What is an Executor of a Will and what do they do?

What is an Executor of a Will and what do they do?

It is a bit of morbid thought maybe, but the role of an Executor is critical for estate planning and very much central to any estate management settlement process.

What is an Executor of a Will?

What do they do?

What are some of their key roles and responsibilities?

Read on, find out, including why I am asking these questions myself!

What is an Executor 101

As a follow-up to this post on my site, Making a Legal Will in Canada, I have a bit of bias to learn more about the Executor role: I’ve been appointed as an Executor within my family and from one of my closest friends.

I’ve always known the basics of this role (i.e., they make sure the wishes stated in the deceased person’s Will are fulfilled; they help arrange and distribute any estate wishes, including personal assets) but I’ve never explored the extent of an Executor’s responsibilities – until today.

I got the chance to speak to team at LegalWills again, about the Executor role, and I’ve also found some good checklist items for folks named in an Executor role as well.

Read on and let me know your thoughts.

LegalWills, what is an Executor? Can you summarize their role?

Yes, of course Mark. Thanks for having us back on your popular site!

Your Executor represents you after you have passed. They are the person that you entrust to carry out the instructions in your Will, and in particular distribute your assets according to your direction. The key steps therefore are to gather and secure your assets, and then distribute them to your beneficiaries according to your instructions.  In addition, they are usually tasked with making your funeral arrangements.

Keep in mind that beyond specific requests in your Will, there is a “residual estate” and your Will probably could say something like “share the remainder of my estate equally between my children”. This means that your Executor has to establish the scope of your estate, and also determine what an equal distribution would be.

Great overview. OK, so when does an Executor need to start their work? What do they need to do, right away?

The Executor’s job starts as soon as you have passed. The very first task is to find the Will. It sounds simple, but many estates get tripped up on this basic first step. This is why it is important to not hide your Will. You must let your Executor know where it is, and they should be aware that they are the Executor. Depending on the nature of the family dynamics, it is then important to immediately take inventory and secure assets. We hear from people every day telling us “My mother has died, and my brother has started removing things from the house because he claims that he was promised them”. The Executor is responsible for making sure that this does not happen.

The next step would be to apply for probate if required. This would officially recognize the Will as the official Last Will and Testament, and give your Executor authority from the courts to act as the Estate Administrator.

Can you summarize the responsibilities of an Executor?

I will do my best to summarize!

• The Executor has responsibility to arrange the funeral (and perhaps pay for it from the estate). They must obtain a death certificate, and also ensure that the direct family’s financial needs are met.
• The Will must then be verified through the Probate process, and the Executor must receive a “Grant of Probate” from the courts (there may be probate fees to be paid for out of the estate).
• The Executor must form a relationship with the beneficiaries, providing them with regular updates and reports. It is important that expectations are set with the beneficiaries regarding the estate and the timelines involved.
• Then, the Executor can start to gather the assets (including proceeds from insurance policies). They should open a bank account for the estate, settling outstanding debts and filing documentation with CRA. Some Provinces require a valuation of the estate to be submitted to CRA. A final tax return will need to be submitted to CRA.
• If the Will has instructed Trusts to be set up (for example for minor beneficiaries), the Executor will work with the bank to do this.
• After this, the assets are distributed to the beneficiaries, and the Executor compensation is determined. A full report of accounts should then be shared with the beneficiaries.

That sounds like a lot of work…

What support should Executors have? Meaning, who should they reach out to and when? Can they get advice?

For sure Mark.

As you can imagine, the Executor must have a number of skills. On the practical side, they must be good with paperwork, and working through checklists in a methodical way. But they also need people skills because they are working with beneficiaries to ensure fair division of assets. Remember, there is usually a lot of money at stake, and in some cases, a life changing amount of money. Beneficiaries can often become impatient waiting for their inheritance, and a lack of communication usually results in mistrust or suspicion. The administration of an estate can take up to a year, so it is vital that the Executor maintains an open dialog throughout this time.

There is a lot to take on, but many professional resources available. For example, some lawyers offer a fixed fee probate application. Certainly, it is worth engaging with a professional accountant to file final taxes. The banks should be able to provide professional assistance in setting up the trust accounts. There are also many books as well as online tools set up to help the Executor, like ClearEstate.com and QuickEstate.ca

Interesting. As a follow-up question, any tools, books, other that could support Executors in their role?

Yes, there are. I have to speak to one in particular. An inventory of your assets and key people to contact. Imagine sitting down right now and listing all of your assets: the things you own, your bank accounts, investments, subscriptions, online accounts. It would be a huge undertaking. Now imagine trying to do this for your brother-in-law’s assets. It would be impossible. This is the task facing your Executor.

You do not include a list of assets in your Will, you usually refer to your “estate” in general terms. Your Executor must gather your assets, but if you haven’t documented them anywhere, it is an impossible task and you may have assets go undiscovered. We have a tool for this called MyLifeLocker, but even if you don’t use a tool, you should somehow keep an inventory of everything that your Executor needs, and store this with your Will. This inventory is equally useful for your Power of Attorney.

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Let’s go back to the Executor work. Is there any compensation for that effort?

There is Mark.

As you know from our information above, the Executor role can be time consuming. Being an Executor can be a long, drawn-out activity, requiring skill, effort and attention to detail. So, Executors are not expected to work for free.

As a general rule they are entitled to compensation, from the estate, for their efforts. Executor compensation is owed by the estate. When it is contested, it is supervised by the courts, through a process known as ‘passing accounts’. We won’t get into more details on this, because it can be very technical, but all this to say, Executors are absolutely compensated for their work from the estate.

In rough terms, the Executor(s) of an estate will be entitled to compensation up to five percent (5%) of the total value of the estate, although 2.5% is also common. This is a good rule of thumb and approximation, and subject to adjustment (up or down) based on a number of factors by a Court, and may be reduced by any fees paid by the executor(s) to third parties for services that the executor is normally expected to perform.

What is an Executor of a Will and what do they do? Summary

As a guideline, I’ve learned that an Executor has approximately one year to administer an estate (not including any long-term trusts. However, I can also appreciate there could be very lengthy administration work for complex estates. Hopefully my family and friends have a good handle on their plans!!!

The role of an Executor is one that I do not take lightly – so as a consequence – here are some reminders about what your Executor will need to do and how you can help them, now, after you are gone:

Estate identification and distribution

• Make it easy for the Executor – identify all assets, a detailed inventory including any insurance coverage. Share that information with them. Keep it updated and accurate. Make sure the Executor knows where to find your Will.

Estate winddown

• Again, make it easy for the Executor – identify how assets, including houses, personal materials are to be managed. An Executor will need to arrange for the place of residence to emptied, cleaned, and potentially sold. There is paperwork to complete when it comes to cancelling government benefits or other entitlements. Identify those clearly. There is also the preparation and filing of the final income tax return.

I want to thank LegalWills, for their contributions to today’s post. For further reading, check out my previous post with them below.

Further Reading:

Check out this Government of Canada estate planning to-do list.

Making a Legal Will in Canada.

As part of my ongoing partnership LegalWills.ca, they are happy to offer my dedicated promo code MOA15 at the time of product checkout for any products.

As always, there is never any obligation to use any partnership code on my site. Any codes that exist on my site are always elective.

Thanks for your readership and drop me a question in the comments section. The team from LegalWills is also ready to provide their subject matter expertise and answer questions. 

Mark

What is an Executor of a Will – Checklist:

I’ll update this list from time to time. Here are some duties and checklist items for the Executor.

Key duties:

• Arranging the funeral
• Securing and appraising the assets of the deceased
• Applying for probate, if necessary
• Paying the debts and taxes of the deceased
• Accounting to beneficiaries
• Distributing the assets of the estate

Key accounting practices:

An Executor must keep accurate financial records, including copies of all receipts, as well as a record of time spent in administering the estate. This serves two purposes.

1. Satisfy the Court and beneficiaries that the estate has been administered properly.
2. Entitled to compensation for work completed/time spent by Executor.

Executors – to do immediately:

• Determine whether the deceased left a Will – we hope so!
• Make funeral arrangements and pay for funeral.
• Retain a solicitor.
• Open an estate bank account.
• Notify beneficiaries of their interest in the estate.
• Identify estate assets and safeguard until distributed or sold.
• Collect income generated by the estate assets and/or payable to the deceased.
• Pay bills, mortgage payments, property taxes, income taxes, insurance premiums, credit cards.
• Redirect mail, cancel memberships and subscriptions to newspapers and magazines.
• Cancel health insurance, driver’s licence, utilities, credit cards.
• Arrange for care of pets.

Executors – near-term work:

• Update/confirm an inventory of assets, including real estate, money in deceased’s bank accounts, life insurance assets, interests in other estates or trusts, investments, other.
• Arrange for valuation of assets where necessary.
• Notify creditors and prepare inventory of debts.
• Instruct solicitor to apply for a Certificate of Estate Trustee (Probate).
• Prepare and file income tax returns for the year of death and prior years (if necessary).
• Make reasonable inquiries for next of kin, if required.
• Consider any claims or potential claims against the estate and obtain legal advice (if necessary):
• Assess the rights of the surviving spouse under provincial family law.
• Assess the rights of any dependents who were financially dependent on the deceased.
• Set aside a reserve fund for estimated debts, taxes (including potential taxable capital gains), and the personal representative’s compensation.
• Prepare interim release and make interim distribution to beneficiaries, if appropriate.

 Executors – final considerations (if not done above):

• Convert investments and other assets to cash and deposit funds into the estate account, or invest the estate balance in interest-earning investments, pending final distribution to beneficiaries.
• Re-register assets in estate’s name, if applicable.
• File the final income tax return.
• Obtain a clearance certificate from Canada Revenue Agency.
• Settle and pay all legitimate claims against the estate.
• Arrange for transfer of real property/sell real estate and manage disbursements.
• Arrange rollover of RRSP/RRIF to spouse or dependent child.
• Apply for any benefits payable on death, including CPP/QPP death benefit, life insurance proceeds, death benefits from pension plans or annuities.
• Prepare and maintain estate accounts for approval by the beneficiaries or examination by the court, where appropriate (Passing of Accounts).
• Have your solicitor prepare and send final releases to all beneficiaries.
• Finalize the distribution of assets.
• Prepare cheques and transfer bequests.
• Invest assets for any trusts.
• Close estate bank account.

Disclosure: My Own Advisor was not compensated for this post. Should you need support in your Executor role, I know I would not hesitate to seek out the guidance of my lawyer. This is not professional advice, but I hope it helps you in your Executor role.