executor Archives

What are my duties as executor?

Posted on January 13, 2020April 17, 2023 By admin

In the unfortunate event of death, the executor(s) named by a Will (liquidator in Quebec, see below) is charged with carrying out the final wishes of a deceased testator and administering the estate. The estate is, in general terms, all the money and property left behind by the testator. The executor(s) will be required to pool all the remaining assets of the deceased, pay any debts or taxes, and distribute the remainder in accordance with the Will.

Executor(s) have an obligation to administer the estate in a timely manner. Although there is no stated time period during which a trust must be administered, the common law presumes that an estate takes approximately one year to administer properly. This is known as the “Executor’s Year”. After the Executor’s Year, in some cases beneficiaries may be permitted to seek payment.

I have been named in a Will as an executor. Do I have to accept?

A person appointed by Will may decline to be an executor. However, if an appointee is considering declining the appointment, it is imperative for them not to begin administering the estate. Once an individual begins to act as an executor, a court order may be required in order for them to resign.

What should I do next?

If a potential executor has not been named by Will as estate trustee, they will need to obtain a Grant of Administration or a Certificate of Appointment. If an executor is explicitly named by Will or has obtained a court order permitting them to administer the estate, they should begin by identifying anyone familiar with the business and private affairs of the deceased such as lawyers, accountants, business partners, etc.

A named executor can begin making funeral arrangements. The Will may outline funeral instructions or pre-paid plans. If the Will contains no requests, it is prudent to involve family members in decision-making, since they will likely have thoughts about the deceased’s funeral wishes, and may have wishes of their own.

If the estate is sizeable or complex, an advisor may be engaged to draft and review the probate paperwork. The ultimate responsibility for review and signing of probate paperwork lies with the executor, but the use of an advisor can simplify and expedite the process. The cost of any legal fees and taxes are deducted from the estate once the legal work is complete. A TEP can act as an advisor or assist in engaging, instructing, and comparing specialists.

Satisfying debts and obligations of the deceased

One of the key responsibilities of an executor is to ensure that any outstanding debts or obligations of a deceased are settled, including any outstanding tax obligations. People familiar with the deceased may provide some guidance on known debts. However, in order to give notice to any other potential creditors, a notice should be posted in a local newspaper and (if appropriate in the province) in the provincial gazette. The notice must provide the deceased’s name and a request for any potential creditors to come forward.

How do I obtain a death certificate?

A proof of death certificate can be obtained from the funeral home. This document should be registered with the Vital Statistics Agency in the province in which the deceased resided. This Agency can provide an official death certificate. A proof of death certificate will be sufficient for most purposes in some provinces.

What if there is not enough money in the estate to cover funeral expenses?

The executor may apply to the deceased’s municipality for funding to assist with funeral expenses. Arrangements should not be made until eligibility for assistance has been determined.

Notifying beneficiaries named in the Will

Executors are legally required to notify all beneficiaries named in the Will. If the executor applies for probate, courts will require proof that beneficiaries have been notified.

Valuation of the estate

An executor is required to establish the value of the deceased’s estate for the purposes of filing the terminal year tax return of the deceased, calculating capital gains taxes, and determining probate fees/estate administration tax to be paid on the value of the estate. A TEP can help with the process of estate valuation.

Do I have ongoing obligations? How long does this take?

The length of time required to administer an estate depends on, among other factors, the complexity of the estate, size of the estate, and number of beneficiaries named in the Will. With a standard estate, it is assumed that the bulk of the process will take approximately a year. Tax matters will generally take longer, especially if a Clearance Certificate is requested from the Canada Revenue Agency. As part of the distribution of the estate, the executor may need or wish to present a formal “passing of accounts”. This process involves the presentation of written accounts to a Court and items of controversy may be challenged by one or more beneficiaries.

Do I get paid as executor?

The Will may or may not explicitly provide for executors to be compensated. If the Will is silent on the matter, the appointee may still be compensated for acting as an executor. This would either require approval from all of the beneficiaries, or an order from the Court as part of a passing of accounts. A Court can order that any compensation taken by an executor without approval be repaid.

What is a liquidator?

In the province of Québec, a liquidator plays a similar role to an executor in other provinces. Liquidators are responsible for distributing the succession of the deceased. This role has slightly different obligations than the requirements for an executor in other provinces. For example, in Québec, there is a legal duty to not only notify the beneficiaries in the Will, but also to notify anyone who would inherit if the person died intestate.

For further information or assistance in carrying out your duties as an executor, please consult a TEP.

What is capital gains tax?

Posted on January 13, 2020April 18, 2023 By Joanna Pegum

The sale or gift of an asset that is capital property which has increased (or decreased) in value while it was held by an individual will attract capital gains tax (or a capital loss) on disposition. The gain or loss is the difference between any proceeds received (or deemed received) on disposition and the purchase price (less any costs associated with the disposition). The deemed proceeds for a gift is equal to the property’s fair value at that time.

How are capital gains taxed?

Only 50% of all capital gains (or losses) are taxable (deductible) in Canada. This 50% is added (or deducted, in the case of a loss, against any capital gains) to personal income and taxed at an individual’s marginal income tax rate.

What is exempt from capital gains tax?

Capital gains are not generally taxed (and capital losses are not available) on the following items in Canada:

The principal residence of an individual
Transactions in tax-sheltered plans such as Tax-Free Savings Accounts (TFSAs), Registered Retirement Savings Plans (RRSP’s) and Registered Retirement Income Funds (RRIF’s)

What is a lifetime capital gains exemption and am I eligible?

A lifetime capital gains exemption may apply to the gains on dispositions of farm or fishing property, as well as shares of a qualified small business corporation. There are lifetime limits to the exemption which are calculated by individual.

For further information, or assistance with tax planning, please contact a TEP.

10 Tips to help you get started as an Executor

Posted on January 12, 2020April 18, 2023 By admin

Serving as an executor can be a lot more challenging than is initially expected. People often underestimate the amount of work that goes into the role. This article will provide executors with helpful tips for carrying out their obligations successfully.

1. Understand an executor’s duties

The executor of an estate is the representative of the estate of a deceased person. Being an executor can be difficult, time-consuming and stressful. The executor is responsible for everything from obtaining a copy of the Will to communicating with beneficiaries and creditors. While not an exhaustive list, here are some of the duties of executors – review insurance coverage, close financial accounts, pay debts, taxes and fees and distribute assets to the beneficiaries. In some cases, an executor can be found personally liable for the debts of an estate. It is important that a person appointed as an executor educate themselves about what is involved before taking on the role, in order to ensure that they are comfortable with everything that is required, as once an individual begins to act as an executor is it is difficult to leave the role.

2. Locate important documents

One of the first obligations that an executor has is to locate and read the original and most recent Will of the deceased. In an ideal situation, the testator will have informed the executor as to the location of the Will and other important documents. If this has not been done, the executor will have to conduct a search for the Will. The executor should also obtain the original death certificate of the testator and certified copies which may be required by third parties such as Financial Institutions to confirm the executor’s appointment and enable them to act on behalf of the testator’s accounts and other assets.

3. Communicate

Settling an estate can often create tension amongst family members. Executors will be required to speak regularly with beneficiaries and family members to ensure that they understand the process and balance any potential conflicts of interest. It is important to be as transparent as possible and keep the lines of communication open. Family members should be told what actions are being taken to settle and distribute the estate, and what their interests are in the estate.

4. Carry out the Will as it is written

It is crucial that the executor abide by the terms of the Will. While this may seem obvious, sometimes executors may feel tempted to change an unpopular part of the Will in favour of what they believe to be fair or efficient. At other times, family members or beneficiaries of the Will may encourage the executor to alter a certain provision in their favour. It is important to remember that the executor’s role is to distribute the estate strictly as it was set out in the Will.

5. Pay debts and taxes before paying beneficiaries

One of the most important responsibilities of an executor is paying off any outstanding debts, taxes and fees. Sometimes, executors feel pressure by family members and/or beneficiaries of the will to distribute their interests right away, but if an executor pays a beneficiary before clearing all liabilities, they may be held personally responsible for doing so.

It is best practice to obtain a Clearance Certificate from Canada Revenue Agency which confirms that any taxes owing, interests and penalties have been paid by the estate. Doing so, provides the executor with clearance to distribute the estate assets with the knowledge that tax obligations have been satisfied. Executors who fail to obtain a Clearance Certificate may be held liable for paying any outstanding taxes up to the value of the estate (and possibly beyond in the event the executor was found to be grossly negligent).

6. Take your time – within reason

Administering an estate is time consuming. It can often take more than a year and could stretch out even longer depending on the complexity of the Will and nature of the various assets. An executor must strike the correct balance between ensuring that they take the time to understand the issues involved in the administration of the estate, while keeping estate settlement moving forward. Executors should be aware of the concept commonly referred to as the “executor’s year” during which time there is an expectation that the executor gather the deceased’s assets and administer the estate in a manner so that at least any cash bequests can be made within the year of death. It is possible that interest may accrue to cash bequests not made within the executor’s year unless the Will specifically disallows the application of interest.

7. Maintain records

Keeping good records is crucial. If beneficiaries have questions, the executor must be able to back up and support their decisions with the correct documentation. Since the executor is accountable to the beneficiaries for the assets of the deceased, it is vital that accurate records are maintained when dealing with the distribution of the estate, as well as records of all debts, expenses and taxes. Further, it may be necessary to submit the records to the court for approval known as the “Passing of Accounts” therefore detailed accurate records are essential.

8. Seek professional advice

Once you obtain the necessary documents, an executor will have a better understanding of just how complicated administering an estate may be. At this point, they may wish to seek advice from professionals whose expertise will assist in preventing costly mistakes. Executor duties often require consulting multiple professionals, including lawyers and accountants. In most cases, it is not appropriate to undertake the process of estate administration without the involvement of professionals.

9. Delegate where appropriate

An executor is not obliged to do everything personally. Executors are entitled to outsource many of the necessary tasks of estate administration. It is expected and encouraged that executors seek advice from professionals and other advisors. Delegation should be limited to appropriate tasks.

10. Protect yourself

Executors have a number of different responsibilities when managing the distribution of an estate. For peace of mind, there are two principal ways executors can protect themselves from personal liability:

(1) Executor Insurance: executor insurance will protect trustees who face any legal issues relating to decisions made in the course of estate administration.

(2) Obtain Releases from Beneficiaries: releases operate to discharge an executor from personal liability. They are typically presented to the beneficiaries at the time of distribution. The release should contain an acknowledgment that the beneficiaries received a full and adequate accounting of the administration of the estate and are satisfied with the information that was provided

For further information, or assistance with estate administration, please consult a TEP.

Who should be executor of my Will?

Posted on January 10, 2020April 17, 2023 By admin

One of the most important decisions to make when preparing a Will is choosing an executor (referred to in Quebec as a liquidator and in Ontario as an Estate Trustee), i.e., the person charged with administering an estate and carrying out the final requests of a deceased individual. Appointing the right executor ensures a quick and accurate distribution of an estate, while minimizing animosity among beneficiaries.

Duties of an executor

The duties of an executor are plentiful and include the following.

Immediately After Death

Determine whether deceased left a Will
Make funeral arrangements
Open a bank account for the estate
Notify beneficiaries of their interest in the estate
Cancel health insurance, driver’s license, credit cards
Pay outstanding debts and taxes of the deceased
Secure estate assets (ensure proper insurance)

Interim Matters

Prepare an inventory of assets including real estate, bank accounts, life insurance, investments, and personal property
Arrange for valuation of assets
Assess the rights of the surviving spouse (if any) under provincial law
Assess the rights of any dependents who were financially dependent on the deceased
Pay any outstanding debts and taxes of the deceased

Final Matters

File a final T-1 personal tax return and an T-3 trust tax return for the estate
Obtain a clearance certificate from Canada Revenue Agency
Arrange for transfer of real property
Dispose or distribute personal effects in accordance with the Will
Distribute the remainder of the estate as indicated in the Will
Close estate account

Who can be an executor?

Generally, anyone over the age of 18 who is mentally competent can act as the executor of a Will. The person named as an executor may also be a beneficiary of the Will. When choosing an executor:

Consider naming more than one executor

Multiple individuals (or co-executors) may be appointed to share the burden of administering an estate. One pitfall of this approach is that naming multiple individuals can make decision-making more difficult. If the Will is silent about decision-making, then unanimous consent will be required. However, this may still be the correct approach, and a Will can always provide for a tie-breaker if executors disagree on a decision.

Name a back-up executor

It is important to appoint an alternate executor or executors in the event that the primary executor is unable or unwilling to fulfil their role. Accordingly, Wills should list both primary and alternate executors in order of preference.

Consider the residency of your executor(s)

In addition to the practical difficulties of overseas estate administration, naming an executor who resides in a foreign jurisdiction will cause complications for post-death estate planning. For example, naming a foreign executor could change the tax residency of the estate or prevent the executor from being entitled to make trading decisions on certain investment accounts. There may also be bonding requirements for a foreign executor.

Consider naming an estate professional as an executor

Generally, people appoint family members or close friends to be the executor(s) of their Wills. However, in situations where there is a complex estate, or acrimony among beneficiaries, dependents or family members, it may be appropriate to consider appointing an estate professional as an executor. Estate professionals who provide these services include trust companies, lawyers, and accountants.

Who should I choose as executor of my Will?

The executor is tasked with the responsibility of administering an estate in accordance with a Will. The executor should be someone who:

The testator trusts to administer their affairs in accordance with their wishes;
Lives within reasonable proximity of the testator so that it is easier to deal with the deceased’s family and assets;
Has a degree of knowledge pertaining to the complexities involved in the testators tax filings, investments and financial decision-making;
Is driven and able to get things done promptly; and
Is likely to survive the testator’s death.

These responsibilities should be assigned to someone who is aware that the duties of an executor are both time-consuming and stressful. In some provinces, once an individual begins the process of dealing with estate assets, they are legally bound to see the administration of the estate to its end, unless relieved of their duties by a court order.

How do I appoint an executor?

The best practice is to first have a discussion with a chosen executor prior to naming them in a Will. If they are amenable to the role, they may be appointed as executor in the Will. Their contact information should be included in the Will, or given to a trusted advisor who holds the Will and will contact the executor.

For additional information or assistance with appointing an executor of your Will, please consult a TEP.

What is Probate? What does it mean to probate a Will?

Posted on January 6, 2020April 17, 2023 By Louise Polcaro

Probate, from the Latin probare, “to test or prove,” involves the act of proving the legal validity of a Will. In certain situations (for example, to access a deceased’s bank accounts or to transfer land), a legal document must be issued by a Court proving that a Will is valid and the person named as Executor within the Will has the authority to act on behalf of the Estate. In most provinces and territories, the Court issues a certificate called ‘Letters Probate’, the ‘Grant of Probate’, or ‘Grant of Certificate of Appointment of Estate Trustee With (or Without) a Will’. The process is commonly referred to in short as “Probate.”

The process for verifying Wills in Quebec differs from the rest of Canada.

If the deceased left a Will

If the deceased left a valid Will, the document should provide who the appointed authorities are (i.e. Executor(s)) to look after the estate administration, who the beneficiaries of the Estate are, and any specific intentions as to how the deceased’s possessions, money or property are to be distributed to them.

The Executor named in the Will may be required to obtain Letters Probate (or Certificate of Appointment of Estate Trustee With A Will, in Ontario), in order to administer any estate assets or settle any claims of the deceased. If required, a probate application form would be prepared and submitted to the Courts, along with other required or supporting documentation. This process varies slightly from province to province. For more information regarding probate in the specific province of residence (determined with reference to the deceased), please click the name of the province below.

If the deceased did not leave a valid Will

If the deceased did not leave a valid Will, they are said to have died “intestate.” Generally, when a person dies intestate, an application must be made to the Court. The Court will appoint an authority (i.e. Administrator(s)) to administer and distribute the Estate according to specific laws called the laws of Intestacy. These laws determine who is eligible to receive assets in the estate, and they do vary province to province as well.

How does the Grant of Probate different than the Grant of Administration?

Although the naming varies slightly between provinces, Courts generally have three different grants they can issue when a person applies to administer an Estate. It depends if the deceased died with a Will or without one. It is the responsibility of the person applying to determine what type of grant they are applying for and to apply for the appropriate grant. Each type of grant will have different application requirements.

(1) If the Will names you as the Executor, you will apply for a Grant of Probate (or in Ontario, a Grant of Certificate of Administration with a Will).

(2) If the Will ‘does not’ name anyone as Executor or the person named as Executor is unable or unwilling to act, it will be necessary to apply for a Grant of Administration with Will Annexed (or in Ontario, a Grant of Certificate of Administration with a Will).

(3) If the deceased died without a Will, you will need to obtain a Grant of Administration (or in Ontario, a Grant of Certificate of Administration without a Will).

There are other grants for more complex situations, which may include replacing an acting Executor or Administrator, or recognizing a foreign Grant of Probate from another province or territory. It is prudent to seek legal assistance prior to making applications to a Court.

Most provinces will not issue grants of administration to people who reside outside the province. In provinces where grants of administration are made or made to people who reside outside the province, the court may require some form of security or bond to be placed by the person assuming the role of administrator. These requirements vary from province to province and a TEP should be consulted regarding the rules specific to the applicable jurisdiction.

Do I need a lawyer to probate a Will?

Estates vary substantially in terms of size and complexity. If the Executor is required to obtain the Grant of Probate, the application process can be very complex. Although most Probate applications do not require a formal appearance in Court, there are a number of legal forms that must be filled out correctly. Determining which forms are necessary, completing them accurately, and enclosing appropriate supporting documentation can be daunting. Legal assistance is recommended, although may not required for simple estates.

If an Estate is contested by a beneficiary or involves administration outside the scope of what is discussed in this overview, Executors should strongly consider seeking formal legal advice.

Is it necessary to probate a Will?

Not all Estates will require the Will to be Probated. The Grant of Probate will provide legal authority to an Executor(s) to handle any assets held by an Estate. Generally, any land or real estate held in an Estate may only be handled by and Executor who has received Probate. If the deceased died with bank accounts in excess of $25,000, the bank may only release those accounts to the Executor if Probate was issued by the Court. For Estates with assets of lessor value, banks may accept other forms of indemnity to handle those assets rather than obtaining the Grant of Probate.