Estate Law Considerations: Executors Proceed Cautiously
By Lianne Macdonald.
Here’s What We’d Hope For
If we must die, we’d like:
- things to be organized and simple, so we can enjoy our final days with family or friends.
- our assets to transfer smoothly to our chosen family, friends, or charities.
- to save costs, if we can.
Probate Is Not Always Required
If your spouse survives you and is your primary beneficiary (or with a very simple estate), the transfer of your assets to your spouse can be easily achieved with proper planning. Minor legal assistance may be needed. The survivor spouse’s Will, Power of Attorney and Health Care Agreement may also need to be updated at this time, or new planning considered to efficiently pass the couple’s wealth to the next generation.
For the executor of a person who made their will at Beacon Law Centre, a free consultation is available to clarify the steps to follow.
When Probate Is Needed
When the last of two spouses dies (or with more complex estates) a BC Supreme Court Order, called a “Grant of Probate” (or “representation grant”), may be needed to handle the Estate. Here, the executors really should seek legal assistance in carrying out their responsibilities.
Liability Concerns Arise
Probate involves a variety of complex laws. While your executor may be bright and confident there is a high risk of personal liability if the estate incurs financial losses (even if mistakes are made innocently). Common risky behaviours exhibited by lay executors include:
- Starting to deal with the assets and then deciding not to act as executor.
- Failure to act impartially in the distribution of personal items.
- Failure to identify all the assets.
- Failure to identify (or pay) a liability before distributing funds to beneficiaries.
- Keeping risky or unauthorized investments, or failure to adequately insure property.
- Failure to include the proper parties in the Probate process.
- Failure to adhere to legally required time limits on distribution.
- Distributing without appropriate waivers or releases from beneficiaries.
- Failure to keep proper records and account adequately to beneficiaries or creditors.
- Errors in the handling of income tax matters.
- Paying out Executor fees without the proper approvals.
Often, executors who are family or friends don’t discover that their handling of the matter was problematic until it is too late.
Family Strife Problems
When Probate is necessary, it will take several months to administer the Estate, even when the Executor is advised of all of the steps and is extremely efficient. Beneficiaries are often unaware or not sympathetic about the work required, and can be critical of the executor and the timeline and costs of proper administration. For this reason, some will-makers choose a friend or a professional advisor as executor in an attempt to preserve the relationships between their children. Others encourage their family member executors to engage an estate lawyer, to help them to avoid errors and give the others a further assurance that the estate is being well handled. We encourage our clients to think critically about their choice of executor.
Choice of Executor
The role of executor is not for the faint of heart, nor for the ’emotional one’ in the family. The most successful executors are objective and careful. They don’t let paperwork accumulate on the desk corner. They figure out what work to delegate, and what work to do themselves. They are not baited by petty displays or poor behavior, and will patiently and calmly rise above unwarranted criticism. So, look for these characteristics in choosing your executor.
When Probate is involved, the person who acts as executor will nearly always decide to charge an executor fee because so much work is required. The fee (payable from your assets and regardless of who acts as executor) is usually in the range of 2% to 3.5% of the value of the estate assets. The maximum allowed (for disputed or complex estates, and also for small estates) is 5% of the value of the estate assets.
Too much emphasis is placed on avoiding or minimizing executor fees. Given the work involved, some kind of compensation is appropriate. The law has checks-and-balances to ensure the amount is reasonable. It is a much lower amount than the real estate commission payable when a house is sold, even though the executor’s duties often last for one or more years. Rather than worry about an executor fee — worry about choosing the right executor!
Opportunities and Action Steps
We advise to keep your will and other estate planning documents up to date, and to encourage your beneficiaries to do the same. Also, if your spouse or main beneficiary dies, update your documents and explore new ways to provide for your beneficiaries. The efficient passage of wealth from one generation to the next is a matter of being well informed and well organized.
I wanted to say thank you for your help with making out our wills. We have not needed legal advice until now so I was not looking forward to searching for a lawyer that I trust. You made the whole process easy to understand and my wife and I feel that, with your guidance, we were able to make the proper decisions in regards to our children’s future. I would have no problem recommending you as you are friendly, professional, you listened to our needs, and you are affordable. Thank you for helping us know that our children will be safe and secure if we aren’t around to take care of them.
This is just a quick note to let you know how much we appreciated your personal service in preparing a power of attorney for my mother last month. As you know, Mom is quite challenged with the English language and she needs a lot of clarifications. Your draft given to her ahead of time, your use of regular language rather than legalese and your patience with her in your office meant so much to her. She was just as much at ease as when she conducts business in her native French language. So, once again, many thanks for the human touch.
I can’t say enough about our satisfaction with Lianne Macdonald. She was extremely patient and understanding and helped us attain our wishes with our will. She gave legal advice but helped us to fulfill our wishes in a way that worked for us.
Del was patient, considerate, listened to my issues and treated me with professionalism and respect. Del put in extra thought in drawing up my will by thinking through the legal consequences of different options.