Tag Archives: Executor

The Pitfalls of Becoming an Executor
A man stands in the foreground, while his family grieves their loved ones.

Taking on the role of executor might sound respectable, but do you know what the role actually entails? The role is far more intricate and challenging when you look into what it actually entails. If you have recently been named as an executor of an estate, it’s important to carefully evaluate the the legal, financial, and emotional difficulties that can make being an executor more complex than you 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 role involves filing out court documents, notifying beneficiaries, and managing the debts and taxes for the estate of the deceased. Executors can run into complex legal requirements, and those complexities can lead to potential mistakes. This can delay dispersing assets to the right heirs.

In short, you REALLY need to know what you’re doing in your official capacity as executor.

2. Time and Resources:

Executorship is a time-consuming process: coordination with accountants, attorneys and beneficiaries is all a necessary part of being an executor. Depending upon the complexity of the estate, completing all of your duties can take several months (or even years) to close the estate. Executors have to deal with their own personal responsibilities, fill out the proper 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 you need help in to manage your duties, you may wish to start with getting an estate planning lawyer to help you out. An estate planning lawyer can assist in dealing with unreasonable beneficiaries – beneficiaries who may dispute the prescribed amount of money they were designated by the deceased. An accountant can help you manage the ins-and-outs of filing estate administration taxes, correctly and on time, while simultaneously assist with paying off any outstanding loans (or debts) on the estate. A financial advisor can help manage asset distribution. A real estate agent can assist with selling any property the deceased may have wanted sold.

You can see the importance of having a whole team of people behind you.

You may have to take time off work to become an executor.

3. Family Dynamics and Emotional Strain:

In addition to all of the legal and financial duties of an executor, the role is definitely going to be emotionally draining, because the executor is usually a family member of the deceased. Combined with the added element of grief, this can lead to disagreements between beneficiaries (who may or may not be siblings of the executor in question). 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 the possibility of being held personally liable if financial assets are mismanaged; there are financial risks to consider: mismanagement of 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 in Canada outlines instructions for executors to be compensated for their work. The provinces do have their own rules as to how executors should be compensated. The CRA upholds that any compensation received by an executor is to be taxed as income.

Even that comes with risks: some family members may have difficulty with giving one sibling compensation, running the risk of favoritism.

Nonetheless, everyone should be paid for their work.

This isn’t even going into the headache that Probate could bring.

Whether or not you decide to take on the role, take into account everything that the responsibility holds. That includes both the benefits and the potential pitfalls.

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Executor vs. Power of Attorney in Canada: Their Distinct Roles
Overwhelming responsibilities come with being an Executor

Estate planning doesn’t have to be a complex, nebulous and confusing term. Estate planning is something that everyone must deal with, at one point or another in their lives. The regulations managing Estate planning vary from province to province, and the laws may differ in other countries. Two vital positions frequently discussed in Canadian estate planning are the Executor and the Power of Attorney (PoA). Both are two distinct roles, which this article will delve into:

Definitions

Duration and Timing

Scope of Responsibilities

Limitations

Appointing the Right Individuals

1. Definitions and Basic Understanding

Executor:

In the Canadian context, an Executor (sometimes referred to as a “liquidator” in Quebec) is a person or institution named in a Will to administer the estate and ensure that the deceased’s wishes, as specified in the Will, are carried out after their death.

Power of Attorney

A Power of Attorney is a document appoints which allows you to give someone else the authority over your financial affairs and property. It applies in situations where a Will would not apply.

2. Duration and Timing

How long does each role last? How long can you be an Executor? How long can you be appointed as a Power of Attorney?

Executor:

The role of the Executor in Canada happens upon the death of the testator (person who wrote the Will). The Executor’s responsibilities continue until the estate is fully settled, which, depending on the estate’s complexity, can range from a few months to several years.

Power of Attorney (POA):

A PoA is a Canadian legal document, allowing an individual (known as the grantor) to designate someone (referred to as an Attorney, not to be confused with a lawyer) to act on their behalf concerning financial or health matters, especially if they become incapacitated. Much like the role of an Executor, the range of time an Attorney has to deal with his/her specific duties often varies.

3. Scope of Responsibilities

The scope of responsibilities vary on the type of responsibilities/document that you create. The Executor of your Last Will and Testament has the following responsibilities listed below (this is only a brief overview):

Executor:

  • Asset Management: Identify, appraise, and safeguard the deceased’s assets, ensuring they adhere to Canadian laws.
  • Debt Payment: Address the deceased’s outstanding debts, including taxes—in collaboration with the Canada Revenue Agency when necessary.
  • Estate Distribution: Distribute the remaining assets to the beneficiaries, according to the will.
  • Legal Processes: Engage in the probate process if required and address any legal challenges to the Will.

The “Attorney” appointed to follow your wishes, (as outlined in your Power of Attorney document) has the following responsibilities, as listed below. These responsibilities vary upon the type of Power of Attorney, and the instructions you have outlined for him or her to follow.

Here is a brief overview:

Power of Attorney:

  • Medical Decisions (Healthcare PoA): Under a specific PoA for personal care, the attorney can make healthcare decisions on behalf of the grantor.
  • Financial Management: Oversee the grantor’s financial assets, which may include banking, investments, and bill payments.
  • Real Estate and Personal Property: In accordance with Canadian laws, manage or sell real estate and other assets.
  • Other Specified Powers: As detailed in the PoA document, this could include tasks like business decisions.

4. Limitations

Executor:

  • Guided by the Will: Canadian Executors are strictly bound by the directives of the will.
  • Pre-death Authority is Absent: The Executor’s authority is exclusively posthumous.

Power of Attorney:

  • Adhering to the Grantor’s Interest: Every decision made must prioritize the best interests of the grantor.
  • No Alterations to the Grantor’s Will: The attorney cannot modify any existing will of the grantor.
  • Scope Restricted by the Document: A POA operates within the stipulated boundaries of the document, respecting Canadian legal standards.

5. Appointing the Right Individual

Given the considerable responsibilities and potential challenges, it’s paramount for Canadians to choose reliable, adept individuals for both roles. It might sometimes be practical for one person to act in both capacities, but the pros and cons should be thoroughly evaluated.

It is very important that Canadians understand the differences between being an Executor, vs. being appointed as a Power of Attorney.

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