When can the executor be reimbursed for expenses?

When an executor is compensated for his or her work on an estate, the amount he or she receives is separate from the reimbursement of expenses. Unless a will specifically says otherwise, the fee is over and above being paid back for expenses. In this post I'd like to look at the expenses rather than the fee.

It's always a good idea for an executor to try to limit his or her personal involvement with estate expenses by submitting bills directly to the bank where the deceased had an account. Many know that they can submit the funeral bill to the bank so that the bank pays that bill directly without the funds passing through the executor's hands. However, this arrangement also works for other bills that are clearly the deceased's bills, such as property tax for the deceased's home, or the final heat and electricity bills. It's worth a chat with a banking officer to see what can be done.

Of course, this idea only works when there is cash available in the deceased's account. Realistically there might not be enough funds. There are plenty of estates which consist of a house and a RRIF and not much more. In those cases, submitting bills isn't going to be helpful and the executor just might end up paying for things (funeral, lawyer, accountant, bills, tax) out of his or her own money.

When hiring a lawyer to obtain a Grant of Probate, you will likely find that lawyers who do a lot of estate work won't even bill you until they get the Probate. This is because they know their bill should be paid by the estate and that you likely won't be able to liquidate estate assets unless you have the probate.

I always advise executors not to take their fee until the estate is finished and the fee has been approved either by the residuary beneficiaries or the court (except for very unusual circumstances). However, that's not the case with expenses which the executor pays directly out of pocket. When the executor is out of pocket, of course he or she needs to be reimbursed as quickly as possible. The executor doesn't have to wait for any specific time or event.

Being reimbursed from the estate means that money has become available, either because an asset has been sold or an investment has been collected in by the executor. These funds would have been deposited into the estate bank account set up by the executor around the time he or she applied for probate. This is where any reimbursement should be taken from. Keep the arrangements simple and transparent. Don't take money directly out of accounts or investments owned by the deceased.

I would suggest that the executor reimburse himself or herself once a month out of the estate account. This way ALL money taken by the executor can easily be accounted for in one statement, and the executor never amasses unmanageable debts on behalf of the estate.

The executor should keep a receipt for every expense and know which cheque out of the estate account paid for which expenses. Don't keep track in your head; keep track on paper or computer. If he or she is claiming for mileage, it should be calculated on paper, which would then be used like a receipt (in my Alberta Probate book I provided a form for this that you can either print or download, as well as forms for all of the executor's record-keeping and accounting).

Now let me add the inevitable caveat. Be careful about what kind of thing you're claiming as an expense and don't make the mistake of thinking that everything even remotely connected to the estate is a legitimate expense. For example, flying your family members to the funeral is an individual's expense, not an estate expense. Getting that massage or that expensive champagne to manage your stress is your own expense. Remember that the residuary beneficiaries are going to examine your accounting at the end of the estate and if you have reimbursed yourself for inappropriate items, you will probably have to repay them to the estate.

Here's the second caveat. Don't be a spendthrift with estate money. The courts won't like it at all should you end up there, and that won't go well for you. Also, there might not even be enough estate funds to pay you back if the estate is small and there are debts and taxes to be paid.