasks are time sensitive with specified filing requirements.
Manage Funeral Arrangements – adhere to final wishes when making arrangements for either burial or cremation, first determining if organ donation was requested.
Secure Property – change the locks to ensure assets are not wrongly claimed before the Will is located and reviewed. Arrange for mail pickup, inform insurance and utility companies.
Locate Assets and Debts – locate documents, determine value of property, bank accounts, investment accounts, digital assets and complete an Estate Information Return (EIR) in Ontario.
Obtain Probate (not always required, depends on value of assets and province) – locate original Will and apply to the court for probate.
Communicate with Beneficiaries – communicate the directions in the Will, manage expectations on timelines and process before assets can be distributed, give regular updates.
Manage Estate Finances – create accounts in the estate of the deceased to manage expenses and deposits, monitor and manage investments, claim for life insurance and CPP death benefits.
Pay Taxes and Debts – file taxes for deceased in tax year of death, file terminal return, obtain a Clearance Certificate. Locate known creditors, place ads to find unknown creditors, pay debts.
Distribute Assets – liquidate assets at the appropriate time ensuring the highest value is secured for the estate, distribute assets as per the Will after all debts and taxes are paid.
Prepare Reports – present to beneficiaries a report itemizing all transactions during the administration of the estate.
Of course, this is only a high-level glimpse of the work involved and does not include all tasks, especially if a company is involved or there are works of art or other valuable collections.
Do you have the time, patience, and persistence to complete these tasks as quickly as reasonably possible?
That leads us to the second key element of the executor role.
2. Required Attributes to Administer an Estate
Once you understand the work required, it’s easier to appreciate what life will look like while you work on settling the estate.
Accountable to the beneficiaries, there are high expectations of you to get the best possible return on investments and property and distribute assets as quickly as possible.
Being honest with yourself on whether you possess the following attributes is the next important step in making your decision to accept an executor role.
Good Communicator – You will need to communicate and negotiate with creditors, financial institutions, family members, and manage their expectations. Keeping all of them regularly informed will help prevent misunderstandings and avoid conflict.
Tenacious and Persistent – Get ready for delays, mountains of paperwork, bureaucracy and doing lots of research. You will need to pack your patience, not back down to unreasonable demands, and be persistent in achieving the best possible outcome for the estate.
Trustworthy – You must perform your duties with the highest integrity. You are accountable to the beneficiaries while following. the instructions of the Will. Family dynamics cannot bias you toward decisions that favour certain beneficiaries over others, including yourself.
Financial Acumen – This role often requires selling real estate, making investment decisions, negotiating with creditors, and getting the best value when disposing of property. This all requires strong financial knowledge.
Good Judgment – In the course of administering the estate you could potentially deal with over 17 different professionals, such as lawyers, accountants, property valuators, real estate agents, funeral directors, financial advisors etc. You must know when to seek professional advice.
Can you see yourself administering your parent’s estate? Do you have the required attributes?
Two important points to remember:
1) You must trust your instincts when making decisions on behalf of the estate. Advisors give advice, but as executor you are accountable for decisions, not them.
2) You must keep meticulous records on all transactions while administering the estate.
You’ll need to rely on the above to protect yourself, which brings us to the third key element of the executor role.
3. Legal and Financial Risks of an Executor
Did you know an executor is a fiduciary? This means you are bound legally, financially and ethically to represent the best interests of the beneficiaries.
That’s a BIG consideration! Being accountable takes on a whole new meaning when your assets could be at risk. So, what situations could cause litigation and financial risk?
Let’s review some of the possibilities:
Administrative Errors or Conflicts of Interest – making any kind of error that costs the estate money, or transactions made when you have a conflict of interest.
Mishandling of Investment Decisions or Property Sales – should one or many beneficiaries believe you were incompetent in managing the estate’s investments or sold property for less than fair market value.
Biased Against Other Beneficiaries – disruptive family dynamics can often lead to litigation about an executor’s management of the estate especially if a beneficiary perceives you are unfairly favouring yourself or others.
Delayed Probate – some jurisdictions take longer to process probate (up to 8 months in Toronto), which means, as executor, you must secure a loan to pay for estate expenses like mortgage, utilities etc.until probate is granted and you gain access to estate funds.
Distribute Assets Too Soon – should you distribute the estate’s assets to beneficiaries before ensuring enough assets are set aside for debts and taxes, you risk being responsible for any shortfall. Creditors and Revenue Canada have first claim on estate assets over beneficiaries.
You may think your fellow beneficiaries are your family members and would never litigate against you, but this happens more frequently than you would expect.
Knowing that as an executor the buck stops with you, are you prepared to assume the risk?
You can protect yourself against these risks with executor liability insurance and charge the estate the required premium. ERAssure is one company that offers this type of coverage.
Conclusion
Agreeing to become an executor is a BIG decision. Before you say yes to mom and dad’s request to be the executor of their estates, reflect on these questions:
- Do you have the time, energy and inclination to fulfill the executor responsibilities?
- Do you have the attributes required to act in the best interests of the estate?
- Are you prepared to assume the legal and financial risks this role entails?
Will you do whatever’s required to honour the Will’s instructions with integrity, accountability, and fairness to all beneficiaries?
The good news is you are not alone. There are many resources available to help you do the job. Professional Executors can assist you to perform any duties you are unable or don’t have the time to do, which may make it a little easier for you to agree to your parent’s request to be their executor.
And as their executor, we recommend that you and your parents read our blog on How to Set Your Executor Up for Success and how our Family Playbook™ streamlines the process.
Did this article help you decide if you want to be your parents’ executor? Let us know!
Financial Concierge™ offers Professional Executor and Power of Attorney services to assist you with executor or attorney duties when the time comes. Learn more about Financial Concierge™ here.
Author: Janet Jackson, Contributor: Jill Chambers
DISCLAIMER: This blog is not intended to be legal or financial advice and should not be construed as anything other than for information purposes.
