Beneficiaries: Beyond the Cheques

12 Aug Beneficiaries: Beyond the Cheques

Many beneficiaries don’t wait more than a month or two before they begin asking, When will I get my cheque?

Often, they don’t like the executor’s answer. Settling an estate is a process that typically takes a year, or even longer in more complicated cases. And distributing the assets won’t happen until the very end.

That’s because all bills, expenses and taxes must be paid before the estate can be closed. If the executor distributes assets before winding up all the expenses, the executor could be held personally responsible for those expenses. A careful executor takes it a step further and waits for the tax clearance certificate from Canada Revenue Agency (or Revenue Quebec) before beginning the distribution process.

Even once you’ve reached that point, distribution is more than just passing out cheques to beneficiaries. It settles the estate. Complete these steps to settle the estate properly:

1. 1. 1. 1. Distribute legacies and bequests. In many cases, a will includes an itemised list of legacies (cash gifts) and bequests (gifts of personal belongings) that should be given to specific family members or friends. Other times this list is separate from the will. These gifts are usually the first to be distributed to the beneficiaries.
         2. Oversee the establishment of trusts. If a beneficiary is a minor or a person with disabilities, the deceased may have set up a trust to protect the assets intended for that person. The executor should ensure the trust has been set up properly and that the beneficiary has what he or she needs.
         3. Distribute major assets to beneficiaries. Major assets include real estate and vehicles, among other things. In many cases, the executor should advise the beneficiaries to consult with a financial advisor about the best way to manage their newfound assets.
         4. Settle the executor’s accounts. The executor can be reimbursed for any expenses incurred through administering the account. In addition, some executors are paid for their services, which may involve additional taxes. As part of settling the estate, the executor must reconcile any fees or expenses with the estate, which may mean seeking approval from the beneficiaries.
         5. Deal with the residue. The residue includes any part of the estate that is not specifically bequeathed to someone on the itemised list or in the will itself. Usually, the will itself specifies a person (or several people) who will receive “the residue.” However, because the “residue” is also used to pay off any debts and taxes, it is possible that the residue could be quite small.
         6. Close the estate accounts. Once everything has been distributed and the executor’s accounts have been reconciled, the estate accounts can be closed. Most banks require directions in writing to close the estate accounts.
         7. Prepare a final accounting and obtain final releases. The executor’s last major task is to provide a paper trail. The final accounting should include records of every financial transaction from the beginning, with all supporting documentation, to track where all the assets went. The completed version should be signed by all the adult beneficiaries in order to release the executor from any further responsibility for the estate.  The releases protect the executor from any further complaints or claims by the beneficiaries. Often this step is completed before the final distribution of assets.
            
            

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

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.