Following the passing of a family member, surviving relatives begin the process of going through the estate.
Being named as an executor on a will can be difficult to manage especially when it come to beneficiaries who maybe in line to receive some money from the deceased. Very seldom does a beneficiary actually know how the process works or there are some misconceptions on what someone has seen on TV.
Partner Nancy Ling who practices in wills, estates and trusts speaks with AM 1150 and compares what beneficiaries expect to what is reality.
Ted Farr: This morning we have Partner Nancy Ling from FH&P Lawyers. She’s going to be giving us the insight on what you need to know if you're inheriting from someone who has passed away. What sort of starts this conversation? How do we get into it here?
Nancy Ling: We help a lot of people who have been named as executors under a will or who want to administer an estate when there is no will, and a lot of dealing with the estate of someone once they’ve passed away is dealing with the beneficiaries. I find that a lot of the beneficiaries don't necessarily know how the process works or there's some misconceptions from things you see on TV like the formal reading of the will for example. So I’ll talk through a bit of the process and I”ll compare what I found people expect versus the reality. As I said the first thing that a lot of people expect is that there's going to be a meeting of all the family members in the lawyers’ board room and we're going to formally read out the will and tell everybody what they've got. In Canada it doesn't happen and in BC when we need to probate a will and that's if there is a will and there's a lot of money involved or there's a house or something significant enough that the banks and the Land Title Office want to make sure that the will is valid, then the will has to be proved or probated by the court and only when you actually have to go through that court process, which isn't mandatory, do you actually have to serve the will to all the people named in it. Basically you just pop a copy of the will in the mail so there's no formal meeting where we read it out loud, it just gets mailed to the beneficiaries. It also gets mailed to anyone who wasn't named in the will who might have had an expectation to, so that includes the biological children, adopted children and spouses of the deceased. For example if a person wrote a will and left out their children, they disinherited their children, the will would get delivered to whoever they named as a beneficiary but a copy of it would also get delivered to their children letting them know that they weren't named in the well. So that's the first thing people expect. The next thing is what I find when people get this package in the mail, a lot of people aren't used to getting packages in the mail from the law office, it tends to stress people out. I find that first step, the notice the copy of the will is really just that, it's just sending a copy of the will. I find a lot of beneficiaries will rush out and get legal advice what do I have to do with this and unless somebody knows that there's a different will or they have a reason to believe that the copy they've been given was a forgery or fraudulent in some way or they know of some other issue with it, it's really just giving the beneficiaries a copy so that they know that's the will that everybody's going to be following. However that is if the beneficiary does know there's a different will, say I was going to inherit from an estate and I get this package in the mail with a photocopy of a will and it's from 2010 and I know for a fact that the person who has died has gone back in and done another will in 2018 for example I would want to let the executor know right away that they're mistaken about which will they're using and it's not the most recent and the most valid.
Ted Farr: So that's just a simple phone call and it isn't like a set in a movie, I keep having visions of this, that the movie is telling us what to expect and it’s not true.
Nancy Ling: Exactly. It’s a notice to make sure everyone knows what’s going on who has an interest in the estate and they’ve got an opportunity to reply or reach out to the executor or voice any concerns. That's why there's a rule in place that once the executor mails out these copies of the will to everybody they have to wait 21 days before they can take the next step and that is meant to give everybody time to get the copy, look at it and make sure that everything is copacetic.
Ted Farr: So Nancy what is the next step?
Nancy Ling: First I just want to talk about that notice because the other thing is, I get phone calls all the time from people. Somebody has died and they expect that they’re named in the will but they haven't received any notice, nobody's gotten in touch with them and that happens quite often when people assume they're named in the will and they're not and they're not also a child. Or sometimes we see it in common law situations where maybe they are a relatively new relationship and they're just sort of eeking into that spousal common-law territory and maybe the other family members of the deceased don't actually recognize that person as being legally a spouse. So if you are someone who you think should have gotten a photocopy of the will because you're a common-law spouse of a person who died but you know other people who got the will and you didn't, you need to probably hire a lawyer right away because they're taking the position that you're not actually a spouse and just something like a girlfriend or boyfriend. That's the other part but again you can always get legal advice when you get documents from a lawyer and you don't know what they are about. The next step after that once a notice has gone out is basically just making sure the beneficiaries understand the timing. A lot of people hear that they're going to inherit, they get this copy of the will and they get very excited and they start making plans for that money right away. I have even had some beneficiaries make offers on houses without realizing that it can take a year for an estate to be administered. There's a lot of work and personal liability for the executor so they don't want to rush or miss anything and there's also some rules in place that force the executor to wait. For example the executor submits the will to the court asking for it to be approved or probated and once the court comes back and confirms the will and issues a grant of probate confirming it's valid, then the executor starts to give that will to all the banks and everybody to amalgamate all the money in one place. But the executor is supposed to wait 210 days from that grant before actually paying the money out to the beneficiaries. So that’s a lot longer than most beneficiaries expect so I find the biggest issue is making sure that that's communicated, because quite frequently we find we are having beneficiaries follow-up repeatedly, ”where's my money?” It's understandable but every time that the lawyer or whoever is assisting has to reply, write letters for the beneficiaries, it does add legal fees to it because it is additional work that the lawyer has to do so it's finding the nice balance between maintaining good open communication with everybody but not following up every other week when it's a process that's going to take a year not weeks.
Ted Farr: So the job of the executor is big as you’ve been describing. I mean that's a long time.
Nancy Ling: Yes and it’s really hard to know what we're dealing with until we get into it. So we will try to feel out a lot of questions at the outset for the beneficiaries but we may not have the answers yet. If the person who died had US bank accounts, maybe they had some mineral rights in Saskatchewan, who knows maybe they had a cottage out east somewhere, so we have to track down all of these assets. We have to figure out how to deal with them to get them liquidated or sold or transferred. We also have to track down all debts because it’s the executor’s responsibility to make sure that all of the debts of the deceased are fully paid before the remainder of the money gets divided up to the beneficiaries, so debts and taxes in particular have to get paid first. Most people understand that CRA is not a particularly quick-moving governmental organization so the executives have to make sure that all of the deceased tax returns have been filed, they’ve been filed properly and assessed and then they have to file the final tax return, get those assessed and usually they'll want to get a clearance certificate from CRA as well. That's because CRA has great auditing powers and they can come back and reassess tax returns years and years later so the executor doesn't want to wait years and years for a potential audit so what they do is they ask CRA for a clearance certificate to review everything right now and say they're not going to come back and audit but that process especially with all of the COVID-19 benefits and extra work that CRA is doing right now its taking longer and longer. Getting a clearance certificate from CRA to give the executors peace of mind that there's no more taxes that are going to be payable it can take almost nine months to get that certificate. So that's another delay beneficiaries don't always understand or expect and they wonder why it matters and that's because if the executor spends all of the estate's money and pays everything out to the beneficiaries and there's no more money in the estate and then CRA comes back and says wait we've done an audit and reassessed there's another $10,000 owing, if the executor has already paid all the money over to the beneficiaries they may look to the executor to pay that out of his/her own pocket. It’s balancing trying to get things done timely and efficiently with making sure that the executor isn't going to end up being personally liable for debts or taxes of the estate because they paid it out too soon.
Ted Farr: Nancy Ling a partner with FH&P Lawyers.
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