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Saturday, February 18, 2012

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.

19 comments:

  1. My sister is also the executor for my fathers estate. My youngest sister and I paid for the funeral my youngest sister bought the burial plot in her own name. For this reason, my older sister refuses to pay back the funeral, burial, or grave marker, unless the name of the plot is changed to "the Estate of." Is this behavior legal?

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  2. If there are multiple executors and there are bills that need to be paid, should the bills be split equally amongst the executors?

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  3. can the executor of the wills pay himself out of the estate for the flight to go to the funeral if the time spent on location is also used to take care of the estate

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    1. Yes, assuming that what you did for the estate needed to be done in person. Make sure that you're being reasonable, as all expenses will eventually have to be approved either by the beneficiaries or by the courts. Keep detailed records of what you did on behalf of the estate during the trip.

      Lynne

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    2. Hi Lynne,
      I am the sole living sibling of my deceased sister and have been granted Administrator of her estate by the court. A tenant in her home is claiming Co-dependent status and has filed an affidavit, been questioned on this and in my opinion has no grounds for his claim. I have paid out 15,000 from my own funds defending the estate from this claim. I check with another lawyer and they indicated I should be compensated for these expenses and want to get your opinion. The Plaintiff''s lawyer has chosen not to answer letters and calls from my lawyer and not indicated what his client's intentions are.
      The costs that I am seeking reimbursement for are those spent to defend
      the estate from the co-dependent claim and included obtaining RCMP case
      records, 5 years of bank statements and hiring of another lawyer for the
      creation of 2 affidavits with evidence to oppose the co-dependent claim. I
      also had to pay for the affidavit questioning of the plaintiff and the
      documentation of this dialogue. The questioning session reinforced the
      case that the plaintiff's relationship with my sister was not one of
      "economic and domestic" dependence.

      His answer was:

      These are the costs of the estate. It shouldn't be that you pay and then
      seek reimbursement.

      The estate should be paying from the start.

      Thanks for your help

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    3. Certainly you should be indemnified by the estate for expenses relating to estate administration and estate litigation. You can reimburse yourself right away, but make sure you document everything clearly to protect yourself.

      Lynne

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  4. Hi Lynne: I am the executor of my mother's estate. She recently died and I have gone through the probate process and now have the grant letter. I have set up an estate account at the bank. There are 9 grandchildren inheriting each a sum of money, a brother in law receiving a sum of money and the church. The church is named in the WILL to receive the proceeds from the sale of furniture and appliances in the home. The house and any residuals are left to my sister and I. My sister does not live in this province (Nova Scotia). When she was home for the funeral we opened an account with Home Depot to purchase paint and flooring to clean up the house. Now the bill has come in (in my name) and I am wondering how to get the funds to pay them. Do I write a cheque to Home Depot credit department or do I write a cheque to myself and use the cash to pay it? Really appreciate any help you can give. Thank you, Linda

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  5. Yikes! Our tragic comedy of an Estate (2 really, 1 that lead into another) has been going on for over 13 years now..

    The long and short of it is this:
    My Mother applied for and was granted Administration (Administrator) of my step-fathers Estate (died intestate for no good reason). Due to the almost 'surreal circumstances' surrounding his estate, my Mother had no choice but to hire a lawyer to deal with 'the other lawyers' (his sister was contesting the Mothers will, he died during her probate).
    Unfortunately it hasn't turned out well and we have needed to help this lawyer and 3 of his other junior lawyers (all of them quit or fired) in every aspect of this estate. This is to say that we have done 'countless hours' of legwork and research in helping to FINALLY get this estate to a point where we can 'sign off' (releases) 13 years later and be done with it.

    Now because we dealt with the Estate from the very beginning, can she bill the estate for hours that were logged even 'before' she became the Administrator of his Estate?
    Things such as;
    -Removing his personal effects and cleaning out the house (still belonged to his mothers estate of which he was the main beneficiary) even though she was kicked out of it.
    -Getting his affairs in order and dealing with the coroner, funeral home.
    -Dealing with storage for personal effects until probate was done (even though it was destroyed by a collapsed roof in a storage facility).
    -Finding counsel and attempting to set his affairs so that his sister didn't get away with defrauding the estate.

    Now what about after she became the administrator?
    -I had to help her with the Estate (calculated to over 145 hours for me alone!).
    -The lawyers failed in every aspect and because of their ongoing mistakes, I actually had to travel to another City where I had to 'Coach' the lawyer through the JDR (never, ever do one of those again..) because the main lawyer who attended the JDR had NO CLUE what was going on as he left it to the 'other lawyers' who just kept leaving the firm, which is exactly what happened just before the JDR.
    It seems almost laughable that the lawyer in this Estate can charge 10's of Thousands of dollars and yet my Mother doesn't get to charge anything even though we did quite literally ALL of the actual legwork.
    Am I missing something here? Can my Mother at least charge ‘SOMETHING’ to the Estate before the beneficiaries are paid?

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  6. Wow, a lot has happened in two weeks!
    -Fired the lawyer
    -Going ahead with the Taxing of his account
    -Will pursue the Law Society option immediately following the taxing of his account.

    We were able to clear up a LOT of loose ends and are now waiting to hear from the lawyer in regards to picking up the File and Trust Funds. My guess is that there is 'no way in hell' he is going to release the funds without us signing a release and will be nasty about having a 'complete file' waiting for us in the next few days (gave 10 days notice).

    I did verify that he HAS indeed paid himself out of the Trust account and perhaps that is why he want's this release so bad. Either way, it ain't happening and I feel that his paying himself with Estate funds without permission, nor a contract/agreement, may be to our benefit come taxation day.

    Estate bank account is now open, beneficiaries have been updated and with 'competent legal guidance' from a different lawyer (only when needed) is already saving this Estate a nice chunk of change.

    Now we get to hurry up and wait....

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  7. Thanks for your most helpful site. I have one question though. Since beneficiaries MUST attend a mediation and can't turn it down, and it's strictly business and anything but fun, can they be reimbursed for traveling expenses, hotel fees and so on? Should be I would think. If not, why? Thanks

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  8. My late mother In law will have a terminal tax bill of approximately $140,000. there isn't sufficient liquid cash to pay this when it is due and I (executor) will have to draw against my own line of credit to pay the bill until the house is sold. Can I charge the estate for the interest I will have to pay on my line of credit?

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  9. There two executor to a friend estate. One is from out of town and one is local. The out of town one is claiming travel expenses to and from the executor home town. The local executor was capable and wanted to clean up the estate home. The out of town executor used the estate home for her own purpose until the home was sold. Are the travel expenses and home expense legitimate.

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  10. I am a co-executor of my brother's estate and I live in Arizona U.S. The other co-executor lives locally in Scarborough, ON. When my brother was alive, we, the local person and I, each had power of attorney. The local co-executor was a long time friend of my brother and previous common-law wife who held a hand written will(1996) leaving everything to her and her daughter(no relation to my brother) and wasn't aware of the new will my brother had had written and executed by a lawyer in 2004. I was aware of the new will because he had a near death experience in 2003 which initiated him putting his affairs in order, legally. When the local coexecutor and her husband left town they knew my brother was gravely ill. Whilst they were away, the hospital contacted me and notified me to come as quickly as possible that he may die within the next 24hrs. I booked a flight in the wee hours of the morning and was on a direct international flight to Toronto on Air Canada. I arrived in time to sit with him that same day and he passed away the next day. The local friend was on an RV vacation and had been visiting me at my home in Arizona just a few days before I got that call. Meantime, the local co-executor continued to make their way back home but did not arrive back in the city until 12 days after his death.

    My brother and I were very close and I had been given a key to his residence several years prior. Lucky for me the security guards remembered me from my previous visits. This was not my first time performing the duties of an executor(POA) and I began to carry out the duties of an executor while taking up lodging in his home. Having been a familiar face in the bank in 2003 for four months, I was able to carry out the business of maintaining his payment obligations without any problems. The bank was very accommodating. Meantime, I had the formidable task of readying his condo to put it up for sale and filing for the certificate of probate which took approximately 90 days.

    During this transition, I had to be present for various legal banking and insurance transactions secure a lawyer to file for the probate certificate and other duties assessed to wills. According to the bank and the insurance company these transactions could not be done long distance and as co-executor, I had to be there physically to sign checks and legal documents. Flying back and forth from Arizona to Toronto was a very expensive option resulting thousands of dollars of expense to the estate, so I elected to stay locally and reside in the condo(much to the bank's delight) until it was sold. I am retired and was able to get a friend to look after my home in Arizona. I stayed for seven months due to delays created by the local co-executor, going home once to sign my lease and take care of pressing business due to my absence.

    My out-of-pocket expenses for this long stay was approximately $7300.00 U.S. and $1000.00 CDN for travel and lodging(being the largest expense), gas, meals for helpers assisting in clean up of condo, condo renovations(washer went out and replacement of blinds, shower curtains etc.), moving costs, postage, office supplies, Family Memorial with final interment of ashes in a niche, etc. At the time these expenses occurred there was only enough money to pay the monthly bills i.e. condo fees, property taxes, mortgage, car note, insurance(condo/car). After the sale of the condo, the estate did not have a shortage of money to reimburse these expenses but the lawyer we engaged has not disbursed these checks. Should I not be reimbursed for these expenses?

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  11. I am a co-executor of my dad's will. However, my siblings and I paid for the funeral expenses. my dad's bank want to pay the funeral home and is asking me to ask the funeral home for a refund. this is apparently a government regulation in ontario. is this true? can they not pay us back by paying the executors.

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    1. I don't know if that's a government regulation. Sounds more like a bank policy to me, but I completely understand their position. They will pay the deceased's funeral bill from the deceased's account, but they are not going to pay the deceased's money to anyone else. They are not required to pay it at all and would be within their rights to say they won't pay the funeral bill at all until you get probate, but they do pay them to make it easier on families.

      If they pay money to you, or to anyone who claims to be owed money by the estate, they are taking a huge risk. They would basically be acting as executors, which they obviously are not allowed to do when they are not executors. If they pay out money, they can be sued by any beneficiary who claims that the money was paid out wrongly. So there is no way you are going to persuade them that it's more convenient for you if they risk a lawsuit so that you don't have to get a refund from the funeral home.

      Lynne

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  12. Does the executor have to have cheques available when we sign the release?
    She says sign first, pay later.

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    1. No, she doesn't have to. In fact most executors wait until they have the signed releases from everyone before sending out cheques to anyone. This is because if one person refuses to sign the release, there could end up being further legal proceedings such as passing of accounts. If that happens, there is less money in the estate to be divided up so the executor would have to re-calculate how much everyone would get.

      Lynne

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  13. Hi my son recently passed away with no will. . He has listed his ex girlfriend as his beneficiary on his life insurance pilicy... other than that he has a small pension .. I have a cheque made out to the state of... .. it was for his funeral... there is no estate account set up for him... am I entitled to this money or does it have to go into his estate

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  14. I had POA for my Parents an am Executor of their Estate. In Nov 2012, my dad who lives 600k away had a stroke. I ended up going there to take care of my mom (83) at her home & dad who was in hospital for 6 months. Hospital was horrible so had to be there. While there I began working on their Home which was needed major repairs to sell.

    Middle of 2013 my dad moved to a Nursing home in Toronto. After that I spent almost two weeks out of every month going back up to work on the house and take care of my mom. The money they had coming in from Canada Pension was never enough for the bills. I paid for almost everything, Food, Utilities, Taxes, Dentists, etc, Dads clothes, drugs, TV, & 30% Dads Nursing Home & the Reno. End of 2014 mom Passed. While mom was alive I could not do major repairs, due to clutter(kept everything).

    Apr to Mid Sept of 2015 I stayed in Northern Ontario working on the house continuously. Major mold, foundation issues, water damage etc. Also had Derelict Garage & Carport condemned by the Town. In Apr 2016 house sold. End of 2016 dad passed. From 2012 to end of 2016 I had spent 104k out of my own money. 20k was e-transfers to Dads Acct, 20k was Funerals. Dad owed bank 30k, so after House sold I got 65k from house.

    My sister who never lifted a finger now has a lawyer & wants her disbursement & threatens me too pay her legal fees if they have a case.

    I have everything in Spreadsheets & tons of scanned receipts. Tons of Hours of work. I can account for all of it. I am out 39k that I will never get back. Everyone tells me that when I send all this info to their lawyer that I can also include an amount for my time spent as POA till end of 2016 before dad died. Can I do that & if so at what rate etc? Also can I make her pay for my lawyer fees?

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