Executor and beneficiary: Know your role

When a person passes away, there are several important duties to be performed in order to fully carry out their financial wishes. Simply having a will isn’t enough to make sure that an estate is divided according to an accurate depiction of the deceased’s instructions. An executor must carry out a number of responsibilities before the assets can be disbursed amongst beneficiaries of the will. Today, let’s take a look at the roles of executor and beneficiary in greater detail.

Executor
The role of executor comes with a great deal of responsibility. This is the individual tasked with administering an estate in accordance with all the applicable laws. While many people feel honoured to be named as executor, if they do not have prior administrative experience, it is necessary to work alongside a professional to avoid liabilities.

Some of the main responsibilities of the executor can be:

– Filing final income tax forms
– Distributing assets
– Establishing trusts
– Investing surplus cash until the estate is finalized
– Cancelling government benefits
– Transferring health, employee, or pension benefits
– Returning government issued ID cards
– Communicating with CRA and receiving the tax clearance certificate

– Timely and ongoing reporting to beneficiaries

Given the breadth of responsibilities, executors are entitled to compensation for their work. If there is more than one executor, it is expected that the fee is shared between them, not doubled or tripled to account for each executor. These fees are set by the Provincial Courts. Compensation is based on a number of factors, with fees broken down as follows (though generally, fees do not run as high as are recommended):

– 2.5% of income receipts
– 2.5% of income disbursements
– 2.5% of capital disbursements
– 2.5% of capital receipts
– 0.4% for care and maintenance per annum

The compensation received by the executor is taxed as income.

What if you don’t want to be an executor?
Individuals who have been named executor can renounce the position. But the renunciation must take place before the work has begun. An executor cannot begin the process and then decide to renounce. If an executor does begin and then is unable to complete their duties, they will need to apply to the court to be released in order to resign.

Beneficiary
Beneficiaries have a number of rights that they can advocate for as the estate is administered. Though they are not able to complete any of the tasks of the executor, in the event that the beneficiaries do not approve of the executor, they do have the right to object to their appointment.

In order for a beneficiary to object to the appointment of an executor, there must be proof that the executor will be unable to fulfill their duties. Proof of fraudulent activity in the past, for instance, is an excellent example of the type of evidence necessary.

Removing an existing executor is more difficult. In these cases, the beneficiary must prove evidence of misconduct. It is worth noting that executors are expected to act; to execute the will in a timely manner. If they are not taking action, they should resign. In the event that an executor is not performing, the beneficiary will need to take them to court. A lawyer will be able to force the executor to fulfill their duties.

The most common situations in which a matter like this is brought to court is one in which the executor has not:

– Applied for probate
– Sold real estate
– Distributed the estate
– Accounted to beneficiaries

Estate trustee during litigation (ETDL)
Though a dispute between the beneficiaries and the executor is not in itself grounds to remove the executor, it may make sense to appoint a third party as the “Estate Trustee During Litigation”. In this case, the ETDL is responsible for administering the estate during the dispute, but cannot ultimately distribute the estate.

The process for appointing an ETDL is much easier than to remove an executor. As we’ve discussed in a previous blog post, the ETDL performs a number of diverse functions, but perhaps the most important is to act as the intermediary, facilitating discussion between opposing parties to affect a settlement or find a cost-effective path forward. The ETDL is there to ensure that assets aren’t distributed until the matter comes to a full resolution.

Seeking professional support
Regardless of whether you find yourself acting as a beneficiary or an executor, it is undoubtedly advisable to seek the support of professionals. With so many responsibilities on both sides of the equation, it’s helpful to work with a team that understands of how to handle any bumps in the road- major or minor.

At Zeifmans, our Estates and Trusts team has built our level of expertise over decades of work administering estates of all sizes. And in the event that you require ETDL services, our team can help. Given our firm’s resources in tax, mergers and acquisitions, valuations, and accounting, our ETDL clients benefit from our expertise spanning a host of financial spheres.

To speak with us about your estate affairs, contact our team today.

Suggested supplemental insights:

How to minimize or defer taxation on your trust’s 21st anniversary

Foreign Trustee vs. Canadian Trustee: What’s right for you?

Building a legacy wealth plan: Strategic planning expert Jonah Bidner shares what you need to know