Canadians who plan for the day when they must pass on their estates face a quiet fear that many of us don’t acknowledge for most of our lives. It takes courage to follow the necessary steps to ensure that their legacies survive as intended.
That leaves us asking the question should Executors have unlimited liability while grieving?
In the vast majority of cases where Canadians have done this, it becomes clear that a financial planner or insurance advisor has played a key role in educating the client in the value of planning ahead. They are also instrumental in making sure that the proper tools and products have been utilized to prepare the estate as intended.
However, sometimes all of that planning with a client unravels as they pass away. Why is this the case? The explanation could simply be that the Executor was not equipped to fulfill their duties in settling the client’s estate successfully.
Executors left out of the planning process simply won’t possess the experience, facts on hand, or the familiarity needed to honour a client’s final wishes upon being called close to the moment of transition.
Many estates face this exact challenge.
According to a 2014 BMO Leger poll, 99% of Canadians intend on naming a family member or a loved one as the Executor of their Wills. It is not surprising then, that nearly half of all Executors in Canada face serious emotional issues when settling estates.
First and foremost, most Executors are grieving. That means approximately 99% of executors take on a fiduciary role with unlimited personal liability and no formal training immediately after suffering the loss of a parent, sibling or best friend.
That is what an Executor faces. Compounding that issue are the demands from beneficiaries who may not be so sympathetic to the Executor’s circumstances. It is possible that beneficiaries’ interests will not align with the Executor’s emotional health, even within a single family.
Take the case of the Executor who was told by the bank to get an $846,000 bank draft as opposed to a certified cheque for a beneficiary. The Executor followed the bank’s advice, got the draft and sent it via UPS to the beneficiary (her brother). UPS lost the draft and the Executor was on the hook to replace it.
We recommend preparing answers for these questions well in advance of transitioning an estate to avoid disruptions during the estate’s transition:
- How many Executors are set up for success?
- What steps have been taken to ensure that Executors truly understand your client’s estate plan?
- Do the Executors have access to all of the necessary information to complete a systematic, orderly administration of the deceased’s property and assets?
- Has an Executor had any chance to review the Will before the Testator has passed away?
- Was there any forum to ask questions and get any clarifications of the final wishes so that the Executor can position them accordingly with the beneficiaries?
Answering those questions ahead of time is critical for smooth transitions and highlights the need for advisors to develop a close relationship with the Testator (client) and their Executor. An advisor can play an essential role in crafting the estate plan and setting the Executor up for success.
This will mitigate the risks for Executors, smooth out the transition of property, and keep peace in the family. It will also endear the advisor to the next generation of potential clients for a job well done.
Most important of all, it may save the Executor from receiving poor—and financially disastrous—advice while in the midst of their grief.
Free Estate Planning Resources
- Official Executor Guide for Canadians
- How to Prepare Your Estate for Your Executor
- Will Preparation Guide
- I’m an Executor – Now What?
- What are my executor duties?
- Who do I choose to be my executor?
- What happens when there is more than one executor?
- What happens when there is no will?
- Passing of Accounts: How does it work?
- Is there protection for executors?