The Role of the Executor
The responsibilities of an executor start within 24 hours of someone’s passing and can continue for months (for a straightforward estate), to years (for more complex estates involving real estate, out-of-country assets or the will is contested). Here is a step-by-step guide to help you know where to begin and what to do next:
- Locate the will
This can present some challenges, particularly if you don’t know where the will is kept. If you can’t find it, you can approach the deceased’s lawyer, but if some time has passed, many law firms don’t keep them on file.
Many people keep their will in a safety deposit box at the bank, and access to it will vary depending on the institution. Once you provide the bank with evidence that the person has passed away (such as a death certificate); the key to the safety deposit box, and your ID to prove who you are, the bank can do an inventory of the contents, and tell you if the will is in there. You cannot personally access the contents.
- Plan the funeral
Get in touch with the funeral home whose staff can guide you through arrangements for burial or cremation. Hopefully the deceased has been clear about his or her wishes, including their preference of service or memorial to guide you in your decisions.
The funeral director will likely need to see a copy of the will to confirm who has authorization to make the funeral arrangements, and information to register the death:
- Full name and name at birth
- Date and place of birth
- Physical address
- Marital status
- Name of spouse (and maiden name)
- Father's name and place of birth
- Mother's name (and maiden name) and place of birth
- Occupation and type of business
- Name, address and phone number of person responsible for making arrangements.
The home will issue a death certificate or a Funeral Director’s Statement of Death. Be sure to ask for multiple copies, which you will need to forward to financial institutions, insurers, and government agencies, as you settle the estate. (See below).
3. Inform appropriate parties
To protect the deceased person’s name from identity theft, organizations such as:
- Banks, lending institutions, and credit card companies
- Legal and accounting firms
- Government agencies - Canada Pension Plan, Old Age Security, Motor Vehicles, Veterans’ Affairs, Medical Service Plans, etc.
- Insurers
- Employers about payroll and benefits
- Utility companies
- Email addresses, online memberships and social media
All will require a copy of the death certificate or the Funeral Director’s Statement of Death copy, and a copy of the probated will when it’s available.
Note: Once a bank is informed, all accounts only in the deceased’s name will be frozen, and their credit cards cancelled. Those with joint accounts can still access their funds.
- Take inventory
Make a list of the assets and obligations of the deceased, for the lawyer dealing with probate of the will, and the accounting firm doing the final tax return.
One of the best gifts you can give your heirs is to be organized with a detailed list of all your financial affairs: your assets and their original costs, insurance policies, bank accounts, loans, real estate, etc. - and remember to keep it up to date.
- Probate the will
Probate is the process of proving, in court, that a deceased person’s will is the final valid will and testament, the assets and obligations are true and correct, and the executor is authorized to administer the terms of the will. Depending on the jurisdiction, this process can take anywhere from a few days to a few months.
Financial institutions and insurance companies need a certified copy of the probated will to ensure they are authorized to release any funds to appropriate people. Remember to ask for enough copies for all the organizations that require a copy for their files.
Once the probate documents are received, the executor can open an estate account, into which monies from the disposal of the deceased’s worldly goods are deposited – and then distributed to heirs, once the estate is settled. To set up the account, the bank will need the complete names and addresses of all beneficiaries, as well as their social insurance numbers. In a future blog, we’ll take a more in-depth look at the probate process.
- Prepare the final tax return
The executor is responsible to the Canada Revenue Agency (CRA) to make sure the taxes of the deceased are paid, or will be personally liable. To make sure the return is done correctly we recommend that an accounting firm help to prepare the taxes, and to file the return. The executor then arranges for payment of any taxes owed.
If the estate earns any income and depending on the types of assets (such as real estate holdings), other types of final returns, such as a Rights and Things, and Trust income tax return, may also be required. If applicable, estate or trust returns are filed after the terminal and/or Rights and Things returns.
At this point, the executor typically provides a list of assets, taxes triggered and paid, and liabilities paid out (such as credit card debt or mortgages), to the beneficiaries for sign off, before any distribution is done. This ensures monies are not paid out before any dispute is settled.
- Distribute the assets
Depending on the size of the estate and the amount of taxes owed, a partial distribution of assets to the beneficiaries can be done. Some monies should be held, however, just in case further taxes are owed (since an executor is personally liable for any unpaid taxes). Once CRA has issued a final Notice of Assessment, the executor can apply for a Clearance Certificate, and complete the distribution.
A Plan of Distribution is then filed with CRA, and the estate is wound up.
The bottom line
If you are asked to be an executor, it’s important to know that this is a serious social and a legal responsibility. If you agree, ask for a copy of the will when it is prepared, make sure you know where all documentation is kept, and talk to your friend or family member about their wishes.
If you are choosing an executor pick someone who is capable, trustworthy, and able to fulfill his or her responsibilities.
Need help?
There’s no doubt that the duties and responsibilities of an executor can be complex and overwhelming – and often take much longer than anticipated. Some tasks can be delegated to other family members, and there are professionals – such as lawyers and trustees who can help. Both usually charge a percentage of the estate, so always ask for an estimate before you begin.
At Pivotal CPA we are experienced in working closely with executors and lawyers to prepare the list of asset values for probate documents and accounting for beneficiaries, filing income tax returns, and applying for the clearance certificate. We can also help to manage money, pay bills, and disburse funds. Most importantly, we can help people with estate planning, to ensure their affairs are in order before they die. Please let us know how we can help you.