Being named an executor is both an honour and comes with responsibilities (and possible risks). It’s important to understand what it means and your role.
Once you reach the doing part of being an executor, depending on your relationship with the person who died, it can also be an emotional time filled with loss and grief.
If you’re able, prior to the death of a loved one for which you’re the executor, try to wrap your head around your responsibilities to ensure you’re not scrambling or taking action with a foggy mind and heavy heart (these feelings are likely to still be present and having reviewed the documents before might help ease some of the potential load of the responsibility).
What is an executor?
“An estate representative administers a deceased person’s estate. [An] estate includes what [is owned] (assets) and [is owed] (liabilities).” Other common terms are: “estate trustee, executor, liquidator and administrator.”
When you accept the role, you will “be responsible for carrying out the instructions written in the will after that person dies.” That said, even “if you’re named in the will, you don’t have to accept the responsibility of being an estate representative. If you don’t accept, the responsibility will be given to an alternate estate representative if one is named in the will.” If no alternate representative has been named, the “responsibility will be determined based on provincial or territorial law.”
“An executor’s role also includes safeguarding the deceased's assets, which can include everything from making sure property bills and insurance are being paid on time, to ensuring a farmer's livestock is being fed.”
Your primary focus is to ensure the wishes stated in the deceased person’s will are fulfilled. Being named an executor is an honour, signifying the testator trusts you to carry out their final wishes and see to their legacy. However, it is important you evaluate the estate in question, consider the time commitment, task and responsibilities, and your personal situation before committing—It’s a bigger decision than most realize.
Being Named An Executor: What It Means & Your Role
Before you accept the role, it’s important to fully understand and evaluate the following considerations in relation to your personal situation and capacity:
- The complexities of the estate
- The time commitment
- The immediate responsibilities
- Duties after the testor dies
- How you will be paid
- Executors are “entitled to compensation equal to five percent (5%) of the total value of the estate. This is an approximation and subject to adjustment (up or down) based on a number of factors by a Court. [It] may be reduced by any fees paid by the executor(s) to third parties for services that the executor is normally expected to perform.”
The Government of Canada lists the below as the “responsibilities of an estate representative:
- Making funeral and burial arrangements
- Locating the deceased’s final will
- Paying estate fees
- Locating and notifying all beneficiaries named in the will or under the law if there is no will
- Getting an appraisal for the value of the estate
- Applying to have the will validated by a court (probate)
- Completing a final tax return for the deceased, as well as any returns required for the estate
- Putting a notice out for creditors notifying them that the person has died
- Paying all debts owing by the deceased
- Dividing the estate as outlined in the will (or legislation, if there is no will)
- Providing financial information about the estate to the beneficiaries
When settling an estate, [it’s important] to consult a legal advisor to answer any questions or concerns you may have. You may also want to ask your financial institution if it has any information available to help you settle the estate.”
“Most financial and other institutions won’t deal with you until you have a probated Will , and that takes some time, so the process needs to start as quickly as possible.”
- Step 1: you will need to “locate a copy of the deceased's most recent Will.”
- Step 2: once you’ve located the Will, “you’ll likely be required to obtain ‘probate.’ Probate is the formal process of confirming the Will and confirming the authority of the executor(s). However, the probate process is not applicable in the province of Québec.”
- To probate the will, “you take the will to court to confirm it's legally valid. If you live in Quebec, a notary may also be able to probate some types of wills.”
- You can read more about probate going digital in Ontario in this past blog post.
Following the loss of a loved one, we are called to decide on a myriad of different decisions—all while grieving. The tough part is that these decisions must be made in a short timeframe. One of the most important and necessary decisions is: what will be done with the remains?
In some cases, your loved one may have already made the decision around what they would like done to their remains. In other cases, you may have to make the decision around how to respectfully handle your loved one’s remains, wanting to honour their values and preferences.
You can visit the Eirene blog and scroll down the ‘Funeral Planning’ for a collection of helpful information. As a first step, you may want to consider whether cremation or a funeral is the right choice or whether to scatter, bury or keep the ashes.
Finding, Valuing, Liquidating and Distributing Assets
Examples of assets may include:
- Cash, or money in a bank account
- Real estate
- Registered plans, like RRSPs and TFSAs
- Investments, like stocks, bonds or mutual funds
- Personal items and keepsakes
“Executors also need to apply for and collect the Canada Pension Plan (CPP) or Québec Pension Plan (QPP) death benefit, or survivor's benefit, as well as apply for and collect life and other insurance benefits.”
Tracking Down Beneficiaries
It can be tricky to track folks down in our mobile society, and finding “the grandchildren” who aren’t named can also be a possible difficulty. Communication is also key—”For instance, it may take 24 months before the assets can be administered, but beneficiaries don't know that, which is why regular communication is important.”
A prudent executor will be sure to keep beneficiaries “updated on the status of the estate and eventual distribution of assets.”
The final step is distributing the assets.
Three rules of executor liability for debts of an estate:
An executor is not automatically liable for the debts of the deceased just because they are the executor. When you step into the role of the executor of an estate, you do not automatically become personally liable for all of the debts of the deceased. Therefore, do not get hounded into believing that you are liable for the debts of the deceased – you are not. But see Rule 3 for how you can become personally liable if you do not handle the deceased’s debts properly.
The executor is personally liable for all debts that the executor incurs after the death of the deceased. For instance, if the executor hires movers, accountants, or lawyers to assist with the estate, then the executor is responsible for ensuring that those debts are paid.
An executor is liable for is ensuring that the debts of the deceased are handled properly; in other words, it is the duty of the executor to ensure that all of the creditors of the estate are treated equitably, and if possible, are all paid in full from the estate. An executor will be liable if one creditor receives more (as a % of their debt) than another creditor. Also, an executor will be held personally liable if the executor distributes any of the estate to beneficiaries and without first ensuring that all creditors are paid in full.
Paying Outstanding Bills
When a financial institution is advised of a client’s death, the deceased’s account(s) will be frozen. This means that no cheques or cash can be drawn from the deceased’s account except for certain expenses. These expenses vary between financial institutions, so you should confirm what the deceased’s institution will allow, but generally, these include funeral expenses, probate taxes, property taxes, income taxes, public utility bills and car and house insurance payments. In Quebec, only the following expenses can be paid out of the deceased’s account: funeral expenses, court fees (for non-notarial form Wills), legal costs, and, if necessary, public utility bills and debts in urgent need of payment. As the executor, you can make arrangements with the bank to have these expenses paid out of the deceased’s personal deposit account.
You can visit a previous blog post here to learn more about death and debts.
“In Canada, there is no inheritance tax. Instead, the Canada Revenue Agency (CRA) treats the estate as a sale, unless the estate is inherited by the surviving spouse or common-law partner, where certain exceptions are possible.”
Meaning the “estate pays the taxes owed to the government, rather than the beneficiaries paying. By the time the estate is settled, the beneficiary should not have to worry about taxes.”
- When a person dies, their legal representative, the executor, has to file a deceased tax return to the CRA. The due date of this return depends on the date the person died. Any taxes owing from this tax return are taken from the estate before it can be settled (dispersed).
- Once the executor has settled the estate, they must ask the CRA for a Clearance Certificate which confirms all income taxes have been paid or that the CRA has accepted security for the payment. As a legal representative, it is important to get this clearance certificate before distributing any property.
- If you do not get a certificate, you can be held personally liable for any amount(s) the deceased owes.
Moving Through the Steps
When a loved one passes, there is a lot to do.
It can quickly feel overwhelming.
You might also be reeling, you might still be in shock, even if this death was expected (it doesn't make it any less painful), you might be feeling any number of things. There is no one way to grieve, no one reaction that’s recognizable for all, and the list of to-dos can feel like it’s piling up and quickly, especially as an executor.
While we certainly can’t take away the pain, we can provide support and resources to help you navigate an already challenging time. We hope this post helps ease the burden, even if only a little (we also have a post available here around what needs to be done in the first 24 hours following a death) and brings some guidance as to what needs to be considered.
Give yourself the space and time you need as you contemplate taking on the important (and legal) task of honouring your loved one’s final wishes as their executor. And if you do move forward with saying yes, be sure to also take good care of yourself once the person passes. While there is a lot to do, your well-being and grief remain a part of the process.
To learn more and access additional resources, visit www.eirene.ca.
DISCLAIMER: Eirene strives to provide equal, unbiased information for all its readers and customers. That being said, we are not a financial or legal institution or provider and urge you to seek out expert advice before considering any of the below.