Foreign executors

bridge-1I have many clients with children who live abroad. This makes things complicated when they want to have their child who lives in England or the United States act as the executor of their estate, because the courts in Ontario have broad powers to require what is called a bond. Basically, the courts can say that the executor has to pay into court an amount equal to the value of the estate; executors can get around this by buying a bond, or a type of insurance policy, to cover the amount. The cost of the bond is not reimbursed when the money is released from the estate to the beneficiaries, so it is a loss to the estate.

Generally, the court will not require a bond if the executor is in Ontario, other parts of Canada, or even a commonwealth country such as England or Australia. Generally, the court will require a bond if the executor is anywhere else.

If you are thinking of naming a foreign executor, in addition to the difficulty of acting from afar, keep bonding in mind.

Inheriting a house

HouseSometimes, instead of a share of an estate, a person could be left a specific asset; sometimes, this is a house or cottage.

If you do inherit, keep in mind that the executors will likely have to wait to transfer it to you until they have gone through the probate process. This can take anywhere from two weeks to six months, depending on how busy the courts are, so be patient.

Second, you need to seriously consider whether you want to keep the house or not. Don’t make a quick decision; this warrants a visit with an accountant and financial planner to assess possible costs and benefits to keeping it or selling it.

Inheriting a property can be more of a headache than it’s worth, so don’t be afraid to not hold onto it if it’s not the right decision for you.

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Choose the right executor

Choose 2The person you choose as executor of your estate can either make it go smoothly or make it incredibly difficult, and expensive. Choosing a person who is in serious debt, or has addictions, or doesn’t get along with any of the other beneficiaries, or wants to please everyone and so might bend the rules – these are all bad ideas. Choosing all four of your children or keeping in a child who lives outside of Canada because you don’t want to hurt anyone’s feelings is also a bad idea. It’s also important to think about how complex your estate could be. If it is going to be incredibly complicated, it might be worth paying for a corporate executor, such as a bank or trust company.

The best plan is to keep an open mind, and have a frank discussion with your lawyer before making a final choice. Having a bad executor can be a terrible thing.

Prince, and the lack of a will

Purple princeBy now, everyone knows that pop and rock superstar Prince died on April 21. He died suddenly, and it has now been confirmed that he died without a will.

Prince had been married, but was single at the time of his death. His only child died at one week old, and his parents were both deceased, so his heirs are his siblings. His sister, Tyka Nelson, asked the judge to appoint Bremer Bank as the trustee of the estate, which was ordered last week. The estate will be distributed based on Minnesota’s laws of intestacy.

In Ontario, as in most jurisdictions, intestacy laws are very strict. If you are married or have a child, they get priority over the estate. If you are not married and have no children, it goes first to your parents, then to siblings, then aunts and uncles, then nieces and nephews, then cousins. It appears that Minnesota law is similar and his siblings will inherit his entire estate.

Maybe this is what Prince would have wanted; he does seem to have been incredibly generous with his family over the years. However, he was also an active member of his church, which will get nothing, and he will pay significant estate taxes because of his lack of planning.

Prince’s estate will be just fine; even with high taxes, each beneficiary will receive quite a large sum of money. However, a bit of planning might have resulted in less tax and money distributed as he truly wanted. This is a lesson to us all: a lack of a will doesn’t lead anywhere good.

The importance of multiple death certificates

PapersWhen you are acting as executor, you will need many copies of the deceased person’s death certificate. The lawyer, bank, and government agencies will all want to see one, but keep in mind that you may also need one for online services such as email or social networking to close those sites down as well. Take as many as the funeral home will give you.

Tips for executors

TipsI talk a lot about planning, and getting your documents in order. Today, I’m going to talk about what executors need to do to best protect themselves when administering an estate.

  1. Don’t give out the estate money too early. You will have taxes, and there may be debts. There is no reason to rush to distribute the estate. Holding onto funds is better in the early stages.
  2. Be careful where you spend estate funds. Draw a very hard line between expenses that belong to the estate, and expenses that belong to you.
  3. Keep on top of taxes. They still need to be filed, even after death. If you ignore taxes, arrears will build up; if the arrears are your fault, you will have to answer to the beneficiaries.
  4. Follow court orders. This should go without saying, but if a court orders you to do something, or not to do something, be obedient.
  5. Hold off on a final distribution until you are sure that all bills and taxes are paid. If something comes in after, you may be personally responsible for paying it.
  6. Do not ignore debts. If you are aware of them, distributing money to beneficiaries is fraud.
  7. Get advice. Ideally from a lawyer who practices estates, but at least from a professional. You don’t know what you don’t know.

Keep these in mind, and your next job as an executor will go much more smoothly.

Notifying creditors of a debtor’s death

ClassifiedIn Ontario, an executor has a duty to pay all debts of the deceased. This duty applies regardless of whether the executor is aware of the debt, unless there is not enough money in the estate to cover the debt.If the executor distributes estate assets to the beneficiaries without checking into whether there are debts, then the executor can be held personally liable for any debts.

If you are acting as an executor and you are not sufficiently aware of the deceased’s finances, you can get around the liability for paying debts by advertising for creditors. Traditionally, this would have been done by putting an ad in the local paper where the deceased lived and running it for three weeks in a row; if no creditors came forward, then the executor no longer has liability. (The creditor can still go after the beneficiaries directly, but can’t go after the executor.)

These days, however, with newspaper circulation down, it’s hard to justify running a paper ad. Enter noticeconnect.com, which allows you to publish a notice to creditors online. It is indexed and therefore searchable by the deceased’s name (if a creditor is looking), and also published on social media sites. This gives a potentially broader reach, which ensures that the executor is fully protected in the event of a debt that shows up after the estate has been distributed.

A notice to creditors is always a good idea if you are at all unfamiliar with the deceased’s financial affairs. With the rest of the world moving online, it’s nice to see an option for a notice to creditors on the internet as well.