BACK SEAT DRIVING IS A SNAP!

MISTAKE #50

Being a belligerent beneficiary

IN WRITING ABOUT COMMON MISTAKES in estate administration up to this point in the book, we’ve probably been a bit like schoolmarms in our admonishments to executors: act quickly, communicate with the beneficiaries, expect the unexpected and file taxes! If you are an executor you are likely quite weary of it all by now, so here we are putting the shoe on the other foot and addressing the mistake of being a mean-spirited or overly impatient beneficiary.

starting off on the right foot

As a beneficiary, start off on a positive note with the executor. Make it clear that you appreciate the role he or she is taking on and that you will do whatever you can to assist. If the executor is someone you know well, perhaps a sibling or an uncle, try to set aside past history that isn’t positive. Resolve to come to the end of the estate administration with your relationship at least as good as it was at the time of death. If there are tasks that you believe should be getting done, offer to help.

Clarifying expectations (yours, the other beneficiaries and the executor’s) will help everyone. The law allows an executor about a year, generally speaking, from the date of death to administer the estate and transfer the assets to the beneficiaries. Although this sounds like a long time, the debts and taxes also need to be paid before the distributions can be made, so the year usually flies by. Meeting with the executor early in the 12-month period after the death to discuss his or her approximate timetable will take away those nagging questions about what is happening and why it is “taking so long.”

Once you have agreed on an approximate timetable of events, such as receiving the will, applying to the court for probate and so on, promise the executor (and keep your promise!) that you won’t be in touch with questions about what is going on. By showing this respect to the executor, you increase the likelihood of the executor letting you know when the house sale is being delayed for some reason or the court is taking longer to issue the probate document than expected.

Trust officers working for a trust company that has been appointed as an executor or co-executor do their very best to keep the lines of communication open with the beneficiaries of an estate. Privately they will tell you that sometimes beneficiaries don’t listen very well to their explanations about delays. For example, the executor can send a transfer form to each bank that holds funds in the deceased’s name—and then those companies can take weeks to respond. Later, the executor can file the application for probate, or whatever the term is in the applicable province—and then the court takes four months to issue the certificate. You get the picture. Agree with the executor on a reasonable schedule and then let the executor do his, her or their work.

Another tip is to consider speaking on your own behalf to the executor and not delegating this task to your spouse. We heard this tip several times from professional trust officers, who typically end up explaining everything twice when a beneficiary, for whatever reason, asks them to work with his or her spouse but then later wants clarification. Always remember that you are the beneficiary of the estate, not your husband or wife, so at the time the estate is wound up, you are going to be asked to sign a release approving its administration. By asking the executor to work with your spouse or anyone else, instead of you, you may be requiring the executor to explain things repetitively (especially if other beneficiaries make the same request), taking the executor away from doing other estate-related work.

when things go wrong . . .

So far everything we have suggested in this mistake assumes that the executor is well-intentioned, hard-working and wants to do a good job. Of course there are situations where a beneficiary will suspect early on that the estate will either be handled very slowly or not at all, or that it will be administered ineffectively and perhaps even dishonestly. If this happens, hire a lawyer experienced in estate matters who can review the will and the situation, as you understand it to be, and then advise you on the best approach. Just being alerted to the fact that you have retained counsel to represent you may be all that is required to motivate the executor to act. (On the other hand, the lawyer may tell you to cool your jets).

Our final tip to beneficiaries is to get advice on the best way to receive your inheritance, from both a tax perspective and that of family law. In most provinces, an inheritance is not included in the assets that are divided upon a separation as long as it has been kept separate from the marital assets. Even if your relationship is sound, act from an informed position. As one experienced estate planner put it, “It’s great if beneficiaries use their inheritances to pay off the mortgage, but they should at least know what they are doing when they do that.”

points to take away

• As a beneficiary, do your best to support and assist the executor and work towards establishing a reasonable timetable for the estate’s key steps.

• On the other hand, seek experienced advice if your intuition tells you that the estate is being mishandled. An executor is in a fiduciary role and all of the dealings with the estate must be in the best interests of the estate and its beneficiaries, and must be handled honestly, ethically and in good faith. It may be impossible to return the estate to its original status if the executor is allowed to act inappropriately for a period of time.

• Seek legal (tax- and family-law-related) advice before you receive your inheritance.