As promised in our last article, “Will you challenge the Will?“, this next article is about the often-challenging, and rewarding, role that executors play in upholding the testator’s (Will-maker’s) wishes. Being an executor is like being a fisherperson. So you’re wondering, what’s the connection here?

Having a game plan

Like fishing, being an executor requires a plan of action. In an estate, the plan is stated in the testator’s Will. It lays out who the captain is (executor), the property to be administered (what fish are biting), how to deal with the property, and who gets it (and sometimes who doesn’t).

Collecting and preserving

One of the executor’s primary duties is to collect and preserve the property. In this sense, it is the most similar to fishing.

The executor must research and inventory what the deceased owned, where the property is located, and secure it so that it can be eventually distributed according to the Will.

Community customs must be respected

Like fisherpersons, executors must follow the community’s norms and customs for their role.

Just as fisherpersons respect the community by displaying their catch to their peers, and selling it in a open market, executors must apply for the court’s approval of the Will (i.e. “probate”), and disclose to the public at large what the deceased’s Will says, what they owned, and who gets it.

As the Supreme Court of Canada discussed in the Barry Sherman Estate case, the legal requirement to prove the Will publicly, and to disclose the Estate assets, upholds the public’s confidence (and the testator’s) in the system’s integrity and reliability:

The [probate] certificates the Trustees sought from the court are issued under the seal of that court, thereby bearing the imprimatur of the court’s authority. The court’s decision, even if rendered in a non‑contentious setting, will have an impact on third parties, for example by establishing the testamentary paper that constitutes a valid will (see Otis v. Otis (2004), 7 E.T.R. (3d) 221 (Ont. S.C.), at paras. 23‑24). Contrary to what the Trustees argue, the matters in a probate file are not quintessentially private or fundamentally administrative. Obtaining a certificate of appointment of estate trustee in Ontario is a court proceeding and the fundamental rationale for openness — discouraging mischief and ensuring confidence in the administration of justice through transparency — applies to probate proceedings and thus to the transfer of property under court authority and other matters affected by that court action.

This process ensures that the deceased’s wishes receive a community-based declaration and recognition, and that anyone with a claim can come forward to make it, in the legal process.

Protecting the “catch” against interlopers

An executor, just like a fisherperson, is often faced with challenging attacks on the Estate (or the ‘catch’), including:

• Will challenges by beneficiaries or purported beneficiaries.
• Dependency claims (see more about dependent-relief claims here).
• Reversing transactions made during life (inter-vivos transactions).
• Life insurance claims.
• Claims against RRSPs, TFSA, and other designated-beneficiary assets.
• Interpretation issues (what does the Will say about that?).

Sometimes the job can indeed feel like defending the pile of fish from the roving seabirds, beach dogs, and relatives or romantic partners coming out of the woodwork, to snag a fish for themselves.

However, the executor must prove (or “propound”) the last Will, and face these challenges with courage, curiosity, and diplomacy.

This is no easy task. Proper advisors (ship’s Mates) such as a qualified lawyer and accountant, are crucial to the executor’s success in captaining the crew to a safe harbour where the catch can eventually be distributed (after the ‘harbour tax’ is paid, of course!).

Preparing the catch for sale

After all the claims and other legal issues are addressed, the fisherperson’s (and executor’s) task is then to prepare the catch (assets) to sell and distribute to their ultimate beneficiaries. This requires skill and finesse.

Just like fishing, the executor will need to take an account of all the assets and liabilities, pay creditors and suppliers, pay the tax authorities, and reconcile the finances of the operation in a financial statement.

This is done so that the beneficiaries and the courts know what property the deceased’s Estate held, how it has been expended to date, and what the beneficiaries will receive after the expenses are paid.

Before selling assets, it is wise to account to the beneficiaries and give them an opportunity to make claims or approve the plan of action. Ultimately, the beneficiaries must approve the executor’s financial accounting anyways, so this just makes things smoother.

Beneficiaries can demand an accounting at any stage, and the executor positively must provide one to the beneficiaries at least every two years in Alberta, pursuant to Surrogate Rule 97(2).

Before the executor can consider their conduct ‘approved’, they will need to get signed releases from each beneficiary, for each accounting period during their administration of the Estate.

Typically, executors are best advised to do interim accountings, such as:

1. Date-of-Death to Period 1 (perhaps 7 months-to-one year in): This interim accounting, often accompanied by a modest interim distribution of the residue of the estate to the beneficiaries, should not be done before 6 months from the date of death, to ensure there are no surprise/late breaking dependent-relief claims (which are usually filed within 6 months of the grant of probate being issued, due to the limitation period for such claims, in section 89 of the Wills and Succession Act). If any money is distributed before this 6-month limitation, and a dependent makes a claim, the executor can be held personally-liable to repay the distributed funds, so the stakes are very high to do this part just right.
2. Period 2: Sometimes there is a second interim distribution to beneficiaries, after the final bills and taxes are paid, while the executor applies for and awaits a “clearance certificate” from Canada Revenue Agency (CRA). This protects the executor from personal liability for unpaid taxes, if they distributed all assets or too much of the money and the Estate cannot afford to pay the CRA. All competent Estate counsel recommend that executors are never left holding this bag. If any large interim distribution is made, executors are always advised to keep an appropriate ‘holdback’ of Estate money in the Estate bank account, to pay the final CRA bills, advisors’ fees (lawyer and accountant, for example), costs of selling any unsold property, and other anticipated expenses. Like the first accounting period, this one also is accompanied by releases that all beneficiaries must sign, before the distribution can be made. This protects the executor.
3. Final Accounting: The final accounting follows the above steps, and just as it implies, it accounts to the beneficiaries for the last of their funds, after expenses and costs and taxes. One key difference: strategically, it is wise that executors leave any claim for executor fees (while many lawyers advise clients that this is 3-5% of the gross value of the estate, as compensation for being an executor, we strongly disagree that this is appropriate in many cases, and it often leads to litigation). Executors can indeed claim greater compensation, if the Estate was complex, involved skill, effort, and diligence, and time to do, and if there were legal issues or challenges. This is why it is best, if the executor wants to claim compensation (some do, some don’t – the law does allow it by default), that they leave it to the final accounting and include a detailed breakdown of why they are claiming the fee they are. Just as the prior accountings, this must be pre-approved by the beneficiaries before the final distribution is made (including any money the executor claims as executor compensation). Pre-taking executor compensation without beneficiary pre-approval is considered a breach of trust — a very serious matter, for which the courts will impose penalties.

Navigating the waters

Just like the fish market has a set of laws, rules, and practice-customs, Estate administration is a fertile marketplace of tradition.

In the Canadian system, it is a “party-driven” process: the executor and beneficiaries interact to follow the Will and estate plan, and where differences of opinion arise, or an outside viewpoint is needed, they can ask the court to rule on these questions.

There are many unwritten customs on how the process unfolds, so it is wise to rely on an experienced guide.

Proper legal advice, from a qualified and experienced Estate lawyer is a crucial “First-Mate” to the Captain (Executor), to keep the ship away from the shoals.

If you are an executor in someone’s Will, whether before their passing or after, we recommend you get in touch today with one of our Estate counsel, to advise you on your journey. Fair winds and following seas, to y’all!