Estate Planning

Written by Dorothy Powell

The role of an executor

A close friend has just asked me to be his executor. Before I accept this appointment, can you tell me what it involves? I assume it is a relatively simple task.

This job can be simple or complex depending on the clarity of the Will and the Estate Plan. Of course the size of the estate has some bearing on the matter, but even large estates can be relatively simple to administer with a well thought out plan prior to the death.

Your job as executor is to administer the estate and carry out the wishes expressed in the Will. Here is a summary of the duties of an executor:

Finding and reviewing the most recent will and arranging the funeral.
Identifying the deceased’s assets and protecting them until final distribution.

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Preparing a detailed inventory of assets and liabilities, and determining the estate’s value.
Determining capital gains at the date of death, overseeing the preparation of a final tax return and requesting clearance certificates.
Arranging for probate of the Will, and if necessary settling all claims and debts.
Investing surplus cash and managing investments.
Distributing the assets to the beneficiaries along with a full accounting of the estate’s administration.

Simplifying your executor’s duties

You mentioned that a well thought out plan prior to one’s death could simplify the Executor’s duties. What does that involve?

The cornerstone upon which one’s estate plan rests is the Will. This must be properly prepared, regularly updated and easily obtained by the executor at the time of death.

Funeral arrangements can be made in advance or preferences discussed with both family and executor. In the case of minor children, suitable guardians can be appointed.

The plan should outline what you want to achieve as well as state how you want the estate to be distributed. All assets and liabilities should be listed including notes on joint ownerships and unusual circumstances. Having designated beneficiaries on certain assets such as RRSP’s allows those assets to be passed on directly rather than through the estate.

Preservation of the estate should be considered with regard to taxation and probate fees. To ensure that the estate has sufficient liquid assets to pay taxes and other liabilities, Life Insurance policies are often purchased. Charitable giving is one way in which you can leave a legacy and pay less in taxes. In some cases prior division of assets is advisable. Obtaining professional advice from an accountant or lawyer may prove to be well worth while.

Keeping one’s affairs current and important papers filed can ease the executor’s job as well as ensure that your estate is being handled according to your wishes.

Death without a Will

It sounds like the Will is pretty important. What happens if you die without one?

This is referred to as dying “intestate”, and your estate will then be distributed according to the intestacy laws in your province. The end result may not be what you would have chosen, particularly where there are minor children involved.

The absence of a Will can delay the distribution of your estate and incur unnecessary administration costs. This could add both inconvenience and financial burden to the family that is already struggling from the grief of the lost loved one.

Probate fees

You mentioned Probate Fees….what are they?

Assets distributed through an estate may require “probate”. This is a court process that confirms both the validity of the Will and that it is the “Last Will and Testament” of the deceased. As well, it confirms the authority of the Executor to administer and distribute the assets.

For providing this service, a fee is paid to the court out of the proceeds of the estate. The amount of the fee varies within provinces, either based on a percentage of the estate value or a flat fee or a combination of both.

Handling a family estate

My father passed away two months ago and I will inherit a sizeable estate. Do you have any advice for me as I wait for the settlement?

I still can’t believe that he is gone and I will soon be responsible for handling all of the possessions and money that he worked for his entire life! Quite frankly I feel my knowledge and experience is inadequate.

Acknowledging how you feel and seeking advice is an important first step. My suggestion is that you allow yourself as much time as you need to grieve and come to terms with the new position you find yourself in.

When you receive the inheritance, it may be wise to temporarily place it in a minimal risk savings vehicle such as a GIC or Money Market fund. That takes away any temptation to act impulsively and gives you the time you need to make responsible decisions about its future investment.

If your inheritance includes real estate, stocks, bonds, collectables, etc., you can carefully examine what you want to keep and what you want to liquidate. Some things may be kept for sentimental value while other assets might better be converted into cash. Inheriting a business fits into this category. Unless you have the necessary skills to carry on the business, it may be better to sell it as a going concern or to hire professional management.

Receiving an inheritance changes your personal financial situation and triggers the need to review your own estate plan. This should include the reassessment of your assets and liabilities, life insurance requirements, tax implications as well as the updating of your own will.

A qualified financial consultant can show you alternatives from which to develop a strategy for managing your newly acquired wealth.