An executor is a person you appoint to carry out your will after death. Although an executor cannot act until you die, he or she should be named as soon as possible.
The Duties of an Executor
An executor is responsible for using your assets to pay any debts you owe, and all the expenses of your funeral. If there are assets left, an executor distributes them according to instructions in a will or to the rules laid out by provincial Estate property must be turned over to the heirs according to the laws of intestate succession. These are rules about who inherits property when the decedent (the person who died) leaves no will. An executor is personally liable for carrying out his or her duties unless he or she gets written permission to delegate some of those duties to others, such as an attorney. For example, an executor must collect money owed to the decedent and place it in a safe account, prepare an inventory of property that is left for the heirs, and notify all necessary parties that they have been named as beneficiaries. The executor’s job is not easy. In addition to preparing an inventory of assets and liabilities, he or she must see that debts are paid from assets and bills are paid by survivors. An executor may have to sell assets, settle insurance claims, or go to court if an heir contests the will. Executors are also responsible for filing income tax returns after death on behalf of the decedent and sometimes even prior to death. Filing a return before death is required if someone has died who was not subject to income tax, but under certain conditions, it is also required if someone has died who was subject to income tax. If the decedent was not taxable, the executor files the final returns and takes credit for any overpayments of taxes withheld.
The Limitations of an Executor
The estate must be turned over to the heirs within three years of the date of death. If it is not, an “administration order” is obtained from a court, and another person is appointed as administrator to complete the duties of an executor. An executor cannot act alone; he or she needs the help of beneficiaries, attorneys, bankers, accountants, and others who have been named as executor’s assistants. But an executor must not delegate his legal responsibility to carry out the duties of his office. An executor cannot be held personally liable if a beneficiary sues him or her after death because he or she breached a duty owed to that beneficiary. However, the beneficiaries do have a right to see all the assets of the estate, and an executor may not be able to conceal any assets. An executor is responsible for understanding the financial condition of the estate. If debts are paid out of personal funds rather than from other assets in the estate or if the property has been sold without disclosure or court authority, this could amount to embezzlement. An executor who uses personal funds to pay creditors of the estate may be personally liable. If a will is contested, an executor may have to place estate assets in a trust account. The executor may be appointed trustee for this purpose and must ensure that the trust is used only for payment of expenses related to administering the estate. An executor cannot use money from a trust account to pay his or her personal expenses. The executor is also liable for paying any income tax related to the estate, and in some cases may be able to take a deduction for his or her efforts. Since an executor usually has an employer and receives a salary, he or she is not taxed on the income received from administering the estate. However, if he or she does not have regular employment, the compensation from the estate is considered income.
The Law on Appointing an Executor
You can appoint only one executor, but you can name several persons who will become co-executors if your first choice does not qualify or declines the job. You should choose someone with a legal background since he or she will be named in court documents. Laws regarding executors are found in the provincial Business Corporations Act of each province and territory, as well as in specific provincial wills legislation. If someone has been designated to serve as an executor but dies, you can appoint him or her posthumously if your will permits it. If your will was not made in contemplation of the executor’s death, you cannot appoint a deceased person.
The Bottom Line
When choosing an executor, you should not only look at the person’s character and experience but also consider his or her ability to carry out legal responsibilities. An executor is able to accept this duty until he or she no longer qualifies under the law. The office ends with the administration of the estate. If there are two co-executors, make sure they both agree to do the job and will work together. In most cases, if someone is an executor but declines, he or she may be able to serve as a co-executor with another person appointed by you. When someone cannot or does not want to serve as an executor, it may fall on his or her spouse or adult children. For example, if someone dies and leaves a widow who is in poor health, the job might fall to one of his or her children. There are several legal ways in which you can appoint an executor that will handle many of the responsibilities for administering your estate. Some financial institutions that hold burial funds require wills to name the institution as executor to avoid estate taxes. You may also designate an executor in your will or set up a trust so your executor can transfer funds for burial expenses. You should not leave the choice of who will be named as an executor up to someone else, even if he or she is family. If you do, you run the risk that he or she will not do what is in your best interest. If there is a problem, you will have no recourse.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.