Help for overwhelmed executors

It seems that every year during the Christmas week, we here at the trust company have at least one distraught customer come in looking for help with an estate. Usually a loved one has passed away, and with all of the activity and expense and travel already involved in the holiday season, it's just too much for the person named as executor to handle. They usually find their way to us through a banking officer to whom they have just told their problems.

I'm always pleased to be able to tell them just how much help we can offer. A trust company can do some or all of the executor's work for them without having the executor give up the decision-making power. We are professional executors, and we know which steps to take, when to take them and in which order to take them. We have connections throughout the industry, including estate lawyers, accountants, appraisers, realtors and auctioneers.

Not many executors know about this service, and many that do know about it assume that it must be very expensive. However, it's cheaper than you think. And it's great value for the money to have experienced people taking care of the estate efficiently and smoothly, avoiding common pitfalls, getting things done on time, talking to the courts and tax department for you, defusing problems with family members, reducing the chance that you'll be sued by the beneficiaries, and keeping the whole thing moving.

One thing executors rarely have while taking care of an estate is peace of mind. This is something a trust company can help you with. If you're an executor who doesn't know where to start, or is part way through an estate and feels overwhelmed, reach out for help! Call your bank and ask if they have a trust department. Or email me and I'll refer you to the trust officer nearest you.

Credit card debt that outlives Mom

If you're an executor trying to handle an estate that has debts, you must read this new article from The New York Times. It talks about who is responsible for debts and what has to be paid before beneficiaries receive their inheritances. Although this article is American, the legal situation is the same here in Canada. Click here to read the article.

I'd like to draw your attention to the part of the article that talks about collection agencies trying to convince you that you're personally responsible for debts, even when you're not. I know of many cases where collection agencies have tried this. If it's happening to you, find out your legal rights and stand your ground.

What happens if there is a will but no executor?

It's possible to pass away leaving a valid will, but still not have an executor. The person you named as executor could have passed away before you, or lost mental capacity, or simply refused to be your executor. This might create a situation where the will sets out everything the way you want it to go, but there is nobody to take charge and carry out your instructions.

You probably know that if you hadn't left a will at all, and you had assets that need to be dealt with, someone would apply to the court to become your administrator (as opposed to executor). The process is much the same when there is a will with no executor. Someone would have to come forward and apply to the court to be your administrator, but they would also have to give the court your will. It's a cross between an application for probate and an application for Letters of Administration.

If the deceased has made a will, it's important for someone to bring it to the court to carry out the deceased's wishes. There could be gifts of specific items or property in the will. The distribution of the estate might not be the same as it would be under the intestacy (i.e. no will) rules. Wills generally include additional instructions for things like loans made to children during the deceased's lifetime, shares in a family company or dealing with the cottage.

The rules about who has the right to make this application are set out in each province. Assuming that the named executor is out of the picture for the reasons mentioned above, the person with the right to apply to the court is probably a residuary beneficiary of the estate as set out under the will.

An executor's authority to take control of a deceased's assets arises from the will. If there is a will but no executor, nobody has a right to control the deceased's assets until the court appoints him or her. Once the appointment has been made, the administrator's job is much the same as an executor's.

If my name is on my Dad's account when he dies, do I own it?

I notice that in the majority of questions I'm asked about parents and adult children owning assets together, the question contains the words "my name is on it".  I'm not surprised that so many people are uncertain about the ownership and ultimate destination of assets when this is the full extent of the information available to them. Your name can be "on" an asset in more than one way, and even then, there are other circumstances that may affect whether or not you will own that asset after your parent passes away.

The first fact that you must clarify is whether an asset is held jointly with a right of survivorship, or whether it's held as tenants-in-common ("TIC"). You are likely to find the TIC situation only with real estate, including mines and minerals titles, and not on bank accounts. The fact that there are two names on a land title does not necessarily mean that the title is jointly held.

To know for sure whether land is held jointly or as TIC, you must read the title itself (or a search of title, which can be done through a lawyer's office or a registry). If the title is TIC, you will see wording such as "each as to an undivided one-half interest" or some variation on that.

If you are a TIC on a title, you will own only your share of the title when the other person dies. The other person can dispose of his share in his Will, or if there is no Will it will be divided on intestacy.

If an asset is jointly held, this usually gives rise to a right to survivorship. This means that when one of the owners dies, the other owner continues to own the whole asset. This is commonly seen in bank accounts and investment accounts, as well as real estate.

Once you have established whether you own something jointly or as TIC, you have taken the first step. As mentioned above, if you are a TIC, you have your answer. But if you are a joint owner, the question is not yet fully answered.

The complication arises whenever an asset is owned inter-generationally. The usual situation is between a parent and a child, though it could also be between an aging relative and his or her niece, nephew, grandchild, etc. In these situations, our highest court has said that when there is an account held intergenerationally, and the parent is the one who actually put the money in, on the death of the parent the money is deemed to be held in trust for the parent's estate. This is drastically different from what used to happen automatically with joint accounts.

What must happen next is that there must be some written record of whether the parent intended for the money to go to the child by right of ownership. The record must have been made around the time the child's name was put on the account. If no such record exists (and in the vast majority of cases, it doesn't) then the child has to give back the money into the parent's estate.

One of the ways parents are creating written records of their intentions is by making statements in their Wills. This could be a simple statement in the Will confirming that they do or do not want the account or investment or property to go to the child as a true joint owner.

Note that the question of joint owner with right of survivorship does NOT affect husband and wife ownership. The comments I've made in this post are restricted to inter-generational ownership that is usually set up by the parent who mistakenly thinks he or she is simplifying the estate, or just wants help with the banking.

You can see how this area of estate administration is rife with disputes, misunderstandings and hard feelings between siblings. I've said repeatedly that joint assets between parent and child are rarely a good idea, and that is largely because people almost always fail to confirm their full intentions. If a parent just wants help dealing with the banking, then he or she should use a Power of Attorney and leave the joint titles for those who truly want that child to inherit that full asset.

Executor's fees, lawyer's fees or both?

Today I'd like to answer another excellent question from a reader that I think will be of interest to many of you. The question is:

"Can a lawyer who writes up a will also be an executor of that will? Also, can he claim fees as both a lawyer and as the executor? And who decides how much the executor receives? If there are two executors, do they both get the same amount? Are there any limits to executor fees? Thanks."

Yes, a lawyer who writes up a will can be the executor, though he should not witness the will if he is named as executor.

At the time the will is drawn, the lawyer will claim his usual fee for writing the will. Later, when the testator passes away and the lawyer acts as executor, he will claim an executor's fee, which would be the same as a non-lawyer would claim. The lawyer would only be able to claim a lawyer's fee on top of that if he did legal work for the estate that would have needed a lawyer in any event. For example, if a lawyer would have been hired to file for probate anyway, then the lawyer/executor (or his firm) can do that work and charge the usual lawyer's rate for that work.

When a lawyer or accountant is named as an executor, it's a good idea to include a clause in the will that specifically addresses the fact that they can be paid professional rates for professional work and not for their entire executorship. The lawyer and the accountant should already know what they can charge, but the other people involved in the will might not know.

If the will states how much an executor is to be paid, then that is how much the executor will receive. Occasionally the amount is set out in dollars, but usually it's expressed as a percentage of the estate. Unfortunately, plenty of wills don't address executor's fees.

If the will doesn't address executor's fees, the executor must fall back on the statute law and case law for guidance. Executor fees vary from province to province, though there are usually only general guidelines to follow. Estates vary widely, depending on the kind of assets, the value of assets, the number and location of beneficiaries, whether there are claims or difficulties, the expertise of the executor and a hundred other things. As a general rule, an executor is able to claim between 1% and 5% of an estate, with only the more complicated estates reaching the top of that range.

The amount the executor receives - within the range mentioned - is normally determined by the residuary beneficiaries of the estate. During the final accounting for the estate, when the executor is ready to cut the cheques to the beneficiaries, the executor should put forth in writing a proposal of the fees he or she wants to claim. The beneficiaries are asked to approve the estate accounting including the proposed executor's fee.

If the residuary beneficiaries think the fee is too high (and quite often that's the case) then the executor and the beneficiaries may be able to negotiate a sum that's satisfactory to everyone.

If they can't agree, the executor's fee must be set by the court. This involves a hearing in courtroom. The estate can't be distributed to the beneficiaries until that has happened because the fee may be set higher or lower than the executor had requested.

If there is more than one executor named, the fee is expected to be split among them. It's not always an equal split. Sometimes one executor has taken on more of the work because of geography, time or skill. The executors should work out between themselves how they are going to split the fee, and if they simply can't agree, it has to be decided by a judge.

Arriving at a co-executor's fee

You and the co-executor are just about ready to finish winding up the estate, and it's time to think about taking your fee. It sounds simple, but as with most things to do with estates, the rules are unfamiliar. Here are some ideas for getting it right, compensating both executors fairly and keeping the beneficiaries happy.

The will may contain instructions about the amount to be paid in executor's fees. It could say that the executor gets a stated dollar amount as a fee, or that the executor gets a percentage of the estate.  Both are acceptable approaches. If the will includes a clause like this but contains no other instructions, this means that the fee stated has to be divided between the executors. It does not mean that each executor gets the amount stated; they must share it.

This leads to an assumption among most people that the executor's fee must be divided equally. But if you've worked on an estate, you know that the work is rarely evenly divided between the two. Sometimes one lives further away than  the other, or one has more expertise than the other, or simply has more spare time to devote to the estate. Any or all of these factors should be taken into consideration. If one executor has done more than the other, the fee should reflect the division of labour.

However, don't forget that the fee is also intended to compensate for the risk of the personal liability of the executor, so even if you feel that you've done all the work, that doesn't remove the other co-executor from his or her liability and you'll still have to share.

Many wills don't say anything about the fee that is payable to executors. In that case, the co-executors would fall back on the amounts normally awarded in their province or territory, and would share that amount.

In addition to carrying out executor's duties, an executor might provide professional services to an estate. For example, an executor might be a realtor who sells the deceased's home, or might be an accountant who prepares tax returns for the estate. These services are over and above executor's fees. These are things that the executors would have to pay for anyway, and should pay the executor his or her normal rate for those services. The payment comes out of the estate, but not out of the executor's fees. Therefore an executor or co-executor should be paid for their professional services and receive an executor's fee.

Your first meeting with the estate lawyer - what to bring, what to expect

Many times an executor has come to his or her first meeting with me loaded down with a cardboard box (or two) crammed full of papers. The explanation is always that the executor didn't know what to bring, so he or she brought everything. That makes sense, but somehow it still ended up that I needed things the executor hadn't brought along. This post is intended to make that first meeting between an executor (or administrator) and the estate lawyer run a little more smoothly.

What to bring:

• paper and pen for taking notes
• 2 pieces of I.D.
• the original will
• a Death Certificate and/or Funeral Director's Statement of Death
• the deceased's I.D.
• the deceased's social insurance number
• the most recent statements from the deceased's bank accounts, investments, RRSPs, RRIFs, TFSAs, LIRAs, DRIPs, loans and lines of credit
• the deceased's last tax return
• if the deceased was paying child support, a copy of the order or agreement to pay the support
• copy of the deceased's life insurance policies
• names and addresses of all beneficiaries named in the will
• names and addresses of the deceased's spouse and children
• the birthdates of any beneficiaries who are minors
• copy of title to the deceased's real estate, or the tax notice for the property

What to talk about:

• a timeline for individual tasks, and for the estate as a whole
• what the lawyer is going to do for you
• which tasks you are going to do yourself
• who the lawyer represents and will speak with
• who is entitled to see a copy of the will
• any possible claims on the estate
• what to do about personal effects in the deceased's home
• what and when the lawyer will charge for fees and disbursements
• paying the lawyer from the estate
• any further paperwork the lawyer needs from you
• any immediate need for cash for the deceased's spouse
• payment of the funeral bill
• opening an executor's bank account
• any of the deceased's assets that are in danger of being lost or damaged
• what to do if the deceased's house is now vacant
• whether you will claim executor's compensation, and if so, when and how much

Make sure before you leave the lawyer's office that you are clear on exactly what you have to do next to keep the estate moving. Open a binder or accordion file to keep estate documents, lists and statements organized.

Links to Office of Public Trustee

Do you ever wonder how the Office of the Public Trustee looks after the estates of deceased persons? Do you have questions about when they will become involved in an estate or how to go about getting them involved? If so, click on the link that corresponds to your province.

Alberta
British Columbia
Manitoba
New  Brunswick
Nova Scotia
NWT
Ontario
PEI
Quebec
Saskatchewan
Yukon

How and when to set up an estate bank account

Most executors and administrators of estates will at some point set up a bank account for processing financial transactions on the estate. Even when an executor or administrator has hired a lawyer to apply to the court for probate or administration, he usually still has to set up an account. The alternative is to run all transactions through the lawyer's trust account, which becomes expensive.

When the account is opened will depend largely on whether you are an executor (i.e. appointed by a valid will) or an administrator (i.e. appointed by the courts in the absence of a valid will). An administrator has no authority whatsoever to take charge of the deceased's money until he or she is appointed by the court. In other words, he or she can't open an account until the court provides them with a document putting them in charge.

If you're an executor, however, you can open the account at any time once you take charge of the estate. Your authority to do this comes from the will, not the probate. The name on the account should make it clear that this is not your personal money and that you are holding it in the name of the estate. If the deceased is John Smith and you, the executor or administrator, are Mary Smith, the account should be called either "The Estate of John Smith" or "Mary Smith, Executor of the Estate of John Smith".

Executors usually don't wait for the court to issue a probate document before opening the account. While the probate application is being processed, you, as executor, will usually apply for the CPP death benefit, collect any outstanding wages, benefits and refunds, and pick up any cash lying around the deceased's home. All of those things and more may be deposited into the estate account before the grant of probate is issued. As time goes on, you will add other assets to the account, such as when you cash in GICs, sell the deceased's home or transfer over the proceeds of the deceased's bank account.

If you receive cheques made out to the deceased person, they don't have to be re-issued to the estate. They can be deposited to the estate account as they are.

Who does the estate lawyer act for?

When a lawyer is hired by an executor to handle the legal work for an estate, that lawyer works for the executor. The lawyer's job is to advise the executor on legal matters (and often on estate administration matters too, if the executor is inexperienced). The lawyer carries out legal work such as applying for probate and dealing with disputes. The lawyer can't and won't take instructions from anyone else, not even the beneficiaries of the estate.

This is frustrating for beneficiaries, who frequently wish they had more say in what is happening in an estate. Many lawyers take the position that residuary beneficiaries have a right to be informed about what is going on an estate, and almost all will encourage the executor to communicate frequently with the beneficiaries about progress being made or obstacles encountered in the estate. This still doesn't mean that the beneficiaries get to tell the lawyer what to do.

I can't tell you how many times an irate beneficiary has complained to me that the estate lawyer won't listen to him. Well, when you think about it, how would you like to be doing your job the way you're supposed to, and some person who has no right to tell you what to do calls up and demands that you do what he wants?

This isn't to say that beneficiaries have no control over an estate. They have the power to approve the executor's accounts or withhold that approval. They also have the power to hire a lawyer of their own - either individually or as a group - if they have a dispute with the executor that simply can't be resolved without help.

The lawyer for the estate represents the executor in his capacity as executor. So if the executor is, say, a spouse who doesn't feel that she received enough of the estate and wants to make a claim against the estate, the lawyer won't represent her on that claim. (Hopefully the spouse wouldn't be named as executor in this case, but we all know it happens).

Can a person in bankruptcy inherit from an estate?

Here at Scotia Trust, one of our main tasks is to administer the estates of deceased persons who named us as their executor. As you can imagine with all of the estates that cross our desks, we see pretty much every situation sooner or later. Right now my colleagues are working on an estate in which one of the beneficiaries has declared bankruptcy, and has not yet been discharged.

A discharge of bankruptcy is an order of the court that says that the bankrupt person has fulfilled his or her obligations under the bankruptcy proceedings. Either all debts have been paid, or more likely, the property that was available for paying debts was divided up among creditors so that they were paid in part. While a person is undergoing the process and the court has not yet discharged him or her, any surplus income not needed for essentials is paid to the trustee in bankruptcy to be divided among the creditors.

If the person who is in bankruptcy is the beneficiary of an estate of someone who passed away, the bankrupt person's entire share of the estate will go to the trustee in bankruptcy. The trustee will use as much of the inheritance as is needed to pay all of the debts, even if this means the whole inheritance. If the trustee doesn't need all of the inheritance to pay the debts, then the surplus amount will be paid to the bankrupt person.

The bankrupt person can't legally waive his inheritance (i.e. decide he doesn't want it), and he can't assign it to someone else (i.e. say that he wants his inheritance paid to his wife or children or friends etc). The trustee in bankruptcy has complete control over the bankrupt person's incoming money. The executor of the estate has no choice but to send the inheritance cheque to the trustee in bankruptcy.

If the bankrupt person has been discharged by the court and later inherits money, he is free to receive it just like anyone else.

Tax deductible legal fees on an estate?

The legal fees paid to settle an estate are usually not tax-deductible, but read this article from All About Estates to find out when they might be tax-deductible. For a tax article, it's very readable!