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Wednesday, August 31, 2016

15 basic (but important) points about executors

Sometimes when I read questions and comments on this blog or speak with people in my office, I realize that there are basic terms used in wills and estates law that are not necessarily clear to everyone. Sometimes I forget that although a word has been in my daily vocabulary for the last 30 years, it may well be brand new to someone else. So with that in mind, I decided to summarize 15 important points about executors.

1. First of all: co-executors.  When two or more people are named to act together on an estate, they are co-executors. There is no "main" executor; both of them have equal say and equal responsibility for what goes on in the estate. Both of them must sign all the paperwork. If one of them goes his or her own way without involving the other co-executor, he or she can face sanctions from the courts. The will that appoints them should very clearly state that they are to work together. Any executor fee must be split between the co-executors, though the split does not have to be equal.

2. An alternate executor is one who is named to take over only if the person who was named first cannot or will not act as executor, or doesn't finish the estate. The will should clearly say that if A can't or won't do it, then B becomes the executor. If the will says "A and B are my executors" that means they are co-executors, not a primary and an alternate executor.

3. If an executor is also a beneficiary, that is not a conflict of interest.

4. An executor named in a will does not have to take on the job. He or she can refuse. This is called renouncing. There are rules for  how it is to be done, the most important of which is that you can only renounce at the very beginning; once  you start acting as executor you cannot quit without court permission.

5. The executor named in a will is automatically the trustee of any trusts that are set up in the will. such as a trust that looks after money for a minor until the  minor comes of age. However, anyone making a will who wants to name one person to be the executor and a different person to be the trustee can certainly do so in the will itself.

6. The only lawful executors are individuals and trust companies. You cannot appoint a law firm or an accounting firm or a business of any kind (other than a trust company) to be your executor. If you appoint a lawyer as your executor, you are not appointing his or her firm; you are only appointing that individual person.

7. Executors are entitled to compensation for their time, energy, efforts, and risk. If the will sets out how much the executor is to receive, that's how much he or she gets. If the will does not mention the pay, an executor can charge between 1% and 5% of the estate. The higher end of the scale is intended for estates that are very complex, such as those which involve winding down a business, selling property overseas, etc.

8. Executors are obligated to share estate information with residuary beneficiaries. Summaries are generally enough unless the beneficiaries request more detail.

9. An executor may not change or ignore parts of the will to make the estate "more fair". He or she has to do what's in the will or face liability. If the executor strongly objects to the contents of the will, he or she should renounce right off the bat and not get involved.

10. An executor has zero power or rights while the testator (the person whose will it is) is still alive. There is no such thing as acting as executor while that person is alive.

11. The executor named in a will does not have the right to be informed if the person who named him or her changes the will to name someone else instead. While a person is alive and is mentally competent, he or she can make as many changes as desired to his or her will and need not tell anyone if they don't want to.

12. An executor who behaves fraudulently or negligently and ends up costing the estate money or property losses can be held personally liable for those losses.

13. An executor is required to be impartial among the estate beneficiaries.

14. An executor may not decide to give mementos from the deceased's home to family members who are not named in the will. As soon as the deceased passes away, those items belong to the people under the will. An executor who gives items (even small ones) to other people is breaching his or her duty to the estate and may be held personally liable.

15. An executor is not entitled to move into the deceased's home rent-free, to drive the deceased's car or use the deceased's cell phone. The estate does not belong to the executor. An executor is only holding onto assets for a brief time for the benefit of the beneficiaries while he or she pays bills and sorts out paperwork, and has a duty to sell or convert the assets as efficiently as possible.

Are there other terms or phrases you'd like to know more about? Let me know in the comments below.


18 comments:

  1. Excellent!

    How many points can you come up with about beneficiaries?

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    Replies
    1. Probably a lot more than 15, but I think I'll try to limit myself :)

      Lynne

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    2. Hi!
      You often say that a lawyer cannot be included in a will. But what if a person WANTS to include their lawyer?
      Is it possible/allowable to go to a DIFFERENT lawyer, have the will made there, and in it include the favorite lawyer?
      That way, the favorite is just another beneficiary. Would that be okay?

      If it is okay, can the person continue to use the favorite lawyer for other things, just no longer those relating to the will?

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    3. Hi Hugh,
      Yes, it's okay if another lawyer drafts it. And yes, you can still continue to use the fave lawyer for other things.

      Lynne

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  2. What can an executor do when an objection to the will has been filed. For example, three executors were appointed in the will. All 3 acted for 8-9 months at which point 2 renounced. The will has been objected to by one of the beneficiaries indicating it is not valid, and asking for it to be thrown out and allow for a previous will to remain valid, this would also remove the remaining executor as they were not appointed executor in this other will. How is the remaining executor to act and what are their roles. And would all 3 executors not share in the responsibilities/actions taken by all 3 executors when they were all representing the estate during the first 8-9 months? Due to the objection probate has not been obtained either. At some point the majority of the beneficiaries have supported the remaining executor but at other times they have objected as well. (ie. if they are not getting what they want). This has been going on for almost 2yrs.

    ReplyDelete
    Replies
    1. It seems to me that you don't have much choice but to hire a lawyer and get the question regarding the validity of the will answered.

      When an executor brings a question like this to the court, his role is to be neutral. In other words, your role is to ask the court whether the will is valid, not to convince the judge that it is or is not valid. The beneficiaries who stand to benefit under the will are the ones who are going to have to defend it.

      The executors who acted for several months cannot legally renounce. They are on the hook 100% until a judge dismisses them from being executors. They can turn their backs if they want to, but that does not limit their liability.

      You are getting too caught up in the politics of who supports whom and who is in favour of what. Just go ahead and get a court ruling and kickstart this estate.

      Lynne

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  3. An executor is not entitled to move into the deceased's home rent-free. Can an executor allow somebody else to move into the deceased's home rent-free as well as paying the electricity bills for that person out of estate funds?

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    1. No. The executor should be charging rent (at market value) from any tenant, no matter who it is. The executor's job is to maximize the estate assets. Failing to charge rent means a financial loss to the beneficiaries and the executor may well have to come up with the unpaid rent out of his or her personal funds.

      However, let's be practical. Often, there is someone living in the house at the time someone else passes away, such as one of the kids who has been looking after the parent who died. It's only common sense (and compassion) to allow that person a bit of time to find another place to live. By that I don't mean months. In each case you have to figure out where the balance lies between the beneficiary's rights and the practical considerations.

      I hear a lot of questions about the executor hanging onto the house for months if not years, but in most cases there is no real reason for it. The executor should sell (or transfer) the house ASAP unless there is something in the will that directs him or her otherwise. Why hang onto it? It just creates issues like the one that's happening here.

      Lynne

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    2. I have to question your advice on not taking up residence in a deceased relative's home while carrying out the executor's duties of closing his/her estate and paying rent.

      My brother passed away on the 19th of May. We, the family, were totally unprepared for his untimely death. When I was summoned by a call from the hospital medical staff of his impending death, the evening of May 17th, I had to immediately arrange to leave my home(approx. 2500 to 3000 miles away) and fly to Toronto, ON Canada to see him one more time before he passed on.

      Although, I was aware that he had a will drawn up by his lawyer naming me as executor of his estate, I wasn't aware of a co-executor, a friend of his, that lived locally and was away on vacation. Their daughter notified them of his death but due to the road trip, she was unable to arrive home until the 27th of May. Fortunately, I had been given a set of keys many years prior to his demise which gave me access to his home/condo when I came to town to visit. In my yearly summer visits, I had developed a friendship with his neighbors, a relationship with the condo management and the security employees which allowed them to feel comfortable with me staying there.

      Staying at his condo reduced the expense to the estate of the cost of my travel and lodging back and forth in the performance of my duties as co-executor, especially when the bank required my physical presence to sign for any payment of bills and/or legal documents while awaiting the certificate of probate. The relationship I formed with his bank in 2003, gave me firsthand experience in managing his affairs(4 months) when we, my brothers and I, were called to the hospital to remove him from life support after open heart surgery from which he was not expected to recover.

      The bank's management were very supportive of having me stay in the condo while making preparations to sell it and although the accounts were frozen, they allowed me to continue to pay the mortgage, condo fees, bills and other loans upon presentation of invoices/bills. Neither I nor the local friend had the financial capability to pay the ongoing bills and debts over the 90 day period it took to receive the Certificate of Probate. The bank proved very helpful in referring us to a few solicitors to choose to handle filings for the Certificate of Probate, the real estate sale, etc.

      I resided in my brother's condo from May 18th, 2014 until October 19th, 2014 while I carried out my executor's(jointly) duties to facilitate closing of his estate. The condo was put on the market for sale with a realtor October 6th and I returned to my home in Arizona briefly only to return two weeks later to sign the legal papers on the sale of the condo.

      Due to the absence of the friend in the initial execution stage of handling the estate, the funeral services were delayed (6/14). Both executors had to sign to get the funeral home to pick up the body from the hospital morgue for cremation. Meantime, I busied myself contacting all the government agencies, his insurance companies for condo, auto and life insurance, etc. etc. The Certificate of Probate filed in June was not received until the 14th of September; the condo was put on the market the 6th of October and closed on December 8th. The Toronto full property assessment of the condo was $365K. I determined much more than that was needed to cover his debt. So the condo was put on the market for $500K and was sold for $470K.

      I said all this to address the "rent" I am being asked to pay by the co-executor for staying in my brother's condo to bring closure to his estate($14K). Should I invoice the estate and charge my going rate for the reimbursement of the services I personally provided to the services outside the scope of executor duties that saved on additional expenses to the estate; set a price on the cost of being away from home for 7 months while paying a $1000 a month rent on my home that stood empty in Arizona, the expense of paying home and auto insurance and utilities?

      Delete
  4. Re: Alternate executor - what information is it appropriate/legal for the executor to share with the named alternate?

    I am almost at the second year mark as executor dealing with a very modest but somewhat complicated estate. At this point, the main complication is a legal claim against a promissory note signee who has refused to date to honour the (4) notes acknowledging debts to my late friend. The claim was filed over a year ago, but shows no signs of moving quickly through the court system.

    Even if the court upholds the claim, collecting the debts could go on - and on - and on. The 2 residuary beneficiaries are aware of the details, but I was older than my friend, and though i hope to live to see the end of this mess, I wonder what I should share at this point with the (20 year younger)alternate executor.

    Thank you!

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    Replies
    1. There is no requirement that any information be shared with the alternate executor, but I can certainly see your point in wanting to share the information regarding the claim.

      It makes sense to me in terms of your duty to protect the estate that you would keep the alternate executor up to date. This could well prevent a mistake or omission on his part that might otherwise cost the estate a financial loss.

      As an executor, you have the discretion to do what you feel is best for the estate. You cannot delegate any tasks that require judgment (such as deciding whether or not to take an offer of settlement or deciding whether or not to take legal action) but as I understand it, you're not talking about delegating it now. You're simply talking about an exchange of information.

      You are entitled to copy the contents of your file for the alternate executor, if that is the best way to provide the information. Obviously you wouldn't simply share confidential information with just anyone, but this particular exchange is being done for the good of the estate.

      Lynne

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    2. ASAP is correct. The sooner you dispose of an asset like a house the better (of course not giving it away). Getting rid of the asset faster saves maintenance costs, taxes...etc...etc. I did drive my parent's car for about a month because they lived 100 km away and I had no other means to travel to take care of estate business. I made a judgement call that using the vehicle would be less expensive than if I rented a car and expensed it to the estate. Both the house and car sold quickly and luckily the house sold just before the car. Once the house sold I didn't have to travel anymore. Using the Estate car saved money in the long run.

      Delete
  5. Lynne
    As an executor, you have the discretion to do what you feel is best for the estate. You cannot delegate any tasks that require judgment (such as deciding whether or not to take an offer of settlement or deciding whether or not to take legal action) but as I understand it, you're not talking about delegating it now.[Lynne]
    Those are the words I wanted to hear/see based on my situation. This is exactly what some lawyers have been doing to me, including someone higher up. TBC

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  6. Thank you so much for the comments on sharing information with the alternate executor. It is so generous of you to give your time and expertise to readers like me.

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  7. The difference between real and personal property and the obligations of executors and rights of executors. My parent's will gave me sole authority to sell all real AND personal property. I distributed the personal property evenly (actually took pics and created a secret facebook group and had beneficiaries call dibs)...that worked but there was also a provision in the will that set an order to picking...oldest first...then by age. When I went to sell the house the buyer wanted all the beneficiaries to sign off. I rejected that condition as the other beneficiaries had no say in the matter as the will gave me sole discretion,

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  8. @Paddy

    A 'will' that is properly drawn up by a 'good' lawyer that reviews all areas of concern is a must have.
    My situation. My lawyer is leaving his firm and I will now have to deal with someone else at the same firm. This is beyond bizarre. Something is VERY VERY wrong here. TBC

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  9. I would like to know how to get a copy of the deed to our home. It's owned outright, and the lawyers did not send a copy or the original to me. Should I actually have a copy?

    ReplyDelete
    Replies
    1. Go to the land titles office or registry of deeds in your town and ask for a title search. Give them the legal description of the land (i.e. block, lot number) if you can. It's only a few dollars and is done almost instantly.

      Lynne

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