ENOUGH ALREADY!

MISTAKE #46

Failing to keep the estate administration moving ahead in a timely manner

BEING AN EXECUTOR MEANS hanging in there for the long haul, and some estates will require you to be patient and persistent over many months. It’s a mistake to let an estate drag along slowly, a mistake that at the very least will result in the beneficiaries getting anxious and calling or emailing you frequently.

As we recommended for the early stages of an estate, once you are in the midst of the administration it is wise to have a plan of attack for everything that needs to be done. For clarity of thought, you may want to think of the work you need to do as three separate tasks: preparing to distribute, distributing and winding up.

1. preparing the estate for distribution

Now is when the executor works with the assets and liabilities to get the estate into a state where it can be distributed. It is here that you will be speaking with your lawyer about whether it is necessary to apply to the court for formal validation of the will in order to take these steps.

The shorthand term of getting probate may be familiar to you as the name for the court-validation process; the actual terminology varies among the provinces, however. In Ontario, for example, it is referred to as applying for and obtaining a certificate of appointment of estate trustee.

Whatever term is used in the deceased’s province, the probate process is required whenever third parties advise the estate that they cannot transfer the deceased’s assets without that court order. The reason third parties may take this position is because of the possibility of another will or because there are claimants to the estate that are not included in the will appropriately. Accordingly, a bank, for example, will not transfer a large account into an estate account unless its own compliance policy is met, and that policy may require the probate process. Speak to each financial services company where the deceased held accounts to determine its respective policies. The transfer of real estate always requires a probated will unless the real estate was held in joint tenancy.⁵

During this stage of an estate, you will also be:

• making sure that all of the deceased’s debts are paid (likely the estate lawyer will assist you in this by publishing on behalf of the estate an announcement called a “notice to creditors” in the local newspaper);

• bringing the tax returns up to date and preparing and filing the T1 return and clearance certificate by no later than April 30th of the year following the year of death or six months from the date of death; and

• reviewing the investments for their appropriateness and perhaps selling them if the estate, for example, needs cash to make an interim distribution to the estate beneficiaries.

2. distribute

The stages of an estate do not necessarily all run sequentially. For example, you may decide to carry out the distribution of the personal effects in the first few months after the death. On the other hand, the distribution of the liquidated value of the estate (often called the residue of the estate, which is, practically speaking, the cash that accumulates in the estate account as the assets are sold) will take longer as you work your way through the taxes and the payments of liabilities.

However, one of the good-faith steps that you can take with the beneficiaries is to pay an interim distribution once you have paid all of the estate’s debts and you have a very clear idea of how much will be required for taxes. Accordingly, at the time of filing the final tax return and requesting Canada Revenue Agency to issue a clearance certificate, discuss with the estate lawyer how much you can confidently pay out to the beneficiaries at this stage.

3. wind up

Once you have received the clearance certificate, the estate is ready to make the final distributions to the beneficiaries, either paid outright to them or into trusts set up in accordance with the will’s terms. At this point, you will provide the beneficiaries with a final summary of the estate’s assets, liabilities, expenses, interim distributions made, any compensation you are proposing to take, and the proposed remaining distributions, as well as a release, releasing you from your role as the executor. On receiving back all of the releases, you are ready to pay the final distributions and close the estate’s bank account.

summary

The distribution and winding-up of an estate can be overwhelming and a cookie-cutter approach or adherence to a task list may simply not cover everything in each estate. The reason for this is also why trust officers really enjoy their work: every person’s life is unique, so every estate is unique. Stay sharp throughout the estate administration and on guard for unique aspects of the deceased’s life, will or estate that may be a little different than all the checklists. If you are concerned about something, review it with your estate lawyer. It is better to be on the cautious side whenever you are acting in a fiduciary role.

points to take away

• In the preparing-for-distribution and distribution/wind up stages of an estate you will likely be working closely with the estate lawyer to obtain probate and work towards readying the estate for distribution.

• Ensure taxes and all of the estate liabilities are paid or accounted for (with a sufficient amount held back for outstanding taxes) before making an interim distribution.

• Keep the beneficiaries informed. If they don’t hear from you, they may assume the worst and think that you are either doing nothing or that there are big problems.

• Don’t procrastinate or delay. There is a lot to do when administering an estate and leaving the work unattended will raise the ire of the beneficiaries, making your work more difficult than it needs to be.