In our third post, we take a deeper dive into some of the responsibilities executors may be faced and a variety of tips and suggestions, like outsourcing executor duties — or some, at least — to a third party.
The reality is executing a Will is not one job but actually a whole slew of them, from making funeral arrangements (though this is not technically an executor responsibility, it often is) and dealing with the courts and legal requirements around probate to grunt work like cleaning out the cottage or disposing of the deceased’s household items. Engaging one company to do it all can mean overpaying for some services and underpaying for others. So, the likely best way to tackle all the work is to build a small team to handle the executor’s various responsibilities.
Before we discuss the benefits of hiring a third party to execute the Will, here is a rundown of some of the major steps an executor will likely have to take care of:
- The funeral — As we mentioned, handing the funeral, from burial or cremation to celebration of life, isn’t technically an executor’s responsibilities because these usually begin once the Will’s probate process is complete. Nevertheless the executor is often enlisted by the family to help with planning and logistics.
- The road to probate — Wading through the often onerous probate process, so that beneficiaries receive their portion of the estate in a timely fashion, usually involves reaching out to the deceased’s financial advisor, accountant and/or lawyer for guidance, insight and assistance with the application process. There can be a variety of wrinkles with the taxation of the estate, for example, so it makes sense to hire an accountant or at least talk to one to make sure nothing is missed. Keep in mind that, post COVID-19, what used to take about three months for the probate process to unfold now often takes more than a year, so it will also beneficial to set expectations with heirs about when the distribution of assets may be finalized.
- While you wait — Until probate is granted, there’s not a whole lot that can go on with the deceased’s estate, at least not formally. While homes and other assets can’t be sold, family members often use this time to for cleaning up and clearing out possessions. A locksmith should be engaged to change locks early on. Banks should be notified so that utilities, condo fees and taxes can continue to be paid automatically from the deceased’s bank account. And bank statements should be reviewed to ensure that services like cable TV or gym and other memberships are cancelled as soon as possible.
A quick aside about Alter Ego Trusts
While beneficiaries usually must wait until after probate is obtained before the distribution of assets can take place, there is a legal workaround called an Alter Ego Trust. Permitted under the federal Income Tax Act, this transfers a person’s estate, or parts of it, to the trust while they are still alive. During their lifetime, they fully control the trust. But upon their passing, a replacement trustee can bypass the probate process and distribute the trust assets to beneficiaries (once any estate debts and liabilities are paid off). Using an Alter Ego Trust is usually faster and avoids often significant probate fees but there are pros and cons that should be discussed with professionals.
Back to the executor duties…
Once probate is granted, the bulk of an executor’s work really begins. Perhaps the most efficient approach we’ve seen is for the executor to scope out the skill sets required to execute the Will and distribute the estate along with what those various responsibilities may cost.
A traditional — but very expensive approach — is to hire a law firm to be the estate trustee. While the firm will likely do a good job, it could cost up to 5% of the value of the estate, so a $2 million estate could be billed $100,000, not counting a la carte tasks, which could be invoiced at $500 or $600 an hour.
Instead, as we mentioned, it may make more sense to dole out specific tasks to different parties. If, for instance, the deceased’s home is filled with a whole host of items — from porcelain figurines to furniture and books and art — it may not be worth the time or effort to price everything and look for buyers. There are now companies that specialize in decluttering estates and handling estate sales, often for a reasonable flat fee.
Other estate administration companies offer support to prepare an inventory of the estate and get through all the record-keeping and other paperwork for thousands instead of hundreds of thousands of dollars. Many of these administration firms can also be hired as the estate trustee or even the executor, if the designated executor decides they are not able to fulfill their duties.
One more suggestion when selling property
Beneficiaries may have a range of ideas of what the deceased’s property is worth so it’s always a good idea to have the home(s) evaluated or speak to two or three real estate agents about a ballpark value to make sure everyone is on the same page before a sale takes place.
Being an executor can be a complex and time-consuming responsibility. But it’s important to remember: you aren’t expected to go it alone. With the right team — including a financial advisor, accountant and lawyer, as well as estate administration and decluttering services and, of course, family members — you can quickly and efficiently settle the deceased’s estate and distribute their assets as they intended.