Being an executor of an estate is a huge responsibility, and there are some common mistakes executors make in probate. An executor is loaded with responsibilities, along with being accountable for overseeing and distributing the assets of a deceased person.
Probation can be a complex and challenging process. The executor needs to manage an estate, which at times leads to common mistakes. It is not like people do not enjoy acting as an ‘Estate Executor.’ They do, and they are also entitled to financial compensation as a reward.
But there are common mistakes executors make in probate; while trying to provide a valuable service to loved ones. Executorship is both a challenge and a reward, but you must know the common pitfalls to stay vigilant. In this article, we will take you one step ahead so that you can avoid the common mistakes executors make in probate.
What is probate?
What is probate? The legal procedure through which a deceased individual’s assets, debts, property, and other financial matters are managed is known as probate. However the legal analysis of transferring the assets to the right heirs or beneficiaries.
The property is distributed through a legal will in case of no valid will; it is distributed through the law of intestacy. To start a probate process, the estate needs to have an executor. It is either named in the will, if not, the legal authorities issued a state representative.
Below are some key steps of the probate process.
- The first step is to file the will and petition to start the probate process. The appropriate command of a court typically fills it. A petition will be filed to interstate administration if there is no will.
- The presence of an executor is mandatory to start a probate process. The court will appoint a legal representative if there is no will and no executor is named.
- To start a probate process, the executor must compile a detailed inventory of the deceased person’s assets, including bank accounts, investments, personal belongings, etc.
- Executors must notify the creditor to make a claim against the estate for the outstanding debts. The executor will review and pay the debts from the assets.
- Payment of taxes is also a mandatory part of probate. The executor is responsible for filing the income tax return and addressing any estate tax obligations.
- Once all the debts and taxes are paid, the remaining assets, under the supervision of an executor, are distributed to the beneficiaries and legal heirs of the estate.
- The executor needs to notify the court after completing the final accounting; this part formalizes and completes the probate process.
The probate process is complex and time-consuming, and it also depends upon the size of the estate. Due to the potential complexities of probates, executors sometimes make common mistakes in probate.
Who is an Executor?
An executor is a personal representative of an estate. An individual appointed by a person in their will (in case there is no name of an executor in the will, the court will appoint a legal representative). The executor carries out all the administrative duties and responsibilities related to estate affairs.
The role of an executor comes with a lot of challenges and responsibilities. It is a position of trust and compatibility, as they are entrusted to manage the financial assets. An executor is also responsible for ensuring that the deceased’s final wishes are fulfilled and the financial assets are legally distributed.
Key responsibilities of an executor include:
- Initiating the probate as per the Ontario estate law. The executor must present all necessary documents to the court to start the probate process.
- The executor needs to compile a list of assets, financial accounts, personal belongings, and other valuable items.
- The executor is also responsible for managing the estate’s assets, which involves maintaining the property and making investment decisions.
- Before settling and distributing the financial assets, the executor will clear the debts, loans, mortgages, and other financial claims.
- The executor must pay the taxes before distributing the assets.
- Once all the loans and taxes are paid, the executor will inform the beneficiaries about the probate.
- The executor will represent the estate in legal matters once financial assets are distributed.
- Once all the tasks are completed, the executor will get the probate approved by the court.
Being an executor is a challenging job. Yes, it comes with financial compensation but with a lot of responsibility. Usually, executors are close family members, friends, or lawyers.
10 Common Mistakes Executors Make in Probate:
Please read up on common mistakes executors make in probate and learn how to avoid them to make the process smoother and more efficient.
1. Doing everything on their own:
This is one of the biggest mistakes carried out by an executor. Trying to do everything independently is not at all a smart move. A team approach would be a better move to an executorship.
Yes, being an executor is a responsible job and requires attention to detail. Some tasks need to be done by the executor, but there are other tasks that an executor can delegate to a team member. By doing everything alone, the executor risks legal liability and frustrates beneficiaries.
2. Inadequate record keeping:
Executorship demands accountability. Most of the time, the executor must keep a proper financial record. Everything that relates to the financial data of the estate must be compiled in a secure filing system.
Official invoices, transaction receipts, bank statements, and everything must be properly documented. If there are any handwritten or unofficial typed details, a copy must be kept with the official statements to back up any issue.
3. Communication gap with the estate beneficiaries:
As the saying goes, “communication is the key,” the same applies to estate administration as well. There should be a healthy relationship between an executor and beneficiaries. Failing to communicate effectively with the beneficiaries can lead to conflict, stress, and even lawsuits against the executor.
An executor must be responsible enough to communicate with the estate beneficiaries providing them with timeliness and notifying them about the probate steps and process.
4. Not hiring a probate lawyer:
One of the most common mistakes executors make in probate is not hiring a probate lawyer. With the assistance of a qualified probate lawyer, an executor may be able to understand the legalities.
An executor proceeds with the probate to save the expense of hiring a lawyer. A knowledgeable probate lawyer reduces the workload and stress and provides an executor with valuable legal advice.
5. Fails to file the tax returns:
It comes under the responsibility of an executor to file the tax returns on time before distributing the assets amongst the legal heirs and beneficiaries. An executor must obtain a clearance certificate from the CRA in most cases.
6. Not creating a list of assets:
Creating a list of financial records, assets, properties, bank statements, personal belongings, etc., is an executor’s responsibility.
The most common mistake executors make in probate is not compiling a list of the financial data. The list facilitates the administration in the distribution of the estate.
7. Not advertising for the creditors:
Before distributing the financial assets to the legal heirs and beneficiaries, it is the executor’s responsibility to notify the creditors of the claim. The executor is required to post an advertisement in the newspaper, which can notify the potential creditors.
8. Mishandling the estate funds:
Executors are usually trusted individuals by the deceased. But at times, the executor needs to handle and borrow the estate funds. Moreover, handling the estate funds is poorly done, and they find themselves “out of bounds.”
As an executor, you must not borrow funds from the estate for your purposes. In case, contact the probate lawyers first.
9. Not following the will:
Not following the will is an unethical thing to do as an executor. An executor is a trusted person by the deceased, and an executor must act accordingly.
An executor cannot divide and distribute the assets just like that. The valid will contains all the wishes of the deceased, and the estate must be managed according to the will.
10. Not taking beneficiaries’ sign releases:
Lastly, neglecting to have beneficiaries sign releases is a common mistake executors make in probate. By law, executors need to handle the estate funds from the date of the deceased’s death to the date of the distribution. Before distributing the funds to any beneficiary, the executor must get approval from the beneficiary.
Probation is a time-consuming, challenging, and responsible process. The executor must carry out the probate process with diligence and focus. An executor must know about the responsibilities, executors must seek the guidance of experts when it comes to estate planning, and should also know about the common mistakes to enhance the efficiency of the probate. Being an executor has financial rewards, but a significant role needs attention to detail and a proactive mindset.
No, being an executor does not specifically mean that you are liable for any estate debts. Yes, there are some exceptions, and taking such a huge responsibility comes with some risks, which depend on the mistakes.
Any cost related to administering the estate, such as funeral expenses, marketing, advertising, selling the property, and probate registry fees.
Yes, an executor can be held legally and financially accountable for any mistake. As a designated executor in a will, you must properly compile the requirements to initiate probate and must close the probate after getting the approvals from the beneficiaries.
Meet Doug, a seasoned financial planner with over 35 years of experience in providing trusted advice and planning for retirement, estates, income tax, and investments. As a Chartered Accountant (CPA CA), Certified Estate Advisor (CEA), Certified Financial Planner (CFP®), and Elder Planning Counsellor (EPC), Doug has the expertise and knowledge to guide and support executors through the estate processing journey.