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Tuesday, March 19, 2013

Must an executor immediately cash in assets with a maturity date?

When a testator passes away leaving assets that have built-in maturity dates, how should those be dealt with? Must they be cashed in right away? This question was recently asked by a reader, and his question with my answer appear below.

"My father had some money invested in a GIC for one year. The expiry date is September 2013, but my father died February 2013. Can I wait for the expiry date in September to receive the GIC or do I have to dissolve it now since he has already passed away?"

You don't say in this question whether you are the executor of the estate or the beneficiary of the GIC, or possibly both, so let's talk about both of those situations.

Executors have some discretion as to when they cash in or sell assets of the estate. The discretion is there so that executors can carry out their responsibility of making the most of the estate by taking advantage of market conditions, tax losses, or whatever else is available. Each executor must consider each asset individually. In this case, if your father has the funds invested at a wonderful interest rate that you're pretty sure you won't be able to get yourself, you might want to keep it invested to take advantage of that rate.

Ideally, the executor and the beneficiary will have a conversation about the assets to give the executor an idea of what would work best for the beneficiary. However, the beneficiary also needs to realize that the executor may have more on the go than just one asset, and must consider the estate as a whole. For example, if the rest of the estate has been wound up except for this one asset, and the executor just wants to get the tax return done and finish things off, it might not make sense to delay all of that. Remember that as long as the GIC is in your father's name, tax receipts for interest earned will go to the estate.

There is no law that says every executor must cash in every GIC immediately. The executor should first look to the will to see whether there are any specific instructions or timelines to follow (usually there are none, but if there are, the executor must follow them). Usually executors are  under pressure from beneficiaries to get things done quickly and efficiently.

Normally when a GIC is invested for a set period of time, cashing it in before the expiry date will result in a penalty or loss of interest. However, the death of the owner of the GIC is an exception to that general rule. This means that the GIC could be cashed in early without any loss.

You asked whether you can wait for the expiry date to cash the GIC. As is always the case in legal situations, the question isn't whether you can do something; the real question is whether you should do it.

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