Understanding the Estate: Assets

14 Jul Understanding the Estate: Assets

In 2018, the average Canadian’s net worth was $678,792.[1] In Toronto, the number is even higher – nearly $1 million for the average person.[2] The estate of a person with a net worth this high will require care and attention, beginning with collecting all the assets in one place, so the executor can look after them and turn them into cash.

Locate the assets

The average person possesses a variety of assets, also known as resources or property. Assets include:

• Real estate, such as a home or a condo;
• Cash, such as savings or checking accounts;
• Investments, such as stocks and bonds;
• Digital assets, such as electronic files and accounts;
• Intangibles, such as copyrights and patents; and
• Valuable objects, such as cars, artwork and jewellery.

For the executor of an estate, it is essential to compile a complete list of all the deceased’s assets. This list will guide the rest of the work on the estate and can be used later to pay off any debts associated with the estate.

In some cases, the will or trust will include a complete list of all assets, but more often, the executor spends real time tracking everything down. It’s critical that the executor is careful and thorough in finding all assets – including digital assets – and bringing them into the estate.

Safeguard the assets

The executor needs to ensure that nothing happens to the assets. The first step is to notify all financial institutions of the death. The accounts may be frozen, and all trades and withdrawals should be stopped.

At times, certain assets may require additional protective measures. For example:

• Arrange for insurance, including vacancy permits, and a security system for an empty home.
• Change the locks, if necessary.
• Plan for proper storage or insurance for any valuable objects, including vehicles.
• Redirect the mail to an appropriate destination.
• Deal appropriately with all forms of identification to avoid identity theft.

Convert the assets into cash

In order to distribute the estate, many assets will need to be converted to cash. Keep the estate as simple as possible by opening up an estate bank account. It may be necessary to open a specific investment account as well. Deposit all cash flowing in from the assets, including life insurance policies, government benefits or liquidation of physical assets, in the estate account.

The executor may employ a variety of methods when converting assets into cash. When it comes to real estate and other valuable objects, it’s best to hire an expert to help determine the value of the assets. A formal appraisal is worth far more than the appraiser’s fee. Not only does the appraisal provide an accurate representation of what the property or possession is worth, but the executor can share it with any beneficiaries who claim it should be valued differently.

Another expert to seriously consider is a real estate agent. Selling an estate home is different than selling other homes. For example, it’s best to avoid sinking any money into the home to repair it before sale, as that money may not be recoverable. In addition, a vacant home can deteriorate more easily, so selling quickly is critical.

When it comes to other assets, such as artwork, jewellery or other items, the executor may employ several methods of disposal. They can be sold in bulk or piecemeal, auctioned off or even donated to charity. An auction is usually the best way to go, as it takes the decision of each sale out of the executor’s hands and provides complete reporting to alleviate the concerns of the beneficiaries.

But assets tell only part of the story. Once the assets have been accounted for, the next step is liabilities and debts.

To learn more about the role of the executor, contact us.

[1] https://business.financialpost.com/news/economy/canadians-average-net-worth-shrinks-for-first-time-in-a-decade-amid-bank-of-canada-rate-hikes

[2] https://www.thestar.com/business/2019/09/20/toronto-getting-richer-as-canada-gets-poorer-study-finds.html

Joel Rose

With over 35 years of experience, Joel Rose helps families – and their businesses – to prepare for the future. He offers guidance and support to help his clients create estate plans and succession plans that meet the needs of the whole family. Through his extensive professional and personal experience, Joel is known for his compassion and his ability to find a creative solution to meet each family’s needs.