| Sursa dumneavoasta de Estates si Real Estate Law - TO ACT OR NOT TO ACT AS EXECUTOR – THAT IS THE QUESTION|
Many of my clients think that it is an honor to appoint someone or be appointed as an executor to a will. Parents want to make sure all their children have been appointed as executors to their wills, and children feel that if they are not appointed, they were purposefully excluded.
I always say to my clients that appointing someone as executor is NOT an honor, but a very big responsibility. Let me be perfectly clear: being an executor is A LOT of work and it exposes the executor to PERSONAL LIABILITY when acting in this role.
Here are some of the obstacles which executors face:
- hard deadlines
- the need to keep financial records
- demands from impatient beneficiaries
- financial institutions / the court
- arrange for the sale / investment of estate assets
- be aware of the applicable estate administration laws and administer the estate accordingly
- exercise a fiduciary duty in the administration process
- distribute the estate according to the terms of the will
- arrange to file income tax returns (yes, you read correctly, there are multiple income tax returns!)
- pay debts / handle creditors
- handle claims brought by beneficiaries or creditors
As one can see, there is a lot of liability, responsibility and risk involved. Whoever gets appointed as an executor must be good with finances, deadlines, not be risk averse, be willing to ask for help from a professional or be comfortable to figure everything out on their own.
They also must assess the risk of a potential claim looming on the estate. And that’s why not everyone is fit for the task. It is a job, just like all other jobs. Not everyone is fit to be an engineer, a doctor, a sales person because for any profession, one needs to have an inclination towards the requirements of that profession in order to do a good job.
Discussing who should be appointed as the executor is an important part of preparing someone’s estate plan, and it is something I take very seriously.
The client lets me know who they want to appoint as executor, and then I ask the trick question: “do you feel confident that this person handles finances well and most importantly, that they will distribute your estate according to your wishes?”.
If the answer is wobbly or uncertain, I immediately ask them to reconsider.
I explain that it is a very serious endeavour, I describe the tasks an executor has to fulfill and the risk they are subjected to.
On the other side of the coin, once someone passed away and the appointed executor seeks my help with the estate administration, I let them know that they do not have to act if they do not want to or feel competent for the task. I explain the tasks and the risks involved and I note that if an appointed executor wants to renounce, it is best that they do so at the outset, before starting to administer the estate. The process to do so is very simple: sign one piece of paper.
If, however, someone wants to resign after having acted as executor on an estate, the process includes an application in court and a passing of accounts (which means preparing a full accounting of the finances of the estate thus far). As you can see, the latter is a much more complicated and expensive process!
For all the executor’s pain and struggles, they are thankfully allowed to take compensation. Sometimes the will includes a clause which does not allow the executor to do so… and this is another paragraph the appointed executor should scan the will for before deciding to act.
But if the will allows them to do so, then the executor will get paid in accordance to a “court-recognized” tariff. This tariff is not fixed and it is subject to change as sometimes the court may decide that it is more reasonable in the circumstances to adopt another approach (docketed time).
This tariff is expressed as follows:
- 2½ % of the total capital receipts (i.e., original assets realized);
- 2½ % of the total capital disbursements;
- 2½ % of the total revenue receipts;
- 2½ % of the total revenue disbursements;
- annual “care and management” fee of 2/5 of 1% of the average annual market value of the capital of the estate or trust (note: the care and management fee is generally available only where it is a trust estate that is to be held for a number of years).
Sometimes, the beneficiaries do not outright accept the executor’s compensation only because it is consistent with the “tariff.” The executor has to be able to substantiate the amount of compensation claimed.
As an executor, it is normal to feel overwhelmed, and it is also normal to ask for help. So if you have any questions, don’t hesitate to give me a call, and I would be pleased to help you.
PLEASE NOTE THAT THE CONTENT OF THIS BLOG IS MERELY FOR INFORMATION PURPOSES AND DOES NOT CONSTITUTE LEGAL ADVICE.
Raluca M. Soica, BBA, CPA, CMA, JD
Barrister & Solicitor
Raluca M. Soica - Barrister & Solicitor 5/17/2021