Stacy Maurier, Founding lawyer of Estate Connection Law Firm is a member of the Westend Seniors Activity Centre’s, Friends of WSAC business program. Stacy has been a guest speaker here at our centre since 2017, providing educational Toonie Talks on estate law. In January of this year she presented a Toonie Talk called “Excellent Executors”.
This month’s guest blog post, Stacy outlines the top 8 mistakes Executors make when dealing with an estate.
What are the top mistakes Executors make when closing an estate?
Being an Executor isn’t easy. There is a lot of paperwork to be done, a lot of interaction with government agencies, Alberta Registries, banks, insurance companies, accountants, realtors and lawyers. And there are always beneficiaries pressuring you to do things quicker or questioning everything you do. It comes as no surprise that Executors make mistakes. We thought we would look at the top eight mistakes Executors make:
Mistake #1 – Executors Do Not Keep Proper Records
Executors need to keep this in mind “If there is no ledger, they will allege.”
Nothing causes beneficiaries to call a lawyer quicker than an Executor who cannot give them a breakdown of what the estate financials are. Executors should keep a log that tracks all of their mileage and any expenses they incur while performing their duties. These records should outline what you purchased for the estate, the amount and why. Executors also need to keep detailed records of all income received for the estate. For example, if you sell the deceased’s vehicle, you need to record who you sold the vehicle to and the amount you received.
Remember, bank statements are not enough as they do not outline what items the Executor purchased on behalf of the estate. If questioned several months later, you probably won’t remember the details of what item you purchased and why.
If you are an Executor and you know that record keeping is not something you are good at, consider hiring a bookkeeper. Hiring a professional will ensure things are documented properly and will allow you to provide the beneficiaries with a detailed monthly report on income/expenses.
Mistake #2 – Executors Do Not Get Proper Valuations Of The Estate Assets
We have all heard stories about how someone bought something at a garage or estate sale for a few dollars and found out later it was worth a hundred times more than what they paid. For an Executor, this can be a very costly mistake. Wherever possible, an Executor should get appraisals on all assets, because they may be liable for the loss if they sell and item for less than its appraised value at the time of death.
If an Executor decides to sell something for less than value, they must have permission from the beneficiaries. Also, Executors need to remember that beneficiaries may buy items from the estate but it has to be at the appraised value unless all the beneficiaries have permitted to sell for the item for less.
Mistake #3 – Executors Treating Estate Money as if it is Their Own
Perhaps this is the reason for the secrecy mentioned above, but many Executors either don’t know or ignore the limits of their role. Executors have been known to pay off their debts, make loans to family members and buy into business ventures all with the estate funds. None of this is lawful, and Executors may be forced to repay those funds out of their own money. Even Executors who are honest make mistakes with estate money. For example, many Executors don’t see a problem with using estate funds to fly in family members from all over the world to attend a funeral and using estate funds to supply those family members with hotels, transportation, meals, sometimes even clothing to wear to the funeral. These are not estate expenses, and if challenged, the Executor could end up having to reimburse the estate.
Mistake #4 – Executors Do Not Follow the Will
Executors frequently feel that the deceased was not fair and did not write their Will properly. We recently received a call from a lady who was an Executor for an estate. One beneficiary was upset because her father, the deceased, had several sections of land in southern Alberta worth an estimated two million dollars. The father left the land to his son and left his daughter an insurance policy that was worth significantly less. The Executor wanted to know what she needed to do to split the estate evenly.
Executors need to understand that their job is to distribute the estate according to the Will, not to rewrite it.
Executors often ignore other parts of the Will too. For instance, they might sell an asset and give the beneficiary the proceeds when the beneficiary was supposed to receive the asset. They may also give Trust funds to a child at a younger age than permitted in the Will. Not following trust requirements is a big mistake because it usually means they are giving funds to someone not mature enough to receive a substantial amount of money.
Watch for Part Two of Stacy’s guest blog post where she will highlight 4 more mistakes that many Executors make!
If you are a beneficiary and need assistance dealing with an Executor, or if you are an Executor that needs some assistance with Probate and closing an estate, you can find more information at www.estateconnection.com