Denika Heaton, BBA, JD, TEP, CEA Tax and Estate Planning Specialist, Private Wealth
Chris Hanley, CPA, CA, CFP Tax and Estate Planning Specialist, Private Wealth
Being named as someone's estate executor is both an honour and a significant responsibility. While you may feel obligated to accept this role, it's crucial to understand what you're agreeing to before making your decision. Estate administration involves complex legal, financial, and interpersonal challenges that can span months or even years. From managing assets and paying debts to navigating family dynamics and potential litigation, the executor's role carries substantial personal liability and time commitments. Before you accept—or if you're reconsidering an existing appointment—here's what you need to know.
Understanding Your Role as Executor
The executor fulfills the deceased's wishes as articulated in their Will. As an executor, you serve as a fiduciary—someone with the duty to protect and manage the deceased's property until all taxes and debts have been paid, gifts satisfied, and the residue (remaining property) transferred to the beneficiaries.
There could be several reasons why you should not undertake this role on behalf of the deceased.
Factors to Consider Before Accepting
Residency Status
An executor of a Canadian estate should be a Canadian resident (and not a U.S. Person). If you are a non-resident or Canadian resident who is a U.S. Person, your appointment could have negative tax implications for the deceased's estate, including the estate being deemed non-resident and taxed accordingly.
Relationships with Beneficiaries
As an executor, you must exercise reasonable judgment and maintain the highest degree of trustworthiness, honesty, and impartiality. Consider:
- Do you have personal conflicts with any beneficiaries that could impede your ability to manage the estate?
- Do you have a conflict of interest because you intend to challenge the Will or bring a claim against the estate?
Time Commitment
Serving as an executor is time-consuming. Assess your current personal and professional commitments to determine if you can dedicate the necessary time to fulfill this role properly.
Do You Want to Act as an Executor?
Taking on the role of executor isn't just about capability—it's about willingness. Even when qualified, there are compelling reasons you might choose to step aside. Consider these important factors:
Personal Liability Concerns
Executors can be held personally liable if their duties aren't performed properly. This significant responsibility should give you pause.
Premature Distributions: If you distribute assets to beneficiaries before paying all valid estate debts, you could be personally liable for these outstanding debts if creditors remain unpaid after the distribution of the estate's assets.
Insolvent Estate: If the estate lacks sufficient assets to pay all debts, you may face complex challenges and may wish not to be involved.
Other Estate Considerations
Anticipated Litigation: Consider whether you foresee litigation involving the estate or conflicts among beneficiaries that could lead to lengthy disputes and emotional stress.
Executor's Insurance Considerations: Consider obtaining executor insurance to protect against damages arising from errors, omissions, or negligent acts in performing your executor duties. Be aware these policies often have exclusions and generally don't cover large liabilities such as income or probate tax liabilities.
Declining to Act as Executor
One of your first important decisions should be whether you will agree to accept the role as executor, or if your personal circumstances require you to decline this fiduciary responsibility.
Provided you have not intermeddled with the deceased's estate, you are under no legal obligation to accept your appointment as executor and may consider renouncing your role. This means you cannot have already:
- Held yourself out as having authority to administer estate assets pursuant to the Will
- Applied for probate
- Taken control of any estate assets
Rest assured that preliminary tasks, such as payment of funeral expenses, are generally permitted without committing you to the role.
If you have already begun dealing with estate assets or representing yourself as the individual with the authority to administer the deceased's estate, you cannot simply decline your role as executor. In this case, most provincial succession legislation would require you to seek the court's permission to be properly removed and discharged from your executor duties.
Once You've Decided
After making the decision to accept your role as executor, your next responsibility is to locate and understand the deceased's final wishes. This begins with finding the original Will and understanding its contents.
Making an Informed Decision
Deciding whether to serve as an estate executor shouldn't be taken lightly. While it can be rewarding to help fulfill someone's final wishes, the role comes with significant responsibilities and potential risks. If you determine that serving as executor isn't right for your situation, remember that declining is both legally permissible and sometimes the most responsible choice for all parties involved. Whatever you decide, ensure you're making an informed decision based on your personal circumstances, capabilities, and comfort level with the associated responsibilities. When in doubt, consult with legal and financial professionals who can help you navigate this important decision.