Ensure estate trustees know what they’re getting into: Murphy
By AdvocateDaily.com Staff
The responsibilities of an estate trustee, who administers the personal and financial affairs of a deceased person, can be greater than expected, says Toronto estates lawyer Peter Murphy.
Murphy, partner with Shibley Righton LLP, says it can be enormously helpful for an estate trustee, or executor, to become acquainted with all that’s involved before agreeing to take on the job.
“Being an estate trustee takes a fair bit of time and effort, and it often involves more than people realize unless they have experience in this area,” he tells AdvocateDaily.com.
The obligations include administering the estate according to provincial law, as well as federal requirements such as the Income Tax Act, Murphy says.
The process begins with examining the will to confirm who the estate trustee is. Murphy says it could be more than one person, which could allow them to split up the work.
"However, having multiple trustees can make decision-making more difficult," he says.
"The first responsibility," he says, "is usually working with a funeral director to take care of burial or cremation and ceremonial arrangements."
Murphy says the estate trustee must also:
- Determine who the beneficiaries are, then find and notify them
- Identify the assets of the estate
- Set up a bank account for estate finances
- Determine, settle and pay the estate's debts
- File tax return, pay taxes and obtain a clearance certificate for the estate
- Deal with any claims against the estate, including dependent's relief and Family Law Act claims
- Distribute the estate's assets to beneficiaries according to the will
“When you’re looking at these obligations to pay debts and taxes, it’s often useful for the estate trustee to retain professional services like an accountant,” Murphy says. "Legal advice is also recommended, particularly for interpreting the will, understanding the estate trustee's duties, and applying to the court for probate, where necessary."
Some, but not all estates, will require probate, he says.
Depending on the nature of the assets, an estate left to the deceased's surviving spouse may not need to go through probate, says Murphy.
"Even where the sole beneficiary is the deceased's spouse, probate will be required where real estate was not held jointly with the beneficiary," he says.
“It depends on the assets in the estate, the will, the requirements of third parties, and who the beneficiaries are,” Murphy says.
“If it’s necessary, the will and other required documentation will have to be submitted to the court with an application for probate. The application is for the court to approve the will and certify the appointment of the estate trustee, who will be able to use the certificate when transferring the assets from the estate to the beneficiaries.”
Estate trustees are required to maintain detailed accounts of the estate's assets, including all amounts received, invested and disbursed," he says.
"In some cases, the trustee will be required to submit these records to the court for approval."
Murphy says people are often surprised by the extent of the record-keeping obligations.
"Not every estate trustee will have the time, knowledge and skills necessary to properly keep the required accounts," he says.
“Many trustees, particularly for larger estates, will retain professional services to assist with the detailed record-keeping that they’re obliged to do,” Murphy says.
“A substantial amount of time and effort is involved. Many people do not fully appreciate this until they find themselves in that situation,” he says.
“The appropriate time to ensure a future estate trustee is aware of everything that’s involved is during the estate-planning process,” says Murphy. “That way, the person can have an appreciation of their responsibilities and be confident acting as estate trustee when the time comes.”