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Monday, February 12, 2018

How much detail should be in an executor's accounts?

I often hear from clients and blog readers who want to talk about an accounting received from an executor on the wind-up of an estate. Sometimes there are complaints but most of the time it's really an open-ended question: how much detail should there be? The following question recently received from a reader is a good example:

"The executors accounts are vague, for example saying cheque as a disbursement but not saying what for. Accountant fees but no billable hours or reasoning. Also it was said that there was more in the estate than the accounts are showing. No balances to bank accounts or receipts are provided."

Disbursements with no explanation whatsoever are not acceptable. The point of the accounting is to provide information.  If the executor knows what the disbursement is for, the explanation must be included. If the executor doesn't know what it was for, then there are bigger problems. The executor needs to own up to the fact that the money is missing.

Typically when the beneficiaries of an estate receive an accounting from an executor, it is a summary of the records kept on the estate. At that point, there would not be copies of bank statements, receipts, or the accountant's bill attached. The use of summary documents is standard procedure and usually it is sufficient.

However, if you are a residuary beneficiary and this is not sufficient, you are entitled to make reasonable inquiries to obtain more detailed information. The key here is "reasonable". Whether a question is reasonable will always depend on the circumstances. Let's look at the accountant's fees as an example. If you know the accountant prepared a tax return for the estate and the amount shown as payment to the accountant seems about right, is there any need to know the billable hour applied? The answer to that might be depend on whether this is the only questionable item on the accounting or whether the accounting is full of mistakes and gaps. Also, if the amount paid to the accountant seems much too high for the services you believe were rendered, then it makes sense to find out more about what the accountant did for the estate.

An executor is obligated to respond to reasonable questions and requests for details. After all, the money in the estate belongs to the beneficiaries and they have every right to know how the executor dealt with their money.

An executor is not obligated to continue to answer questions if he or she has already provided the information that was requested and if the executor simply has nothing else to add. While certainly there are executors who provide weak or even false accounts, there are also unreasonable beneficiaries who make the executors' lives miserable for no good reason by harassing them with continual accusations and questions.

Reasonableness cuts both ways.

Be careful about relying on second-hand information. You  mentioned in your question that "it was said there was more in the account". You didn't mention who said that or how this person would be privy to the deceased's financial information. If you feel that it was a reliable source, you are within your rights to ask to see a bank statement for the day the deceased passed away. Perhaps you could ask the person with the knowledge of a bigger bank balance to prove it. Just be careful of making unfounded accusations against the executor because once you do that, the job of getting along with each other becomes a thousand times harder.

If the executor and the beneficiaries are not happy with the accounting and they reach an impasse, the usual recourse is for one side or the other to apply to pass the executor's accounts through the courts. It's unfortunate when it gets that far because most of the time the parties really should have been able to resolve it between them without needing a judge to referee. Instead, the parties, who are usually family members, end up facing off across a courtroom, slinging mud, spending their money, and ruining their family relationship.

8 comments:

  1. Lynne.

    Excellent postings Monday Feb 12/2018.

    1)What's with executors giving personal items to non-beneficiaries?

    2)How much detail should be in an executor's accounts?

    The second posting is especially informative as I am an executor and also a residuary beneficiary (one of 2). As the executor I am struggling,going around in circles, to get information to resolve and settle. What also concerns me greatly, who is looking after my legal rights as a residuary beneficiary?

    ReplyDelete
    Replies
    1. There really isn't any specific person or group who looks after the legal rights of a residuary beneficiary. There are laws in place, of course, to mandate the behaviour of the executor. Unfortunately, enforcing those rights falls on the beneficiaries themselves and it costs money to enforce them.

      Lynne Butler

      Delete
  2. Hi
    I am an accountant and as well have been a co-executor for my brothers estate. I believe for transparency purposes Having personally experienced litigation and passed through it.. my advise to executors is to report in as much detail as possible the transactions of the estate. Keeping a detailed monthly bank ledger with backup scanned copies of bank statements and associated documents in case it is requested. Scanned monthly it takes little time to maintain and may avoid a very expensive legal battle. In my personal opinion transparency is always the best course of action as an executor Then the executor cannot be faulted even if it gets ugly

    ReplyDelete
    Replies
    1. Well said, Chantal. Transparency is of utmost importance and so is consistent record-keeping. It's too bad that a lot of people don't figure that out until it's too late, so your advice is appreciated.

      Lynne

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  3. Lynne ButlerFebruary 15, 2018 at 12:33 PM
    There really isn't any specific person...[LB]
    -----
    I spoke with a female lawyer and she said that the lawyer that represents me as an Executor also represents me as a residuary beneficiary.
    I also asked a lawyer (X) from the same firm that my lawyer worked for to represent me as a residuary beneficiary. My lawyer dismissed that. Lawyer (X) never got back to me.
    Something is not right here IMO.

    ReplyDelete
    Replies
    1. Webeye, the estate lawyer works for the executor. In theory that sort of means she represents you, in the sense that the executor is supposed to do what's right for the estate, which includes the beneficiaries.

      In real life where people don't always fit nicely into comfy little pre-defined slots, the executor doesn't always look out for the beneficiaries. The beneficiaries don't always agree with the executor or with each other. When that happens, they need their own lawyers.

      I would not have asked a lawyer in the same firm because the two roles - executor and beneficiary - are potentially adverse in interest. Two lawyers in the same firm are too close.

      Lynne

      Delete
  4. In my case I just copied the bank statement and explained each payment, ie: last phone bill, last insurance payment, rent...etc. There was a neighbor who helped maintain my parent's empty property for a month and received some funds. I had to travel to and from the property a few times for a round trip of 250 kms and expensed gas. I noted each expense in my final accounting...there were no mystery payments. I used a social media account to do this monthly so there were no surprises at the end.

    ReplyDelete
  5. Executors can avoid most pitfalls by doing everything 'by the book'. Executors are accountable to others. Keep good records. Executors are obligated to respond, within reason, to beneficiaries and others who are part of the resolution and settlement of an Estate.
    It does not matter how well you believe you get along with the people who are involved with a 'will'. This includes siblings and all others. Keep it professional. If you don't, it may come back to bite you. This comes to mind "hear me now, believe me later" from Saturday Night Live's Hans and Franz. Funny sketch.

    ReplyDelete

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