Being an executor might sound respectable, but do you know what the role actually entails? Why is it a challenging role to take on? If you have recently been named as an executor of an estate, it’s important to carefully evaluate the potential pitfalls that come with the role: the legal, financial, and yes, the emotional difficulties that can be more complex than initially anticipated.
1. Legal and Financial Responsibilities of an executor:
An executor is legally responsible for maintaining and distributing the estate of the deceased (obviously in accordance with his or her Will). Because the executor has to be in compliant with government laws, it’s important to know what he/she is doing. The general experience involves filing out paperwork, court documents, notifying beneficiaries, and managing debts and taxes. Executors can face complex legal requirements, which can lead to mistakes and delays in dispersing assets to the right heirs. All of that can lead to personal liability issues.
In short, you REALLY need to know what you’re doing when you’re in your official capacity as executor.
2. Time and Resource Demands:
Executorship is a time-consuming process: you need to coordinate with accountants, attorneys and beneficiaries. Depending on the estate’s complexity, completing all your duties can take several months or even years. Executors have to handle their own personal responsibilities, complete the necessary estate documents, attend meetings, etc. The duties of an executor are akin to a full-time job: a “job” that can take up about 100 hours (or more) and 12-18 months to finally complete.
You may want to start with a team of individuals behind you: if you’re not a lawyer and need help managing your duties, you may want to start by getting an estate planning lawyer to help you out. An estate planning lawyer can assist with unreasonable beneficiaries, beneficiaries who are trying to argue against the amount of money they received from the estate, or beneficiaries who want an item of sentimental value, one that was passed to another heir. An accountant can help you manage the ins and outs of filing estate administration taxes correctly and on time, while simultaneously assisting with paying off any outstanding loans on the estate. A financial advisor can help manage asset distribution. A real estate agent can assist with selling any property the deceased intended to sell.
You can see the importance of having a whole team of individuals behind you.
You may have to take time off work to become an executor.
3. Family Dynamics and Emotional Strain:
In addition to all the legal and financial duties of an executor, the role is likely to be emotionally draining, as the executor is usually a family member of the deceased. Combined with the added element of grief, this can lead to disagreements among beneficiaries (who may or may not be the executor’s siblings). A lawyer may be able to assist with unruly beneficiaries who want to battle it out in court over the deceased’s estate and assets.
When it comes to money or sentimental items, tempers and emotions may flare.
4. Potential Financial Risks:
Executors could face personal liability if estate funds are mismanaged; there are financial risks to consider, including mismanaging estate funds, filing taxes on time, and paying off debts.
One benefit of being an executor is that you can be compensated for your time as an executor: the Trustee Acts across Canada outline instructions for executors to be compensated for their work. The provinces have their own rules on how executors should be compensated. The CRA upholds that any compensation received by an executor is taxed as income.
Even that comes with risks: some parents may have difficulty with the notion of giving one sibling compensation for their duties because of the risk of favouritism.
Nonetheless, everyone should be paid for their work.
This isn’t even taking into account the headache Probate could bring.
Whether or not you decide to take on the role, consider everything the responsibility entails. That includes both the benefits of being an executor and the potential pitfalls of becoming one.