Planned giving officers are in the business of encouraging gifts by will. Surprisingly however, many of us are not familiar with the duties of an executor, or the process by which an estate is settled. More importantly, many of our prospects and donors know little about the process, and often look to us for advice.
There is no mystery in settling an estate. The executor bears the primary responsibility for the process, and brings to a final conclusion all the affairs of their estate. It is the legal duty of the executor to carry out the terms of the will. Executors manage the estate’s assets, collect all income, pay all debts, file income tax returns and distribute the assets to the beneficiaries.
The process of settling an estate follows three main steps — preparing for probate, probating the will and administrating and distributing the estate.
Preparing for Probate
There are several immediate concerns following a death. The will must be found and the executor needs to become familiar with its terms. Funeral arrangements must be made and the assets of the estate may need to be secured, protected, insured or stored. Financial arrangements may be required for the immediate needs of the family.
The executor will need to become familiar with all of the affairs of the estate — cash, deeds, securities, mortgages, insurance policies, business interests, etc., and amounts owing to the estate, as well as debts and liabilities. These will need to be listed in an estate inventory together with an original copy of the will, and presented to the court when making application for probate. (Assets such as jointly-held property or bank accounts, and some insurance policies, usually pass outside the estate process, and should not be included in the valuation.)
Probating the Will
Unless the estate is very modest in size, the will should be probated. This is usually done by your lawyer, who makes an application to the court. Letters probate are simply a document giving court approval that the will is the valid ‘last will and testament’ of the deceased, and confirming the appointment of the person named in the will as the executor.
Letters probate are essential documents in the settlement process as it may be impossible to transfer certain assets without them. Notarized copies of the probate papers should be made and presented when transacting business with banks, trusts, brokers, etc.
Administrating and Distributing the Estate
In this step, the executor brings to a final conclusion all the affairs of the estate. All monies due to the estate are collected — final wages, death benefits, insurance proceeds, residuals from annuities, RIFs, any other interests. Creditors are advised and liabilities against the estate are paid. Final income tax is filed and paid.
The executor should set up an estate bank account and use it for all transactions such as depositing estate funds and paying all debts, taxes, and fees. A good record keeping system will ensure that they can account for duties performed.
In distributing the estate assets, an executor’s task may include:
- distributing bequests and obtaining releases from further liability from named beneficiaries.
- conveying, selling or holding those estate assets not specifically bequeathed, such as real estate, household goods, automobiles, stocks, bonds, royalties, etc.
- making interim distribution to residual beneficiaries.
- preparing an account of their administration, including their fee.
- setting up trust funds if directed by the will.
- obtaining final clearance from Revenue Canada, and making final distribution.
Dr. Edward Pearce is the Associate Director of Planned Giving, Queen’s University.
