- Estate Administration Basics
- Duties of the Personal Representative
- Protecting Estate Assets
- Pre-Application Steps prior to obtaining Grant
- Determing Estate Assets
- Who is Responsible for the Deceased’s Debts?
- What are Probate Fees?
- What is a will?
- Why do you need a will?
- When do you need to revise your will?
- What happens if you die without a will?
- What is a Power of Attorney?
- What is a Representation Agreement?
Following a death of an individual, certain assets cannot be dealt with until a personal representative is appointed and a grant has been issued.
If a will exists, the person appointed as the representative (i.e. executor) applies to the court for a grant of probate. A probated will means that the court has reviewed the original will and deemed it to be a valid will. Without probate, most financial institutions will not release the deceased’s assets.
If there is a will, but there is not an effective executor appointed, then an administer will apply for a grant of letters of administration with will annexed.
If no will exists, a grant of letters of administration must be obtained and the court appoints an administrator as the deceased’s personal representative. Generally, where a person dies without a will, the family members will determine who should make the application to the court for a grant of letters of administration. The person who applies for the grant must obtain a formal consent from anybody who has an equal or greater right to make an application for a grant. The process of determining who will be the administrator and obtaining a grant of letters of administration is often more costly than obtaining a grant of probate. The problem of who to appoint as administrator may lead to disputes which further diminishes the estate assets.
If there is nobody else prepared to administer the estate, the Public Guardian and Trustee is the Official Administrator for British Columbia and may be appointed to administer.
The responsibility of a personal representative is often prescribed by the will, but the duties invariably include:
(1) taking possession and control of the deceased’s assets;
(2) paying debts and making provision for other liabilities;
(3) notifying beneficiaries;
(4) acting personally, although designation may be allowed in certain circumstances;
(5) insuring against perils;
(6) continuing or maintaining actions brought by or against the estate;
(7) ensuring investments are authorized;
(8) keeping proper accounts;
(9) arrange for income tax matters to be completed; and
(10) distributing the estate according to the deceased wishes.
Some of the factors one may wish to consider prior to deciding to act are as follows:
(1) the potential for personal liability arising from a breach of trust in the course of administering an estate;
(2) the terms of the will i.e. if there are ongoing trusts to administer and if the executor is a beneficiary;
(3) the nature of the assets and determine whether you have the requisite expertise to deal with the assets i.e. insolvent estate;
(4) conflict of interest;
(5) the personal relationship with the beneficiaries of intestate successors; and
(6) the time involved and remuneration payable.
If you are appointed as an executor and don’t or can’t carry out the responsibilities, you may wish to appoint a trust company to administer part or all of the estate. A trust company may agree to carry out the duties in administering the estate depending on the size of the estate and the complexity of the administration. You may also formally renounce your appointment provided that there has not been any intermeddling with the estate assets. A renunciation must be unconditional, in writing, and should be witnessed by someone who does not have an interest in the estate.
Once a personal representative has decided to act, the following steps should be taken to protect the estate assets:
(1) Search for cash, insurance policies, securities, jewellery, and other valuables, and arrange for their safekeeping. Cancel the deceased’s credit cards.
(2) Lock up the deceased’s residence if it is not occupied. Advise the police if it is not under proper supervision.
(3) Arrange for an immediate inventory of all personal assets.
(4) Check the insurance on the deceased’s assets (e.g., house, furniture, motor vehicle). Check the expiry dates and check the vacancy provisions to ensure that the coverage continues (a 30 day vacancy limit applies in most policies insuring residential property). Notify the insurers of the death.
(5) Arrange for interim management of the deceased’s business.
(6) Collect and deposit any outstanding cheques (e.g., pensions, dividends, interest, salary).
(7) Redirect mail if necessary.
(8) Check for mortgages (and determine if they are life-insured) and agreements for sale and make the payments to keep them up to date.
(9) Check leases and tenancies. Give tenants notice about where to send rent payments and give notice of termination if necessary.
(10) Review the last cheques written by the deceased to ensure that there were no irregularities.
(11) Apply for Canada Pension Plan Death Benefits. If you need any information, you should contact them at 1–800-277‑9914. If you are mailing any documents to Canada Pension, the address is: PO Box 1177, Federal Building, Victoria, BC, V7W 2V2.
Please note that these suggestions apply to many estates, but they may not all apply to the estate that you are administering. This is not a complete list of assets; there may also be other assets that require protection and that aren’t dealt with above.
Prior to applying for a grant of probate the original will and Certificate of Wills Notice search must be deposited in the registry. The reason for this is that the courts need to be satisfied that the will has not been revoked.
All parties beneficially interested in the estate must be sent notice of the application for the grant. The reason for having to send notices is because the Wills Variation Act, provides that a child or spouse of the deceased may seek redistribution of the estate if it can be established that “ adequate provision” had not been made for the “proper maintenance and support” of the claimant.
If there is a will appointing the executor, the personal property devolves at the moment of death, subject to the executors right to renounce. The executor has one year from the testator’s death to gather all assets and settle the estate affairs.
If there is no will, the estate vests into the court until an administrator is appointed.
The personal representative will require an inventory of the deceased’s assets at the date of death.
Generally there are two asset categories. Firstly, those assets that were property of the deceased that pass by will or intestancy to the personal representative. Secondly, assets that may or may not have been property of the deceased that passes by operation of law. Assets that do not pass as part of the estate include the following:
(1) assets held in joint tenancy, which passes by law, to the surviving joint tenant;
(2) bank accounts that are held jointly pass to the surviving account holder;
(3) property that although appeared to belong to the deceased was subject to a triggering event under the Family Relations Act or community property regime;
(4) property that by contract or will passes directly to the beneficiary i.e. pension, insurance policies, RRSP or RRIF payable to direct beneficiary; and
(5) Inter vivos trusts: this a trust set up during a testators lifetime, all assets in the trust pass outside the will and in accordance with the trust.
All assets need to be valued. Generally, the valuation date is the date of death although there may be other dates for tax purposes. Valuation can be a complex process and it may be prudent to retain a professional appraiser.
The personal representative may face personal liability for the debts of the deceased to the extent of the assets of the estate. It is critical that debts are properly listed and valued.
Debts include not only those immediately payable but also deferred debts. The personal representative should check all due dates of debts and make arrangements for the payment or release.
Although in Canada there is no inheritance tax per se, probate filing fees are required to be paid before the grant will be issued. The fees are determined by the value of the estate. If the deceased was ordinarily a resident of B.C. immediately prior to death, all of the deceased’s assets, except of real and personal property located outside B.C. will be subject to probate fees.
The probate filing fees are $6 for each $1000 or part thereof of estate value in excess of $25, 000, up to $50,000, plus $14 for each $1000 or part thereof of estate value in excess of $50,000 together with a $208 fee payable to commence the application.
A will is a legal document made by you to take effect upon your death. It gives instructions on how your assets are to be divided and how your affairs are to be handled.
A will serves a variety of functions:
1. Appointing a personal representative to handle affairs after your death;
2. Appointing a guardian for children under the age of 19;
3. Selecting family/friends/ charities/or other organizations to inherit you assets;
4. Ensuring that your beneficiaries receive inheritance in a manner and age that you feel is suitable;
5. Potential tax planning;
6. Reducing the cost of administering your estate.
When there is a material change in your circumstances which may include, birth, death, marriage, marriage breakdown or divorce, change in circumstances of guardian or executor-trustee named in your will, or a substantial change in assets or liabilities or tax laws.
Where a person dies in British Columbia without a will, a person is said to have died intestate. The administration of your estate will be distributed in accordance with the laws of British Columbia.
The Estate Administration Act sets out the scheme for distribution of the estate of a deceased person. Dying without a will can cause a great deal of stress and expense to the surviving family members. Some of the problems include the following:
(1) There is no executor appointed and the estate cannot be dealt with until the court appoints someone to administer the estate;
(2) Disputes are far more likely to arise amongst family members as the person applying to be the administrator needs to get the consent of all persons with an equal or greater right to apply;
(3) Where children are involved a guardian is court appointed;
(4) Lack of estate planning can lead to increased taxes.
(5) Some beneficiaries will not be adequately provided for. Where there is a spouse and two or more children the spouse is entitled to the first $65,000 and a life interest in the family home and one third of the balance of the estate. This may simply not be sufficient for the spouse;
(6) Children receive the inheritance at the age of 19. Many people use trusts to defer the distribution until an older age when they feel a child is better able to handle the money;
(7) If a beneficiary is receiving disability assistance the distribution of assets may render them ineligible for disability assistance; and
(8)There will be no gifts to friends or charities
The above is by no means an exhaustive list of the problems from dying without a will. Ultimately, the delay and expense of administering an estate can be avoided by planning your estate during your lifetime. It is highly recommended that you consult a lawyer to avoid some of the problems listed above.
A Power of Attorney is a method of giving someone the power to conduct your financial affairs. This document is often granted when a person’s mental
capacity is weakening because of age or illness or other factors and a person no longer feels capable to adequately manage their affairs. By having a Power of
Attorney it allows you to appoint s omeone you trust to make financial decisions on your behalf. In order to grant someone a Power of Attorney you must be mentally
competent. Unless your Power of Attorney specifically provides to it is to continue to be effective notwithstanding your mental incapacity the document will cease to be effective. Therefore if planning for incapacity an “enduring” clause is highly recommended.
The Power of Attorney can be cancelled at any time by the person who granted it assuming that he or she is still mentally sound. Like a Will, a Power of Attorney is an essential part of an estate plan.
A Representation Agreement is a method of giving someone else the power to make health care and personal care decisions. The Representation Agreement can either take effect immediately or in the happening of an event such as incapacity.
The law also allows you to appoint a monitor to make sure that the
representative complies with his or her duties.