I’m an executor. What next?

Being an executor is not an everyday job. For most people, being the executor for a spouse or a parent who has died is the first time they have handled an estate. It’s important to take it one step at a time.

The executor will want to take some initial steps to make sure the Will they have been named in is the last Will made by the person who died (doing a Wills Search, checking safe deposit boxes and important papers). This blog post talks about the main pieces of the job of executor, to give a general idea of what is involved, for situations where the person who died had a valid Will naming an executor.

Deciding whether to take on the job

In most cases, being executor is a manageable job especially with the help of professionals who are experienced with estates. That said, sometimes there are personal or other reasons not to act. For example, if it looks like the estate is insolvent – that there are not enough assets to cover the debts and expenses – the named executor will want to get advice before acting. If the executor is a non-resident of Canada, tax advice from an accountant should be taken before acting. The decision about whether to act should be made before dealing with estate assets and debts.

Funeral arrangements and safeguarding the assets

The executor has the first priority right to make funeral arrangements, and the preference expressed by a person in their Will about cremation or burial is binding on the executor. If the executor is not a family member, the executor may either consult with family members or let family members take care of the funeral arrangements.

One of the other first tasks of the executor is to safeguard assets. This can include things such as securing jewelry and valuables, securing the home, making sure there is proper insurance coverage for home and other assets, making temporary arrangements for a business, notifying financial and government institutions of the death, informing credit card companies so they can close credit accounts, redirecting mail, checking mortgages and the like.

Gathering information and making an inventory of assets and debts

The executor needs to gather information to put together a complete list of the deceased’s assets and debts. How easy or difficult this will be depends on how organized the deceased was – some people leave clear lists of assets as well as names of important contact people who can help the executor. The lawyer assisting the executor can help with this information gathering. The executor will need to get a title search for any homes and other properties, obtain information from banks and other financial institutions about the value of accounts and investments on the date of death, and consider having appraisals and valuations done for homes, recreational properties, jewelry, art and valuables, businesses and other valuable assets. The executor also needs to get information from banks and other creditors about debts owed at death and will need to consider whether to advertise for creditors.

Deciding if probate is needed and applying for it

Probate is a court order that says that a Will is legally valid and that the executor has legal authority to deal with the estate. The Land Title Office and financial institutions will require probate before they will transfer property in the name of the deceased (not joint) to the executor.

Probate is not always needed to deal with an estate. For example, if a person’s spouse died and all of the important assets pass directly to the surviving spouse by joint ownership (homes, bank accounts, investments) or beneficiary designation (RRSPs, RRIFs, TFSAs, life insurance), there may be nothing significant in the name of the deceased alone that requires probate to be dealt with. In this situation, probate may only be needed when the surviving spouse dies. That being said, it is important to be careful because some assets that were jointly owned or had a beneficiary designation may actually be held on a ‘resulting trust’ for the estate – for example, if an adult child was joint on bank accounts for convenience, and the deceased’s intention was that the bank account would be shared with the other beneficiaries of the Will.

In many cases, probate can be obtained by filing the required paperwork with the court, including the Wills Search and certain affidavits. The affidavit(s) filed with the court normally include the original Will that is being probated, a list of all the people who are entitled to and have been given notice of the probate application, and an inventory of the assets and debts of the deceased on the date of their death. If the court approves the content of the application, probate fees must be paid and then the court will issue the probate grant.

Notifying beneficiaries and others

The executor must give notice of the probate application and a copy of the Will to all of the beneficiaries named in the Will, all of the people who would be entitled to bring an action to vary a Will under the Wills Variation Act (essentially, spouse and children of the deceased), and the people who would have inherited if there was an intestacy. This gives them the opportunity to challenge the application for probate if they do not believe the Will is valid, for example if they argue the deceased did not have legal capacity or was unduly influenced to make the Will. If a spouse or child does not believe they are properly provided for in a Will, they have six months from the date of probate to bring an action under the Wills Variation Act.

Filing income tax returns and paying taxes

The executor is responsible for making sure that all of the required income tax returns are filed and any taxes paid. An accountant experienced with estates is invaluable for making sure all of the income tax issues are properly dealt with. In order to avoid personal liability for the deceased’s taxes down the road, an executor should also obtain a tax clearance certificate from Canada Revenue Agency.

Collecting assets and paying debts

After probate is received, the executor can have the assets of the deceased transferred into their name as executor and sell any property and investments that need to be sold. An agreement for sale of a home or other property may be signed prior to probate, and is usually made subject to probate with a closing date that allows time for the probate grant to be obtained. In some cases, the plan may be to transfer certain assets to beneficiaries without selling them, for example if the Will gives a particular assets to a beneficiary or if the executor is using a power in the Will to transfer assets in kind to a beneficiary.

Of course, the debts of the deceased also need to be paid. The executor may want to advertise for creditors to protect them from personal liability if a creditor appears out of the blue after the estate is distributed. If there is any issue of potential insolvency, the executor must be very careful to get advice about how to proceed.

Preparing the executor’s accounts

The executor has the duty to account to beneficiaries of the estate. Before distribution, a full set of accounts giving the beneficiaries complete information about the assets, debts and expenses of the estate, as well as the calculation of the distribution to beneficiaries, should be prepared and given to beneficiaries. If the executor is claiming remuneration for their work as executor, the accounts would also include the proposed remuneration. The level of formality of the accounts will depend on the particular estate. The executor would be wise to obtain releases from each beneficiary consenting to the accounts before any distribution is made.

Distributing the estate

When all of the other steps have been taken, the executor can distribute the estate to the beneficiaries according to the Will. There is a six month waiting period after probate before an estate can be distributed (it normally takes long than that  to deal with income taxes and the like in any case) unless all of the people who could apply to vary the Will under the Wills Variation Act consent. In some cases, if final income tax steps need to be taken, an interim distribution can be made of a significant portion of the estate with an amount held as a “holdback” for potential taxes and expenses. The normal expectation is that an estate will be distributed within the “executor’s year”.