Aug 13, 2021
What assets are not included in probate?
In some provinces, the executor might even need to provide a list of assets from the estate to the probate court before they can even apply for probate.
If you’ve landed on this article, the chances are probably high that you’ve been appointed as the executor of someone’s estate, or someone close to you has, and now they’re urgently asking you to help them find out what that actually means.
No one gladly accepts the responsibility of being an estate executor. It means you have to handle the financial details that a deceased person left behind, and that can get messy. When someone dies, they rarely have all their affairs tied up nicely with a bow on top. And even if they do, the process of transferring ownership of corresponding funds to beneficiaries, paying off debt, and dealing with any taxes that may arise are still complicated tasks that many of us have never dealt with until the time comes.
And then there’s the fact that many estate executors are simultaneously dealing with the grief of just having lost a loved one. Navigating bureaucratic terrain while facing the emotional fallout of a loss is no small thing, and acknowledging this fact is the first step in ensuring that the estate executor gets the support that they need, right off the bat.
But before we can get into that, it’s important to understand what an estate executor actually does, why they exist in the first place, and when they come into play. Read on for the lowdown on estate executors.
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Let us introduce you to Aesha. Aesha is a 40-something professional whose father has passed away after a long illness. Aesha’s father, being a widower, had appointed Aesha as the executor of his estate in his will. This means that Aesha now has a number of responsibilities and tasks she must carry out in order to ensure that her father’s financial belongings get distributed in the way he envisioned it, while ensuring that all taxes and debt are taken care of.
Depending on where you are, there are other names for estate executors. Sometimes they’re known as personal representatives, or estate administrators. Nonetheless, the role and the responsibilities remain the same. The executor becomes vital in a process known as probate. Since Aesha’s father has passed, he can no longer legally own assets such as property, investments, and savings. The process of passing those onto living beneficiaries is known as the probate process, and Aesha, as her father’s executor, is now in charge of overseeing that process.
As you can imagine, this isn’t necessarily an easy task, especially since Aesha is no expert in estate law. Nonetheless, she has to perform the following:
The most important document needed for the entire probate process, as well as for the executor themselves, is the deceased’s will. Aesha’s father left behind a will where he specified that Aesha would be named the executor of his estate, which certainly makes things a bit easier, or as easy as they can be when dealing with the death of a family member and the management of their estate. Aesha’s first order of business would be to submit her father’s will to the probate court, so that the probate process can begin.
Aesha will also need to have access to deeds, partnership documents, insurance policies, or other important papers. Ideally, her father would have put those together for her before his death so she can find them easily once the time comes. But back to the will. Once Aesha submits her father’s will to probate court, the court will review it and decide whether Aesha indeed can act as the legitimate executor of her father’s estate. Only once that decision has been made can Aesha continue acting as executor.
But what happens if Aesha’s father has left no will? Then the process becomes a bit more complicated, because If there is no Will, then a legal process will be initiated to appoint an executor to settle the estate and decide how to distribute it. The appointed executor will most likely be the closest of kin. This process is likely to be more expensive than the probate process, and also shows why it’s so important that a will be drawn up in the first place.
Once the will is evaluated by the probate court, the court will appoint an executor. Since Aesha’s father named her as his executor in his will, Aesha will be named the official executor unless the beneficiaries object, which can lead to separate lawsuits.
It’s important that Aesha receive official authorization from probate court to act as executor for her father’s estate, since many of the institutions holding her father’s assets, such as banks, investment accounts, or insurance companies, won’t hand over the information Aesha needs without this certification.
Aesha can’t just empty out her father’s bank account and transfer the funds to her own checking account. She’ll need to set up an estate bank account, where she can transfer her father’s money and use it to pay any outstanding debt or bills. This account will also ultimately be used to distribute funds to the named beneficiaries, which is why it’s important to have the account in place pretty soon after being named executor.
As executor, it is now Aesha’s responsibility to make funeral arrangements for her father and send out notifications of death, including to service providers such as her father’s landlord, the utility company he paid, and to insurance providers. She’ll also have to notify Service Canada regarding CPP survivor's benefit, Old Age Security, and Guaranteed Income Supplement, if her father received any of those benefits. Aesha will also have to cancel things like credit cards, phone plans, and subscriptions.
Now Aesha has the difficult job of gathering all of her father’s assets and documenting them so that they can be distributed to her father’s beneficiaries, as stipulated in his will. The assets can range from bank and investment accounts, insurance policies, or safe deposit boxes to heirlooms such as jewelry and artwork or property deeds. The value of the assets will then need to be evaluated.
There may also be assets that are not included in the deceased’s will, which is why this step is so tedious and sometimes requires some detective work. It’s also an emotionally exhausting stage to be in, which is why it can be incredibly helpful for someone like Aesha to seek help with a professional expert.
This is another highly unpleasant part of an executor’s job. Aesha will have to file a number of returns, including any outstanding tax returns her father may have had (including a terminal return). She’ll also have to submit an estate income tax return if any assets—such as investments—earn income during the probate period.
Let’s say Aesha’s father also owned property in the United States. Depending on what state that property was in, and depending on the value of that asset, Aesha may also have to deal with paying an estate tax. She’ll also have to pay for provincial probate taxes. This tax is based on the total value of the assets, and the rate charged varies between provinces, with some provinces having a maximum fee. All provinces except for Alberta and Quebec levy potentially significant probate taxes.
Once all of the paperwork is done and all loose ends are tied up, Aesha can submit a summary to probate court detailing all the actions and transactions made on behalf of the estate. Only then can Aesha’s father’s assets be distributed as he saw fit. This can include bequeathing funds to his children, family, and friends, donating assets to charities, or creating trusts for individuals or corporations. The will usually also stipulates how these funds will be managed.
Now that we’ve covered what an estate executor does, let’s briefly go over why. The truth is that while being an estate executor is an unpleasant and often taxing job for the appointed executor, the alternative is a nebulous, long-winded court proceeding that can force someone who’s unprepared into dealing with their loved one’s estate, or leave the estate completely in the hands of the probate court, which will then fall back upon established guidelines on how an estate is divided up if no will or executor is found.
Let’s say that Aesha’s father didn’t leave a will. That means that the probate court will choose an executor, which is often the spouse or next of kin, in order to proximity. He’ll be considered to have died “intestate,” and the distribution of his assets is decided by a formula laid down by the provincial government—not by Aesha’s father—and this formula can vary from province to province. So no matter how much Aesha’s father wanted part of his estate to go to his best friend or to the senior dog rescue charity—if there’s no will detailing these wishes, it won’t happen.
Furthermore, an unplanned estate can signify more fees and taxes. Because the probate court will have to appoint someone to be the executor of the estate, more delays and fees will arise until this process is completed. Taxes are normally deferred on death when the assets of the deceased are passed to their spouse, but this doesn't happen when assets are passed to children or other family members. The rules regarding taxation and inheritance may also differ for common-law spouses in some provinces.
The bottom line is that estate executors are crucial in ensuring that someone’s wishes are carried out the way they would have wanted it, and ensuring that a deceased person’s final affairs are in order. It’s not a pleasant job, but it’s incredibly important and honorable.
The tricky thing about being an estate executor is that timing is crucial. Some things, like funeral arrangements, notifications of death, submitting the will, and canceling subscriptions and benefits, need to occur very, very quickly. That can be incredibly taxing when simultaneously dealing with the grief of losing a loved one.
That’s why preparing as much as possible in advance will alleviate this burden significantly. While it’s always extremely unpleasant to think about someone close to you dying, making preparations beforehand will help you when you’re in the moment. Trust us, future you will thank you.
You can check out a full list of what you should prepare in advance here, but here are some key aspects:
Once these aspects are taken care of, the actual probate process can take a couple of weeks or even months, depending on the complexity of the estate. Things will likely need to happen very quickly at first, and then it’ll probably feel like time is dragging. A quick and clean settlement of your loved one’s estate is the ultimate goal. And that’s what we’re here to help you with, at every step of the way. Welcome to ClearEstate.