WHAT ARE THE LEGAL DUTIES OF AN EXECUTOR OR ADMINISTRATOR?

By Gemma Brown, and Alexandra Philippot (Student)

An executor is a person named within a Last Will & Testament who will carry out directions and requests according to the provisions in the Will. If an individual dies without a Will, they are said to have died intestate. In this case, an administrator must be appointed by the court to administer the estate. Certain requirements must be met in order to be appointed as an administrator. The Intestate Succession Act sets out priorities as to who has the right to administer the estate. The first right goes to spouse or common-law partner, then to an adult child, then to parents, then brothers and sisters, and then to nieces and nephews. According to The Court of Queen’s Bench Surrogate Practice Act, the administrator must be a resident of Manitoba.

There are many duties associated with being an executor or administrator (also referred to as personal representative) of an estate. This article is not meant to be a comprehensive list of all these duties, but provides an explanation of the legal duties associated with this position, as well as the potential consequences and liabilities for failure to do so.

An executor or administrator is a trustee for the beneficiaries or next of kin of the estate and has a duty towards them to pay the debts, clear the estate and hand over the remainder to the persons entitled.
Unreasonable delays in settling an estate may subject the executor/administrator to liability or financial penalties. It is recommended that you do your best to settle the estate within one year of the testator’s death. There is no rule as to what constitutes undue or unreasonable delay, but the courts will consider whether the alleged breach of trust by failure to convert or to realize the assets, and consequent loss, occurred within or beyond a year of the testator’s death or the grant of administration. There are vesting timelines associated with the Income Tax Act that must also be considered.

An executor/administrator is expected to perform duties in the same way that a prudent person would in managing his or her own affairs. Legally, this is known as a fiduciary duty, meaning a duty owed to another party to act in their best interests. An executor should act fairly, honestly, and to the best of their abilities, or they may be liable for any losses resulting from their failure to fulfill their duties.

Specifically, an executor/administrator will need to exercise their discretion reasonably, invest trust assets in a prudent and cautious manner, act impartially and objectively, and avoid conflicts of interests, such as not making transactions using estate assets when this would benefit them personally. Simply stated, an executor cannot deal with the estate in a manner adverse to its interests.

The basic principle of an executor/administrator’s duty to beneficiaries of the Will is neutrality. As such, “an executor should not pick sides between the beneficiaries…It is a matter of indifference to the executor as to how the estate should be divided. He or she need only comply with the terms of the will or any variation of it made by the court.”

It is the duty of an executor/administrator to avoid conflicts of interest. Within the fiduciary’s duties of good faith and loyalty is the duty to avoid a conflict of interest. The fiduciary must not only avoid a direct conflict of interest, but must also avoid the appearance of a possible or potential conflict. The fiduciary is barred from dividing loyalties between competing interests, including self interest.

An executor/administrator is permitted to renounce their position before they have acted on behalf of the estate, but not later. This can be done by filing a specific form with the Court of Queen’s Bench.

Once an individual has started to exercise the responsibilities of an executor/administrator, it will usually not be possible to resign as they will already be enmeshed in the affairs of the estate, and they may risk liability if they fail to carry out their duties. Only in very exceptional circumstances will the courts permit an executor to retract a renunciation of a previously granted executorship and to permit such a retraction a positive benefit on the estate must be shown.

Similarly, an administrator who has accepted letters of administration cannot resign, renounce or in any way relieve himself of the duties of administrator, without the order of the Court of Probate.

Specific Legal Duties:
The legal duties of an executor/administrator are as follows:

The primary duty of an executor/administrator is to preserve the assets of the estate, pay the debts and distribute the balance to the beneficiaries.

1. To dispose of the deceased’s body – It is the executor/administrator and not the testator’s spouse or family, who has the right to determine the place and manner or burial. An executor/administrator, having a duty with respect to the burial, has a right of possession of the body for the purpose of burial.

2. Funeral arrangements – The executor/administrator is legally responsible for making the funeral arrangements with guidance, if appropriate, from the person’s family.

3. Obtain a Grant of Probate or Letters of Administration, if applicable.

a. Obtain death certificates, certified copies from Vital Statistics;
b. Notify beneficiaries and possible beneficiaries, such as a common law spouse and persons who would inherit on an intestacy (where there is no Will) with respect to an application for probate or grant of administration.

4. Preserve the assets of the estate. This includes, but is not limited to, the following:

a. Review all personal papers of the deceased to help locate and identify the deceased’s assets (including any chequing and savings accounts, original investment certificates, stocks, bonds, real estate), tax information and insurance policies;
b. Notify the insurer and the relevant banks and financial institutions of the death;
c. Access and list the contents of the deceased’s safety deposit box, then close the safety deposit box, if it will not be used;
d. Arrange for storage and insurance of any assets that require it;
e. Re-register the accounts and assets of the deceased into the name of the estate.
f. Arrange for valuations of any assets of the estate, such as real estate, vehicles, and other personal property;
g. Obtain statements showing the value of the deceased’s assets, including investments and RRSPs/RRIFs, as of the date of death;
h. Apply for Canada Pension Plan benefits, if any;
i. Terminate deceased’s lease or arrange sublet of premises, if applicable;
j. Contact the deceased’s employees (current and former) to verify any salary/benefits/pensions owing;
k. Apply for any amounts payable to the estate under the insurance policies;
l. If loans are insured, complete appropriate insurance forms;
m. Sell real estate, if applicable;
n. Start sale of assets, and transfer title(s);
o. Arrange for final distribution of remaining assets, and obtain receipts.

An executor/administrator is not entitled to use the estate property for their own personal benefit. If the disbursements or expenses charged against an estate cannot be explained, they are personally liable to the estate for those disbursements and expenses. If they improperly enjoy the estate assets for their own personal benefit without authority and allow non-beneficiaries to also benefit, they are liable to the estate for the value of the benefits received.

5. To protect the estate funds intrusted to their care and to distribute those funds to their beneficiaries intact, that is, properly invested and without diminution, according to the terms of the Will, including:

a. Open a bank account for the estate and transfer the deceased’s bank accounts to the estate bank account;
b. Hold accounts in trust until money is distributed;
c. Obtain passing of accounts from court /approval from beneficiaries;
d. Pass accounts, if necessary;
e. Advise the bank in writing to close the estate account once the estate is settled.

6. To perform all contracts of the deceased that can be enforced against the estate. Breaking an enforceable contract is an unlawful act.

7. Duty to Deceased’s Spouse or Common-Law Spouse: The executor/administrator of a deceased spouse or common-law partner shall within 1 month after the grant of letters probate/letters of administration, serve the surviving spouse or common-law partner with a notice of entitlement to make an application for an accounting and equalization of assets, except where there is only one surviving spouse or common-law partner and they have made or are continuing an application for an accounting and equalization of assets under the Family Property Act.

The notice says that the spouse or common-law partner has 6 months to make a claim against the estate for an equal division of marital property.

The executor/administrator of the estate of a deceased spouse or common-law partner shall not proceed with the distribution of the estate until:

a) The surviving spouse or common-law partner consents in writing to the proposed distribution;
b) The time within which the surviving spouse or common-law partner may make application for an accounting and equalization of assets under this Part has expired and no such application has been made within that time; or
c) An application made or continued under this Part for an accounting and an equalization of assets is disposed of.

If an executor/administrator distributes a portion of the estate of a deceased spouse or common-law partner contrary to this section and the court orders a payment to be made of the estate under an accounting and equalization of assets, the executor/administrator is personally liable to the surviving spouse or common-law partner for any loss suffered by the surviving spouse or common-law partner as a result of the distribution.

8. To invest the estate funds in an authorized investment and manage those investments. An executor/administrator may be personally liable for interest lost to the estate for failing to invest estate assets.

9. To provide accounting: An executor/administrator must always be ready to give an accounting of what has been done with the estate assets/property, so beneficiaries know what has been done with the estate.

a. Prepare an accounting of your expenses and compensation, if any, as executor;
b. Prepare a final accounting of all assets, liabilities, expenses and distribution of assets for beneficiaries;
c. Have each adult beneficiary approve accounting and sign a release;
d. Maintain detailed records of all estate activities, in case a beneficiary or the court asks to review them;
e. Prepare and distribute a final report to the beneficiaries.

An executor/administrator has an obligation to keep proper accounts, including a complete record of his or her activities and be in a position at all times to prove that he or she administered the trust prudently and honestly. He or she must have the accounts ready to give full information whenever required.
An executor/administrator has not sufficiently carried out their duties if they fail to retain receipts for large cash withdrawals of expenses charged against the estate. As a result, they may be held liable for the unsubstantiated amounts.

If an executor/administrator has mixed his or her own funds with the funds being held for another, all of the property must be taken to be the other’s property until the executor/administrator is able to prove what part of it is his or her own.

The executor/administrator, not the beneficiaries bears the onus of establishing that the management and disbursement of funds is consistent with the terms of the Will.

10. To pay all debts, funeral and testamentary expenses, pecuniary legacies and the duties and taxes payable out of the estate.

a. Pay all income tax owing;
b. Settle all legitimate claims and debts (including legal fees, funeral costs, taxes) before final distribution of assets and obtain receipts for any payments made;

An executor/administrator is liable to be sued for payment of debts the moment after the testator’s death.

11. To provide a notice to creditors and advertise for creditors, if necessary.

12. One of the essential duties of an executor/administrator is to attend to the filing of tax return with, and obtaining a Clearance Certificate from, Canada Revenue Agency.

a. Obtain a copy of the last tax return filed by the deceased;
a. Final payments and returns filed and taxes are paid.

Under the Income Tax Act, an executor/administrator will be personally liable for any interest and penalties that may be payable by an estate if the assets are distributed before obtaining a clearance certificate from the Canada Revenue Agency certifying that all taxes, interest and penalties have been assessed and paid.

13. To distribute the assets in accordance with the Will (or any variation of it made by the court).

a. Provide beneficiaries with a copy of the Will;
b. Notify the beneficiaries of the death, if necessary, and advise them of their entitlement under the Will;
c. Identify which assets are to be sold, transferred under the terms of the Will and wishes of the beneficiaries;
d. Arrange to have any RRSPs/RRIFs transferred or rolled over to the named beneficiaries;
e. Establish any testamentary trusts, according to instructions in the Will;
f. Distribute specific bequests according to the instructions in the Will, but ensure that there are sufficient funds to pay outstanding debts and taxes.

14. Property must be distributed out to the beneficiaries once they are able to be distributed to them.

15. Arrange for guardianship of minor children.

16. An executor/administrator may be personally liable for the debts of the deceased to the extent of assets coming into the hands of the executor/administrator.

A breach of trust arises when an executor/administrator fails to carry out the duties imposed upon them. A trust can be breached by failing to do something that they were supposed to do or by doing something which they were prohibited from doing. If an estate suffers any loss as a result of an executor/administrator’s actions or inactions such as failure to rent real property, they are obliged to repay the estate with interest. It is therefore important that all persons appointed as executors or administrators understand their legal obligations so as to avoid potential legal liability.

For more information or questions about executor duties or a specific situation, please contact one of our lawyers.

Notice: This article is provided for general information purposes only and should not be relied upon as legal advice or opinion. It reflects the current state of the law as of this date, and is subject to change without notice. If you require legal advice or opinion, we would be pleased to provide you with our assistance on any of the issues raised in this articles