Wealth is everyone’s dream, but wealth brings a lot of administrative work. Earning wealth is more straightforward than preserving it, as you must maintain it from the tax claws of the Canada Revenue Agency (CRA) and creditors. You may know the complexities of your finances, but what happens when you pass away? Many individuals open a trust to efficiently preserve and grow their wealth tax, and some write a Will. In either case, the onus falls on the estate executor to carry out all the work, from collecting and distributing assets and liabilities to funeral rights.

The Role of an Executor in Managing an Estate

The executor wears several hats of an accountant, lawyer, financial planner, debt negotiator, and asset manager. Hence, when you choose an executor, look for someone you trust (friend, family, or professional). Given the complexities involved, even if you choose a friend or family, they might seek professional help to carry out the responsibilities of an estate executor.

What are the duties of an executor, and why is a professional a better option if your estate is complex?

The executor’s job begins when the owner of the estate passes away. The executor then acts on the owner’s behalf to manage his/her assets and execute what is written in the will.

Find the Will and Apply for Probate

The first step is to find the latest Will of the deceased and apply for probate in the court to get a Certificate of Appointment of Estate Trustee. The probate gives the Will its legal validity and the executor the authority to perform all tasks to close the deceased’s accounts and distribute the assets. The estate has to pay probate fees on the value of the assets, which are subject to probate.

Communicate with Beneficiaries

Once the Will is found, the executor has to identify beneficiaries of the estate and send in writing (email or physical copy) a notice of his or her intention to probate the Will along with a copy of the Will. The executor must also inform the beneficiaries of the status of executing the Will and present detailed accounting. We will get to the accounting part later.

Identify and Value the Estate and Liabilities

From here begins the most tedious part for the executor. An estate is a person’s lifetime earnings dispersed in various forms. One may have a real estate property, boat, jewelry, or bank account in and outside Canada. Then there are retirement accounts, government pensions, salary, insurance, and other investments like Tax-Free Savings Accounts (TFSA) and interest in business. The executor has to assemble all these income sources in liquid and non-liquid form and ascertain the estate’s value.

The executor has to identify and account for all the secured and unsecured liabilities. It includes mortgages, personal loans, pending taxes, credit cards, and other related agreements.

The executor will identify assets and liabilities, prepare an account, and develop a strategy to pay the debts while preserving assets for beneficiaries. This requires financial planning as the executor has to prioritize debts that may entail penalties and have sufficient liquid assets to pay off these debts. The executor also has to negotiate with creditors and, if needed, sell illiquid assets to pay off liabilities. That also requires good negotiation and knowledge of taxes, as the sale of a property will attract capital gains tax.

Safeguarding the Assets 

Until all the liabilities are paid and assets are distributed to the beneficiaries, the executor is responsible for preserving the asset and its value. And, if possible, even enhance the value of the estate. The executor has to regularly inspect and maintain houses, cars, boats, and other tangible assets and ensure they have adequate insurance policies. In the case of investments like stocks, bonds, and other such accounts, the executor has to wear the financial planner’s hat and optimally manage these investments until they are transferred to beneficiaries.

Closing the Accounts

Once the executor pays off all the liabilities and taxes of the deceased, he or she has to close all accounts and get a certificate that proves there is no outstanding liability. If the executor fails to obtain such certificates, they must bear that liability from their pocket. Here is a small checklist of the most common accounts the executor may have to close for the deceased:

• Close accounts or a safe deposit box in banks, trust companies, or other financial institutions. Cancel credit cards and other subscriptions.
• Cancel government-issued cards such as the person’s driver’s license, passport, and health card.
• Empty and clean the house, change the locks, and, if needed, sell the property either to pay liabilities or because the Will says so.
• Close digital assets such as social and digital accounts like email, Linkedin, and Facebook to ensure they are not vulnerable to misuse.

Distribution of Assets

Whatever is left of the estate after paying liabilities and taxes is distributed to beneficiaries per the instructions stated in the Will. The Will should state the proportion of distribution if there is more than one beneficiary and even specify how to distribute assets if the beneficiary passes away before the estate owner. The executor has the authority to distribute these assets.

Maintaining Accounts of the Estate Execution

The executor has to properly account for all the receivables and payables and make them available to beneficiaries. He or she also has to safely keep invoices of all the expenses and certificates of liabilities paid off and any other supporting document to prove the transaction occurred. If the beneficiary is unsatisfied, they can send the executor’s accounts for review in the Court. And if there is anything that the executor cannot account for, he will have to bear the loss from his pocket.

The executor takes the risk and performs the above tasks in return for a fee, even if he is a friend or family. The fee could be a percentage of the estate value or an amount discussed before.  

Contact McCay Duff LLP in Ottawa to Help You Manage and Execute Your Estate

The executor has to be a trustworthy person who can navigate through all legal and financial dealings smoothly. A professional accountant is better positioned to handle the administrative and accounting complexities of the estate. At McCay Duff LLP, our accountants and tax consultants can provide services such as managing the estate and executing the Will. To learn more about how McCay Duff LLP can provide you with the best accounting and tax expertise, contact us online, or by telephone at 613-236-2367 or toll-free at 1-800-267-6551.