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Saturday, October 3, 2015

Does an executor have to agree to beneficiaries' requests to see expenses and statements?

Does an executor have to agree to beneficiaries' requests to see expenses and statements?  This seems to be an ongoing struggle in way too many estates. I'm not sure whether executors are not seeking legal advice, or ignoring legal advice, or simply getting inadequate legal advice, but the conflict between executors and beneficiaries carries on. A reader recently asked me a question about the requirements of an executor. Here is his question, followed by my comments:

"Is it legal within Canada that the executor can refuse to let beneficiaries know what their expenses are, and also refuse to show bank account statements unless the beneficiaries sign release of funds documents? My brother is saying that he is not obligated to show any accounting until he is ready to disperse money. Is he lying?"

I couldn't say for sure whether he's lying, or whether he's simply mistaken, but in either case, he's wrong. An executor must be prepared to produce an accounting for residuary beneficiaries at any time. By "any time" I don't mean that the executor must produce it five minutes after being asked, but he or she should be able to provide it to the beneficiary in writing within a reasonable number of days.

The requirement to account arises from the fact that the executor is a trustee and fiduciary. The executor doesn't own the estate or the assets of the estate; he or she is simply a custodian and manager of the assets. The estate belongs to the beneficiaries and therefore they have the right to ask what is going on.

In my view, the beneficiaries have more than a right to ask what's going on; I believe they have an obligation to ask. There are no executor police. There's nobody at the court or in the government whose job it is to check up on what executors do. It's up to the beneficiaries to ensure that the executor named in the will is actually doing what he or she was appointed to do.

Having said that, let's look at it from the executor's point of view. It's not reasonable for beneficiaries to ask for every receipt and expense as the executor carries out his daily tasks. There are not enough hours in a day for an executor to report on each and every step he takes, as he takes it. Nobody has time to make or receive that many calls and emails. I always urge executors to set up an email mailing list for the beneficiaries, and to send a summary every two weeks, or once a month once things slow down, to keep everyone informed.

While an executor is not entitled to keep bank statements secret from residuary beneficiaries, the beneficiaries do have to let him get on with the work with some level of trust.

The normal procedure in most estates is for an executor to provide a full accounting at the end of the estate when he is ready to write the cheques. Perhaps when your brother was told this by the estate lawyer he took it to mean that he doesn't have to do anything different.

This doesn't mean that he can do as you said, which is "refuse to show bank account statements unless the beneficiaries sign release of funds documents". He has to show the statements and the rest of his accounting first. How on earth could a beneficiary approve of his transactions if the beneficiary isn't told what those transactions are? He has that bit backwards. Generally the accounting and the release document arrive together, at the end of the estate administration, but beneficiaries should not sign releases without studying the full accounts first. If he does not provide an accounting first, he can be compelled by the court to pass his accounts.

The fact that you asked if your brother is lying is proof of something I tell executors constantly - hiding what they're doing only causes suspicion and speculation. They just need to be open about it.

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