What are the responsibilities of an executor?

Leanne Kaufman:

I don’t talk a whole lot about my day job on this podcast, but one of our primary roles at RBC Royal Trust is to act as the executor of the estates of our clients. So, the role of the executor is nothing new to my colleagues, but for the vast majority of the Canadian population, while they may be named in someone’s Will as an executor, they probably don’t know much about the job, what it will entail and what to do when the time comes. So, imagine a role that’s part detective, part accountant, part property manager, part family therapist, and generally a jack of all trades and roll it into one. That’s what being an executor is like. It’s a position that can bring great peace of mind to families and preserve legacies, but equally it can tear them apart. And yes, it can be a burden, it can cause more than a few headaches along the way and whether you’ve been asked to be an executor or considering asking someone to be an executor or you just want to be in the know, let’s talk about the job that you’ve never applied for—being an executor.

Hello, I’m Leanne Kaufman and welcome to RBC Wealth Management Canada’s Matters Beyond Wealth. With me today is Clare Burns, a partner at the law firm WeirFoulds in Toronto, who is a very well-respected specialist in the area of trust, estates and capacity litigation.

Clare, thanks for being here with me today to talk about what makes a good executor and why this matters beyond wealth.

Clare Burns:

It’s my pleasure, Leanne.

Leanne Kaufman:

So, let’s start with the basics. What is an executor and why is this role so important in the grand scheme of things?

Clare Burns:

So, the executor is the person who is named in the Will who steps into the role really of the living person and does what the living person directed should happen with their affairs and assets when they’ve passed away. So, it’s a very important role. It’s a position of great trust.

Leanne Kaufman:

What are some of the key responsibilities and what’s on the to-do list of a typical executor?

Clare Burns:

Well, it really starts immediately following the death, which a lot of people don’t realize. The executor is responsible for the disposal of the remains. So, one first point of conflict in a family can be what’s actually going to happen to a person’s remains. Will they be cremated? Will they be buried? Will they be illegally scattered in an Ontario lake somewhere? All of these things are actually the role of the executor, and that comes as a great shock to many people.

Once you’ve dealt with that, the role is really first to gather in and protect the assets. We don’t just mean assets like bank accounts or investment accounts or houses—although those are all important things—it’s also all the other stuff.

You have to worry about the contents of what is in the house and who’s got access to the house. You have to think about who’s got access to the cottage. Who’s got access to the boathouse at the cottage with the jet skis and the canoes and the kayaks and the paddles, and probably the papier-mâché sculpture that somebody made when they were eight. All of that is your responsibility to find and to make sure you’ve got a list of it and to protect it, which means you also have to make sure insurance is actively in place for everything.

What people often don’t appreciate, Leanne, is that as someone ages, they often forget to pay their bills and sometimes executors find themselves in the unhappy position of finding out that the house has no insurance on it, or the cottage has no insurance, or the car is uninsured. All of that has to be looked at.

Then the next task is to pay all of the debts of the person who has passed away so that’s

• credit cards have to be canceled;
• bank lines of credit have to be reviewed and paid; and
• the big one is taxes.

You have to make sure that the deceased was tax compliant. So you have to look back a couple of years, make sure that they filed their tax returns, that they didn’t try to deduct ridiculous things. We’ve seen some ridiculous attempts at deductions for things like pet clothes and other remarkable things. You have to figure out if there are any tax audits and address them. You have to make sure their property tax has been paid.

So all of those things—and this is usually the debt point is where a lot of skeletons jump out of family closets because this is where you find out that Dad actually loaned $150,000 to your younger brother. Now all the other siblings think he should pay it back and he doesn’t think he should pay it back. So, it’s not just what we think of as formal debts and your tax liabilities, it’s that sort of thing. And making sure that all the caregivers have been paid and the hairdresser who didn’t get paid for the last six months—all those sorts of things have to be tidied up.

Then your job is not done. Then you have to look at the terms of the Will and distribute all the assets in accordance with what’s in the Will.

That sounds super simple, it super isn’t. So, people think, “Oh, I wrote my Will. I’ve got three children. I’ve said divide everything equally.” Sounds simple? Not simple, because one of those children will want the cottage. One of those children will want the house. Somebody else will want your vintage Mercedes. Somebody else will want Nana’s sterling silver wedding service. You’re going to have the fun job of going getting all of that valued—not by back of an envelope calculation, but by figuring out who the appropriate appraisers are. Getting appraisals and getting all the family members to agree as to the valuation so you can actually comply with what everybody told you was a “super simple Will, it just divides everything in three ways.”

And Leanne, as you know, one of my pet peeves is the tchotchkes because inevitably, the Will will say, “Divide in accordance with a list I may have left of how to divide up all of the cricket trophies and the hockey trophies.” And this, that and the other thing—and my favorite being the Royal Doulton figurines. Inevitably, that list was not drafted before the Will was executed, which means it’s not legally enforceable. So now as the executor, you get to negotiate who gets the balloon lady, who gets the Tetley Tea animals—

Leanne is laughing. I can see her, the rest of you can’t.

But at the end of the day that takes hours and hours and hours of time, often. So, all of this is to say it’s not simple.

This all ignores the more complicated estates. By more complicated I say, “Well, so you have a house in Ontario, but you’ve got a condo at Whistler.” So now you’re dealing in two different tax jurisdictions, two different jurisdictions about how real estate is dealt with.

Maybe there’s a condo in Arizona or a house in Florida. Or God forbid, a house in Spain, and now you’re administering assets in multiple jurisdictions with different laws about how estate law works. And you’ve got to sort all that out in the context of whatever the “simple Will” was that Mom or Dad left.

And if your dad was a dentist or a doctor or a lawyer, maybe they have a professional corporation, there are rules around that. And heaven forbid they passed away and they were the sole signing officer and director for an operating company—then it’s just chaos.

So, I know that makes it sound, Leanne, like an unattractive job. That is because in my considered opinion, it is an unattractive job.

Leanne Kaufman:

Yeah. And I think what you’ve said is all completely fair and not at all exaggerating because even like you said, the simplest of estates, when you get into the family dynamics and particularly around those personal effects that you spoke about, I mean, it may not be high dollar value, but man, does it take time and does it impact relationships. And the executor is the common enemy through all of it.

Clare Burns:

That’s absolutely right.

Just as you said that, it reminded me that the hardest thing to divide up is actually the family photographs because there will always be somebody who wants the originals. It’s not good enough to give copies to everybody.

Leanne Kaufman:

Right. Yeah, it’s very complicated stuff and you have to kind of live through it in some cases before you realize what it’s going to look like.

So, Clare you’re a litigator, which is why I love listening to you and your stories when I get the opportunity because you get involved when someone hasn’t done their job properly, or maybe someone’s just saying someone hasn’t done their job properly, or the relationships are so bad that court is the only solution to even get agreement around the table. So, talk to us about some of the potential liabilities and challenges in that regard that come with being an executor.

Clare Burns:

One of them is what we call a passing of accounts, which means that any beneficiary can ask any executor in Ontario to go to court and show to the court every single thing they have done with every asset—and I’m talking down to the pennies, Leanne. This is not a simple task and that could be both very expensive and very time-consuming.

You’ll get questions—and I’m not making this up, “What happened to Dad’s Northland jacket that he used to wear when we were at the cottage?” And there will be lawyers correspondence about that jacket with a total disregard to how much you’re spending in legal fees while you’re sorting out the Northland jacket. I’ve seen executors get very frustrated because they’re often well-meaning trusted members of the family who think it’s insane to be paying lawyers to talk about the Northland jacket. They’re not wrong about that, but they are stuck in a position where they have to answer for what kind of due diligence they’ve done to locate the jacket.

The other kind of liability that comes with the role is around taxes. So, once you take on the role of being an estate trustee, if you distribute anything, and I mean anything, to a beneficiary before you get something called a clearance certificate from the Canada Revenue Agency, you are personally liable for the value of that asset up to the amount of whatever unpaid tax there may be. You may think, “Well, that doesn’t sound difficult, Clare, let’s just get the clearance certificate.” But the reality is the clearance certificates take between eight months and a year to come from the CRA currently, even after you’ve applied for it. And you don’t generally apply for it until you’ve gathered in all the assets and paid all the debts.

So, you’ll have been running the estate for a year or two and the beneficiaries will be wanting to know where their money is. You’ll be saying, “Well, I don’t want to give you your money because I don’t want to be liable for the taxes.” So, executors often make interim distributions and make a deal with the beneficiaries that if there is more tax to be paid, the beneficiaries will return funds to the estate. But I’ve seen lots of cases where if that happens, the beneficiaries have spent the money and are unable to return it. So, the executors are personally exposed.

Another one people don’t think about is the environmental liability. You think that everything’s just tickety-boo, it’s going to be completely simple and you forget that Dad had a metalworking shop in the garage at the cottage until you discover to your horror, that Dad has been dropping PCBs down the well at the cottage to clean up the garage for the last 25 years. And somebody now has noticed this problem or it’s seeping onto somebody else’s property and now you’re engaged in environmental litigation.

So that’s all terrible, obviously. And then the other kinds of challenges are where somebody passes away and they’ve decided in their Will not to leave money to one member of the family often for very good reasons, but that person often will sue. Now you’re engaged in litigation and there’s no escape if you’re the executor, you have to continue to represent the estate until the court relieves you of that obligation. So big picture, those are some of the kind of liabilities that you might be exposed to.

The other big one is if you invest badly. So, if you gather in the assets and you decide to invest and you lose 50 percent of the value of estate, you will get sued for your poor investment choices. So that’s the kind of risks you’re taking.

Leanne Kaufman:

And even if the litigation that the executor finds themselves in the middle of isn’t directed at them personally and it isn’t potentially putting their personal assets at risk, which it can, the time and the energy and the stress involved of being in part of that process, I think should also not be understated. Would you agree?

Clare Burns:

I absolutely agree. I like to think I’m a nice person, but I quite understand why my clients would rather be on the golf course than talking to me about what other fresh hell has arisen in their estate administrations.

Leanne Kaufman:

Yep, yep, I can see that.

So, if someone is considering taking on this role for a loved one, or you’re thinking about who it is that you should be naming in your own Will, if you’re looking at considering updating things. Let’s talk about some of the personal qualities that you think through your experience have made people good executors or maybe the flip side to that, especially in your experience taking these matters before the courts. What are some things people should avoid when they’re choosing their executor?

Clare Burns:

That’s a great question, Leanne.

First of all, don’t choose somebody who you already know has never balanced a chequebook. You need somebody who’s super organized.

I can’t tell you the number of times in the last 30 plus years I’ve had an executor come into the office and I say, “I need to see all your receipts and all the bank statements.” We get handed—well, before they banned plastic shopping bags—we got handed a plastic Loblaws bag full of little bits of paper with some sticky notes and got told to try to figure it out, right? I think in my career, I have only twice seen an executor come in with a beautiful binder with Cerlox pockets and spreadsheets. That’s not the people who end up in litigation. So, if you don’t think your proposed person is a binder and Cerlox sheets and spreadsheet person, don’t ask them to do the job. It’ll be a disaster.

I think they need to be available. I think if someone spends six months of their year as a snowbird in another country and you have properties that require upkeep and maintenance and looking at, probably better not to have a snowbird as an executor.

I think you need to think about their age. Not because I’m ageist, but I, for instance, in my Will—although I have my husband as my first estate trustee—we don’t have our friends as the substitutes because they’ll all be getting old at the same time as we will, and they won’t want to take on the responsibility of cleaning up my personal treasures, which let me hasten to say, do not include Royal Doulton figurines.

Leanne Kaufman:

I’m going to buy you one, Clare. I’m going to buy you a Royal Doulton figurine, just so you can think of me when you look at it.

Clare Burns:

Excellent. Make sure you get the balloon lady. That’s the one they all fight over.

I think you want the person to be neutral and you need to be realistic about this. So, every person I’ve ever met who tells me, “Oh yes, my children, they’re all going to be executors together.” Or even better, “I’ve chosen Bob, the middle child as the executor, they all like him.” That’s going to be a disaster. You need to take a realistic and hard look at your children if you’re naming them as an executor and what their relationships are like. And not just what their relationships are like, but what the in-laws relationships are like with one another. As Leanne, you know, in my line, we like to call the in-laws the outlaws because they often influence how estate administrations go seriously wrong. So, if your children have been squabbling over the TV remote and who gets to sit in the front seat of the car their entire lives and they still fight at the dinner table, best not to choose a child.

Overall, I would say that what you really need is someone who’s a great communicator. Who’s going to keep in touch with the major beneficiaries, who’s going explain what’s happening, going to explain the process. Will pick up the phone, respond to emails, respond to texts. And if they’re responding to texts, will be responding with appropriate texts, not inappropriate emojis, which is what I tend to see in litigation.

Those are the kinds of things I would suggest you look for. And as you know, we often recommend corporate trustees in situations where there are families where the children don’t all get along, or where there have been multiple marriages and the spouses are all still alive and all hate each other because that’s a recipe for litigation as well.

Leanne Kaufman:

Yeah, the neutrality is a big factor in that conversation for sure.

Well, we’ve been talking about executors in general, but we know that not all estates are created equal. What factors can make an estate particularly complex for an executor to handle or potentially more likely to end up in litigation?

Clare Burns:

Number one with a bullet is any person who has blended families. It’s way more likely you’re going to end up in litigation. Particularly if you have not resolved all of the financial issues with your first spouse, your estate is more likely to end up in litigation. And if there is a generational gap between the children of the first marriage and the children of the second marriage, there’s more likely to be litigation. Largely because the first family will have grown up with the deceased person at a time when perhaps they were coming out of university, they didn’t have as many assets, they weren’t able to give those children as much as they are able to give the children of their second marriage, which perhaps has happened when they’re more mature or more settled in their careers, have more assets. So, children of the first marriage will have not had those advantages necessarily, and that will lead to major dissension. So that’s one.

Second one that often leads to litigation is the family cottage. I like to say—Leanne, you’ve heard me say this before—the only way to guarantee no litigation about the family cottage is to burn it down uninsured, or possibly sell it before you die. [The] family cottage is the place where all family dynamics are coalesced. You may have sold the home your children grew up in, but you probably haven’t sold the cottage. If you have not had full, plain and frank discussions about who’s inheriting the cottage and how it’s going to get equalized in your estate and who’s getting the jet skis and what the rules are for removing the family papier-mâché animals that have been on the shelf in the sunroom since, as I like to say, BDT, before the dawn of time, there will be a problem about the family cottage.

Also don’t just leave it four ways if you’ve got four kids, because one of those kids will not be able to afford the cottage. One of the kids will have married somebody or partnered with somebody who has their own family cottage and refuses to go to your family cottage. Some other kid will be working for a multinational and be posted in South America or Africa and can’t access the cottage and doesn’t want to pay for the upkeep. So just don’t dream the dream that everybody’s going to be living—as one of my colleagues likes to say—in a pink world full of unicorns. That’s not what happens with the family cottage.

Another thing is Wills that are too restrictive lead to litigation. So, I’ve done Wills with clauses that require somebody not to smoke or use non-prescription drugs until they reach a certain age and the money’s held in trust until they reach that age. Then the poor estate trustees got to figure out how they’re going to run drug testing. Is it going to be random? How are they going to make sure the tests are not altered? Any of those kinds of trying to reach from the grave to control the lives of the future person or the people you’re leaving behind, lead to litigation.

Sometimes they’re very sad cases like you left a Will that said, you give your grandchildren $100,000 each when they graduate from university. Then one of your grandchildren has a terrible motor vehicle accident and is not able intellectually to graduate from university. And you’ve set up a situation where that child’s not getting the same benefit as the other grandchildren, even though I’m sure you probably want that child to have the $100,000 for their care.

So those kinds of things lead to more litigation. I did a case once where the executor invested two million in go-karts. That ended badly and in litigation, unsurprisingly, in my view, and the court took a very dim view of the go-kart investment, Leanne. The court was not amused by that.

Leanne Kaufman:

I can’t imagine why they thought that that was not a prudent investment.

Clare Burns:

Yes, not happy.

So, I mean, big picture, those are the kinds of things. I think the top two are the blended families and the family cottage. But I do have a friend in town who I won’t name who’s a psychiatrist. He always tells me that if there are more than five children, there will be litigation.

Leanne Kaufman:

Oh, well, there’s another red flag, I guess.

Well, Clare, I always love speaking with you, and like I said, hearing your stories, your cautionary tales and to wrap this up today, if you hope that our listeners just take away one thing from the conversation you and I have had, what would the one thing be?

Clare Burns:

Don’t ever casually agree to be an estate trustee. I have been litigating estate disputes for more than 30 years now, and there are only three sets of people in the world I will agree to be an estate trustee for: my spouse, my parents, and my children. That’s it. That’s all. So, think twice before you agree.

And the last thing is if you suddenly find out you are an executor named in a Will, you don’t have to serve as the executor. You can renounce that role provided you’ve taken no steps to act as executor. So don’t be busily being helpful organizing things for people. Think first about whether or not you really want to do this role.

Leanne Kaufman:

Great advice. Great advice and great advice to end on. Thank you so much, Clare, for joining us today to talk about this role of the executor or estate trustee, as you’ve pointed out, it’s called in Ontario, and why this matters beyond wealth.

Clare Burns:

My pleasure, Leanne.

Leanne Kaufman:

You can find out more about Clare Burns at WeirFoulds.com or on LinkedIn .

If you enjoyed this episode and you’d like to help support the podcast, please share it with others, post about it on social media, or leave a rating and a review.

Until next time, I’m Leanne Kaufman. Thank you for joining us.

Outro speaker:

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