it is not measurable in terms of money. It is not going to end up in court. The consequences are personal, not legal. This book will concentrate on keeping you out of court and out of the lawyer’s office as a result of financial losses and legal mistakes. The added benefit of family harmony that will result from a smooth estate administration is a significant bonus.
There are endless variations on estates. Each is unique in terms of assets, liabilities, family, beneficiaries, and documents, and as a result there is no limit on the mistakes available for you to make. However, the mistakes tend to fall into general categories as we will discuss in this book.
It is important to realize that many mistakes by executors are made by honest, well-intentioned people just like you. While there are some executors who behave as if they have personally won the lottery when they are made executors, most take it more seriously than that. Most want to do a good job. It is easy to make a serious error, even when you are honest and paying attention, simply because you are not aware of a law, regulation, form, or process.
Some rules and laws that govern estates do not make a lot of sense to people who do not work with those rules often. In particular, executors and beneficiaries alike will complain that the estate taxation rules seem difficult to understand. This may be the case if you do not know the theory behind them, but as an executor you are probably not very interested in learning tax theory; all you likely want to know is how not to fall on the wrong side of the law.
Congratulations on choosing this book; you are already ahead of the game, since many executors do not even realize they may face personal liability until they are standing in a courtroom and wondering how they got there. By reading the descriptions and examples in the following chapters of the mistakes that executors frequently make, you will be able to avoid them yourself.
Chapter 1
General Laws and Rules for Executors
In this chapter, you will find a brief review of the laws, regulations, and procedures that set out how an executor must behave in Canada. All statutes (written laws) that apply to wills, probate, and estate administration are provincial, so there are surprisingly wide differences between them. However, the general rules and principles are the same across the country. In the downloadable kit that accompanies this book, you will find a list of the laws that apply to each province and territory.
Laws regarding taxation of estates are made federally so they are the same for all Canadians.
The goal of this chapter is to guide you towards greater understanding of your role as executor and to help you find the resources you need.
1. Where Does It Say That?
A question asked over and over again during estate administration is, “where does it say that?” This question is asked by executors who have read the will thoroughly and simply do not see where it tells them that they cannot commingle (mix) the estate money with their own, or that they must wind up the estate in one year, or a hundred other things.
You may not see these things written in the will. In fact, it is highly unlikely that you will. However, they exist and they affect you.
A legal document of any kind, including a will, is prepared in the context of the laws of the land that relate to that document. An executor who is administering a will is expected to educate himself or herself as to the duties, rights, and obligations of an executor, no matter what is written in the will. You have to make it your business to find out which laws and regulations govern estates and executors, and to abide by them. Saying that you did not know the law will not help you if you are sued.
Therefore, realize right from the beginning that the will is a summary of what you must do, and the laws of your province and of Canada fill in the details of how you must do it.
2. An Executor Is a Type of Trustee
Words used in a will have definitions that are well-entrenched in law, because wills have been around for many hundreds of years. Our Canadian laws are based on British laws and processes that go back to the years before Canada existed in its current form.
These definitions bring with them legal rights and responsibilities that may be invisible to you when you read the will, but that exist in any event. For example, if you asked an average person to define the word “executor,” you would probably hear something like “the person who looks after the will and pays everyone their inheritance.” That is true as far as it goes. However, there is much more to it, as the word “executor” has been used in legal cases for hundreds of years. The law says that an executor of an estate is considered to be a trustee and must behave as a proper trustee.
Because an executor is a trustee, a mistake made by an executor is usually referred to as a breach of executor’s duty.
Every province and territory has a Trustee Act which governs the rights and responsibilities of an executor or estate administrator. You might not know it from simply reading the will, but those obligations apply to you. It would be a good idea for you to read the Trustee Act for your province. Guidance that is typically found in a provincial Trustee Act includes:
• How an executor may or may not invest estate funds.
• Whether an executor may delegate his or her investment decisions to an advisor.
• How and when a substitute executor may be appointed, if that becomes necessary.
• How an executor can request to be removed as executor.
• Rules for selling the estate’s real property.
• Information about the liability of executors.
• How an executor may use trust funds to look after a minor beneficiary.
• How an executor is to deal with creditors of the estate.
This is not an exhaustive list by any means, but these examples should be sufficient to indicate just how important the Trustee Act is to an executor. It contains valuable instructions and definitions which affect the executor. By agreeing to be an executor, you are agreeing to work within all of the rules and guidelines set out in this Act, even if you do not see those rules set out in the will.
Links to provincial Trustee Acts can be found in this book’s download kit.
Each province and territory has its own laws, rules, processes, and forms that apply to wills, trusts, and probate matters. The will you are administering must be interpreted within those guidelines. Always ensure that any reference material you use is relevant to your particular province and is up to date.
3. An Executor Is a Fiduciary
Executors, by definition, are fiduciaries. This legal term refers to anyone who holds property, money, or information for someone else and who has a duty towards the person or people for whom those assets are held. This aspect of being an executor is arguably the most important characteristic of the executor’s job. It will give rise to most of the complaints and questions about executors, even though the word “fiduciary” most likely does not appear in the will. This is because by accepting the job as an executor, you have accepted the fact that you owe a duty of loyalty
