Executor Roles and Potential Pitfalls
Whether you want to or not, many Canadians will end up becoming the executor for a parent, family member or close friend at some point in their lives. While the decision to appoint someone for this role is often taken lightly, the nature of fulfilling these duties can carry some serious consequences.
The handling of an estate that was assumed to be “simple” can often lead to hundreds of hours of work, destroyed relationships and even financial disaster for the executor. A disgruntled beneficiary has the ability to sue an executor if they feel that they have been unfairly treated. An executor can be found liable for any loss they cause through negligence or mistakes, even if the mistakes were made in good faith.
The biggest risk to the executor is the will itself. In order to save a few bucks, a lot of people end up with a cheap or DIY will that has little guidance or clarity. With no specific mention of the contents of a home, family members may help themselves to mementos they believe their parents meant them to have. This is a good reminder for all to ensure that you have a properly structured will in place that clearly outlines your wishes.
When you find yourself suddenly thrust into the role of an executor, it’s important to take a look at the overall situation and decide if you feel there is any potential liability. If you feel that a risk is present, you may wish to purchase “executor insurance” which will offer protection to you in the event of any issues arising down the road. Most insurers will insist that you also hire a qualified estate lawyer before underwriting the policy – which is usually a good idea anyways.
Many executors choose not to hire a lawyer, accountant, advisor, etc to assist with an estate as they fear that the costs incurred will erode the estate’s value. The truth is, qualified professional advisors can help to avoid errors and mistakes and may end up adding to the value of the estate instead of taking some away. Furthermore, these professionals can help to ensure that you as the executor are not found liable for any errors that occur. In addition to seeking out qualified professional assistance, what else can you do to help ensure the estate is handled smoothly?
- Get multiple appraisals – If you are selling a property or other asset, make sure you get at least three separate appraisals of the value. This will help you prove that you did your due diligence.
- Keep really good records – Detailed notes on every transaction you make and receipts for every expense are vital to good record keeping.
- Communicate – Regular and equal communication with all beneficiaries is a simple way to avoid complaints, misperceptions and baseless accusations of wrong doing.
When faced with taking on the role of an executor it’s important to remember that you can decline this commitment. If you do chose to accept it, make sure that you carefully evaluate the situation and get the necessary help to see it through smoothly. For those of you trying to decide who to appoint as your executor, think very carefully about this decision and consider utilizing a trust company if you expect your estate to be a complicated one – the fees they charge may be the best money you ever spend.