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Monday, May 28, 2012

How long is an estate supposed to take?

Being involved in an estate is not a pleasant experience. Not only have you lost someone important to you, but now you're bogged down in paperwork and family arguments. And it seems endless, doesn't it? Why do estates just seem to drag on forever?

The length of time required to wrap up an estate is one of the chief complaints I hear from beneficiaries. Of course it's even worse when the executor doesn't communicate or dissipates assets, but the passing of time is always tough on those who just want the whole thing to be over.

How long is an estate is supposed to take? And if it's taking too long, what can be done about it?

There is no deadline by which an estate must be wrapped up. This is because estates vary so widely. Some people own businesses when they die. Some own houses in other countries, time shares, collections (art, hockey cards, silver spoons), antiques, literary rights, pensions, or unusual assets such as airplanes. And others pass away leaving simply their home and a bank account. Some estates require trusts to be set up or wound down. With such a variety of tasks needing to be done by an executor, it would be impossible to say that every estate must be wound up within a certain number of months or days.

Having said that, there are some deadlines and rules that will give at least some structure to the estate.

There are deadlines by which tax returns must be filed for the deceased person and for the estate itself. These tax deadlines are fixed regardless of what's going on in any given estate. Many simpler estates are wound up quickly enough that only one tax return is needed whereas a more complex estate may require returns to be filed annually for a few years.

There is also a common-law concept known as "the executor's year" which will interest beneficiaries who have been waiting a long time for an estate to wind up. I often speak with people who tell me that an estate has been open for ten or fifteen years while an executor farms the estate land or lives in the estate house or otherwise benefits from the assets of the estate. The only reason this is tolerated is that the beneficiaries haven't yet become aware of their rights under the executor's year rule.

The concept essentially states that an estate should be wound up within a year of the death of the deceased. Any estate where there are no legal challenges, no disputes and no unusual assets to be dealt with should be finished within a year. By then the beneficiaries should have received their shares and signed off Releases.

This is only a guideline. Obviously those more complex estates I mentioned above may take longer. If a company must be sold or several houses put on the market, this could well extend the estate past a year. As long as the executor keeps things moving as best he can, this is likely the best that can be expected.

In some cases it becomes painfully obvious that the executor is making no attempt to wind up the estate. In such a case, the beneficiaries can use the concept of the executor's year to try either to get the executor moving or have the executor removed. This would involve an application to the court to explain the situation to a judge and ask the judge for help in lighting a fire under the executor.

Anyone considering what to do about an executor should understand that if they present a full, accurate description of what is happening, the judge will most likely take steps to get the estate moving. In my experience, judges are not eager to remove executors entirely, but are more than willing to see that an executor does the job properly.

Before taking legal action like this, I encourage beneficiaries to ensure they have all the facts. Specifically, make sure you understand any provisions of the will that control when an inheritance should be paid. For example, sometimes a will states that a person should receive an inheritance at a certain age, after a specified number of years, or after a certain contingency is met (such as getting a post-secondary degree). It could also be the case that another person has a life estate (i.e. a right to use an asset for life) and you are only supposed to inherit the asset after that person passes away.

The key to understanding why a given estate is taking so long is communication between the executors and the beneficiaries. Unfortunately, communication is too often poor or non-existent between the two groups.

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