Your parents have told you they are drafting their will and want to name you as their executor. Wow! How honoured you are to be considered as their executor. But wait a minute—what does the role actually involve?
To begin with, you can be thankful your parents are drafting a valid will. It is estimated that 50 per cent of Canadians do not have a will, meaning they will die intestate. If this happens then the estate of the person who has died falls under the auspices of the Public Guardian and Trustees Office and a court application must be made to appoint an executor. The process can be time consuming and emotionally draining, and can easily be avoided by making a will.
Selecting an executor
When naming an executor to administer and distribute the assets of an estate, you must select someone of legal age, with mental capacity and who is willing to act as the executor. It is also advisable that the executor is not a named beneficiary in the will.
Here are some questions to ask yourself:
- Is the executor accountable and trustworthy?
- Does he/she have the time to be the executor?
- Does he/she live close enough to be the executor?
- Is the executor a generation younger?
- Does the executor have a good relationship with the beneficiaries?
- Is the executor detail-orientated?
- Can the executor keep excellent records when dealing with a wide range of topics and with aligned professions, such as a funeral director, accountant, lawyer, bank or trust representative, insurance companies and government officials?
Another consideration is whether the executor lives in the same legal jurisdiction. If not, the courts may order the executor to post a surety bond—the amount of money will be a percentage of the assets to be distributed.
Too often, people do not know they have been named an executor or are unaware of the scope and range of duties required of an executor.
Acting as an executor
Acting as the executor of an estate involves three major areas.
Step 1
First, the funeral arrangements are the legal responsibility of the executor. This may be difficult if the deceased did not communicate any final wishes prior to death, and typically the will is read after the funeral. The executor has the power to incur reasonable funeral, burial or cremation expenses according to the lifestyle of the deceased.
Then, the executor must locate all the personal papers of the deceased, including the will, bank accounts (including the contents of any safety deposit boxes) and investment information. Immediate arrangements need to be made to cover the necessary living expenses of any dependent family members. This may include claiming life insurance benefits, contacting the Canadian Pension Plan to determine if any pension or survivor benefits are payable or contacting the employer about salary, group insurance and pension or union benefits payable to the estate or designated beneficiaries. Outstanding cheques, loans and other payments may also be owed to the estate of the deceased. In addition, ongoing bills need to be paid.
Step 2
The second time-consuming phase is the settling of the estate. The executor needs to document and take an inventory of the assets and liabilities of the deceased. For example, real estate, business assets, personal belongings, jewellery, collections, stocks, bonds or investment certificates and other valuables must be stored safely and insured appropriately. The executor is personally responsible for the safety of these assets prior to their distribution to the beneficiaries.
Step 3
The third phase is to distribute the assets of the estate. Legally, the residue of the estate may not be distributed until any family law and succession law obligations have been met; all probate, administration fees, funeral costs, taxes owing, debts and other charges against the estate have been paid; and a clearance certificate has been received from the Canada Revenue Agency.
The executor can then tell the beneficiaries what they are receiving. It is advisable to ask the beneficiaries sign a release form acknowledging their receipt of assets from the estate and stating they will not make further claims on the estate.
Compensation
As the executor, you will be entitled to compensation according to the provisions the deceased has outlined in his or her will. Failing this, provincial guidelines state that the fee is generally in the range of three to five per cent of the total asset value of the estate, depending on the time required from the executor and the complexity of the estate.
Fees and disbursements for other professionals are usually additional costs. If you are a named beneficiary in the will, then you will not usually be entitled to additional compensation for being the executor.
A trusted role
There is a Chinese proverb that says faded ink is better than forgotten memory. As your parents’ executor, I hope you can complete these responsibilities with ease, relish in the love and trust placed in you, and be proud of completing this last loving act for your parents.