While it may be an honour to be an executor of an estate, it is also a duty which may require many hours of work, full of responsibilities and subject to potential liabilities. The executor needs to balance legal issues, family issues and tax issues. Proper professional advice is required before undertaking these duties.
The executor is responsible for funeral arrangements unless they have been pre-arranged. If the deceased has left instructions or wishes without a pre-arranged funeral, the executor is not obligated to follow those instructions, in some cases should not follow those instructions and in fact may be liable to the estate if the funeral is unreasonable and adversely affects the beneficiaries’ entitlements. The funeral must be reasonable with respect to the deceased station in life. You must also note that grave markers are not an expense of the estate, but of the family.
Control of Assets
It is the executor’s responsibility to locate and take control of and secure the deceased assets. These assets will include real estate, jewelry, investments, collectibles, furniture and fixtures. Proper storage, insurance and other payments such as utilities must be obtained or maintained. Important papers including the will, tax returns, banking records, investment records, insurance policies and business records need to be located and secured as well. Credit cards and subscriptions should be cancelled.
Inventory, value and account for assets
All assets should be inventoried and in some cases photographed for the record. An estate bank account should be established. Valuations for items such as real estate, collectibles, vehicles and valuables should be obtained.
Will and Probate
The will needs to be located and probated. It is probate which gives you authority to act on behalf of the estate.
Liabilities of the Deceased
Payment of funeral expenses should be paid as soon as possible. Business debts, loans, credit cards, utilities, service providers, leases and other debts should all be confirmed and paid.
All previous income tax returns should be reviewed and confirmed as filed, assessed and paid to up to date. If returns have not been filed, prior year returns should be completed and filed. Final return and/or optional returns should be filed and any taxes owing paid. An estate return if necessary should also be filed. Once assessed, a clearance certificate should be requested immediately.
Account to Beneficiaries
An accounting of all funds and assets of the deceased should be made to the beneficiaries including executor fees, if any.
Distribution of Assets
After obtaining approvals and releases from the beneficiaries on the accounting of the estate, payment can be made to the beneficiaries subject to obtaining clearance from Canada Revenue Agency.
While many feel it is an honour and/or a personal obligation to be the executor of an estate, most do not realize the amount of work involved. Some Wills will establish a fee for an executor while others do not address the subject. Laws and established practices vary by province, but in most cases, an executor is allowed to take a reasonable fee for services rendered. Professional consultation is recommended before accepting the role of executor of an estate.
Income taxes are only part of being an executor. CRA produces both an information sheet RC4111 What to do following a death and a guide T4011 Preparing Returns for Deceased Persons to assist in tax matters following the death of an individual.