One of the services I provide to clients is to assist them in estate administration duties. It is a natural complement to my POA and wills preparation services. When a person dies, the estate administration process ensures that the will is validated and the will is followed by the person (or persons) named to look after the deceased’s affairs. This may require the need to get court approval, but in some cases it may not. There is a lot of paperwork to be reviewed, to be sent out, and to be filed. It’s not as straightforward as some “self-help” books would make you believe. As with other blogs I’ve written, if you follow the advice or instructions set out in a book, you may not find out until it is too late that something was not done right, which in the end will cost you substantial time, money and heartache (and not in that order).
This blog will deal with a basic explanation of estate administration – what it means and entails, the role, the rights, and the responsibilities of the executor and trustee, and the role of the estate lawyer in assisting the executor and trustee to make sure that the deceased’s wishes are followed.
What is Estate Administration?
Estate administration is the process of organizing and listing both the assets and debts of a deceased person, handling the payment of both the deceased’s debts and taxes, and then distributing the assets (whether it be money, digital assets, personal property or real property) in accordance with the express instructions as set out in the deceased person’s will.
If the deceased person did not own a lot of property or have a lot of debts, the exercise of estate administration can be simple, but still very detailed. It may not even have to be “probated” (that’s for another day). But given that we are living in a time when we are seeing the greatest transfer of wealth from one generation to another, most estates have some significant assets (and perhaps corresponding debts) that need to be inventoried and then paid out in a proper manner.
The Executor, Trustee and Estate Trustee
When a person dies, the deceased person lives on through their estate. As the estate is not a human being, the estate must have a personal representative (or more than one). If the deceased person had a will at the time of their death, they will have named a person (or persons) to act as their “estate trustee” to manage their affairs upon their death. Although there are some technical differences between the terms as it pertains to the functions to be performed, we will use the term “estate trustee” to mean the person that will a) execute the instructions of the estate, and b) handle the trusts that were set up by the deceased in the will.
Duties of the Estate Trustee
As mentioned above, the estate trustee is the lead person who makes the necessary decisions and carries out the work to actually administer the estate. Although the estate trustee may use, hire or delegate some of their duties to others (both professionals and others), the responsibility lies solely with them to carry out the deceased person’s wishes. Such duties include, but are not limited to:
- Locate the Will and determine that it is the last valid Will of the deceased
- Make proper funeral and burial arrangements
- Determine the names and addresses of the beneficiaries
- Advise third parties of death, re-direct mail and cancel subscriptions and credit cards
- Obtain proof of death (these are provided by the funeral home)
- Determine the full nature/value of the deceased’s assets, and compile an inventory list
- Locate and preserve all assets – contact employers, banks, tenants, brokers, etc.
- Ensure assets are insured
- Arrange for a listing of the contents of all safety deposit boxes
- Obtain appraisals of all property
- Apply for Canada Pension Plan death benefits
- Open estate bank account
- Retain a lawyer to advise you in the administration of the estate
- Determine whether a Certificate of Appointment of Estate Trustee is needed
- Determine the debts owed by the deceased at death and arrange for their payment
- Contesting debts, if necessary, and settle any compromised claims.
- Locate and review contracts which bind the estate
- Advertise for creditors of the estate
- Sell and liquidate assets of estate as necessary
- Locate prior tax returns and determine any tax returns that need to be filed
- Prepare and file the necessary tax returns for the deceased, pay the tax owing and obtain tax clearances and releases
- Distribute the assets of the estate according to the terms of the Will and obtain releases
- Establish on-going trusts and maintain reporting records of same
- Maintain proper accounts during the administration
- Prepare an accounting for all beneficiaries, showing all dealings with the estate assets during the course of the administration
- Make all decisions as to the administration of the estate
As you can see, the list can be quite daunting for any one person. And if the tasks are not done properly, and mistakes are made, the liability rests with the estate trustee personally, and not the estate itself. I explain this carefully to my client, and I tell them to please make sure they understand this before they agree to take on the responsibility of being an estate trustee.
Rights of the Estate Trustee
No one expects the estate trustee to do this for free, perhaps with the exception where it is the remaining spouse who acts as the estate trustee for the deceased spouse (to whom most, if not all, of the estate will be given). As such, in exchange for taking on these responsibilities, the law allows for compensation for the estate trustee. Pursuant to the governing legislation (the Estate Act), an estate trustee is entitled to compensation to 2.5% of capital receipts and disbursements, and 2.5% of all revenue receipts and disbursements above the expenses incurred to properly administer the estate. In “non-legalese,” this translates to roughly 5% of the estate’s value.
However, an estate trustee may charge a different rate, providing that the estate can justify the rate. Such factors that justify a different rate can include:
- the size of the trust;
- the care and responsibility involved;
- the time occupied in performing the duties;
- the skill and ability shown by the estate trustee; and
- the degree of success resulting from the administration
Can a Person Refuse to be an Estate Trustee?
The simple answer is yes. If the person appointed is not interested in taking on these responsibilities, they can “renounce” the appointment. There is some paperwork involved, and if there is no alternate estate trustee referenced in the will it can create some problems. That is why I always tell my clients, when they are preparing and signing their wills, to ask the person whom they wish to appoint as estate trustee if they would be ready, willing and able to do so. Address a potential problem ahead of time when options are available, rather than after the facts when options are fewer or more costly.
The Lawyer for the Estate Trustee: Lending A Helping Hand
If a will is properly drafted, it will allow an estate trustee to reach out to others to help take on some of the required tasks. If there is more than one estate trustee it is easier, but if not the will allows for delegation (assigning tasks to others) and to hiring professionals to get some of the talks done. Often, this falls to the lawyer for the estate.
When asked to be the lawyer for an estate trustee, I will make it clear, right from the beginning, what my role is and what their role is, as well as the tasks I will complete and tasks they will complete. The one task they cannot delegate to me, or to anyone else, is decision-making: I will do my part to help them, and I will guide them and advise them, but all final decisions rest with them.
Compensation for the Lawyer for the Estate Trustee
Much like the estate trustee themselves, the lawyer who represents the estate trustee can charge an hourly fee, a fixed fee, or a fixed percentage of the value of the estate (it really varies from lawyer to lawyer, and on the complexity of the estate). As well, if the estate trustee delegates some of their duties to the lawyer that would otherwise be handled by the estate trustee, the lawyer can also charge for taking on these responsibilities. Make sure to ask your estate lawyer about their compensation at the beginning your professional relationship.
How Long Will the Estate Administration Take?
This is such a common, yet loaded, question. It really does depend on the relative ease (or lack thereof) of administering the estate, looking at the size of the estate, the amount of assets that needs to be accounted for, the debts and taxes to be paid out, and the simplicity/complexity of the instructions to be followed. Generally, it can be anywhere from a year to 3 years.
It may seem overwhelming to be an estate trustee, but if you have the right support group, including professionals (estate lawyer, accountants, tax advisers) and non-professionals (friends and family), it is an honourable responsibility to be asked to ensure that a person’s final wishes are followed. But like any other adult responsibility, make sure you know what you are getting yourself into before you commit to being an estate trustee, or else you may find yourself envying the deceased!