You can’t help but feel honoured when you’re named an executor of the estate of a family member or friend. It’s a sign that you’re trusted and respected.
When the time comes, however, experts say that sentiment will be tempered by the task at hand – a pile of work.
Not only will administering the estate take at least a year – more likely 18 to 24 months or longer if the estate is particularly complex – but the work will be done during a period of emotional turmoil – both in grieving for the deceased and in navigating family tensions over how the estate is divided.
On top of that, experts say, executors are financially liable for their mistakes and are increasingly being held to account both by beneficiaries and by the courts.
The executor’s job is to gather up all the assets that the deceased owned, pay off his/her debts and ultimately distribute what’s left in the proportions as set out in the will, says Leanne Kaufman, the Toronto-based vice-president of the Professional Practice Group at RBC Management and author of The Executor’s Handbook.
Along the way, she says, the executor is responsible for a number of administrative tasks, everything from cancelling a health card to dealing with “the whole new world” of digital assets, from financial dealings to social-networking pages.
RBC, in putting together guides for executors, identified 70 such tasks for which an executor of an average estate would be responsible, Ms. Kaufman says. Even the simplest of them require letters or several phone calls, she says.
Lynne Butler, the St. John’s-based senior will and estate planner for Scotia Private Client Group and author of four books including Estate Planning Through Family Meetings, says just getting a tax clearance certificate from the Canada Revenue Agency can involve a six-month wait. At the same time, “you’re trying to keep the beneficiaries happy. You’re doing all this work but you’re under constant pressure from everyone saying, ‘Where’s my money?’ ‘You sold the house for too little.’ ‘You gave away stuff you weren’t supposed to.’ It’s just constant.”
The more complicated the estate, the harder the work. Executors may be responsible for selling or winding down businesses or dealing with foreign properties, with all the rules and red tape that involves. Even when things appear straightforward, they can get complicated. Ian Hull, a Toronto lawyer who specializes in contentious estate litigations, cites the example of an executor who takes over a piece of land that turns out to be contaminated. “You’re looking at just a tremendous amount of effort and work that has to be undertaken at a very sophisticated level to transfer that property,” he says.
It is those kinds of decisions by executors – selling properties, keeping a business going – that are often challenged by beneficiaries. “Any time where the executor has to exercise discretion is a possible point of challenge,” Ms. Kaufman says.
So, too, are errors in keeping track: “Did they do a lousy job accounting? Did they miss assets? What we call maladminister or just make mistakes that are problematic,” Mr. Hull says.
He adds that litigation over estate-related matters is increasing, because of demographics and the fact that beneficiaries are more knowledgeable and sophisticated than ever. Twenty years ago, beneficiaries didn’t even need to be told whom the executor of an estate was; today, the process is more transparent and beneficiaries are more likely to sue when things don’t go well.
And, Mr. Hull says, courts are a lot harder on executors than they used to be. “Certainly the case law seems to be imposing costs on executors now in situations where they never would before if they made a mistake.
“If you do mess up as an executor, it can be financially ruinous.”
These considerations, the experts agree, mean that people should take great care in whom they choose as an executor, and prospective executors should consider very carefully if they want to take on the role.
In choosing your executors, Ms. Kaufman says, you need to consider both the business and emotional sides. “Who is it that’s best equipped to do what you want them to do? And use the required judgment and skills you expect in the execution of your estate.”
If your estate is complicated, with, for example, a business, Ms. Butler says you need to choose someone who will be able to run that business while it’s winding down or being prepared to be sold.
Equally important, however, is family harmony. If, say, you choose one child to be executor, how will your other children take it? If you name more than one child, will they be able work together? If you have two executors, Ms. Butler says, they must be in agreement for every decision, not an easy task for warring siblings.
Ms. Kaufman says it may be that placing the burden on a family member “isn’t the right choice at all. It may be that a family friend or a trusted adviser or a professional is really the better option.”
No matter whom you choose, Mr. Hull has a piece of advice: let the person know while you’re still alive and tell the beneficiaries whom you’ve chosen.
And if you’re going to be an executor? Get advice every step of the way, he says, and consider backstops such as insurance for executors or co-executorships with a professional at a trust company.
“Do whatever you can to manage the risk,” Mr. Hull says.