One of the questions we often get asked by people who are planning their estates or for incapacity is who they should appoint to be the executors of their will or their substitute decision makers if they become incapable. (In Ontario, substitute decision makers during incapacity are known as attorneys for property or personal care if appointed by the individual in a power of attorney or guardians for property or personal care if appointed by the Court – see our Client Advisory Powers of Attorney for more information).
There are a variety of matters to consider in making these critical decisions. Each person needs to decide who will best fill these roles in their unique circumstances. However, one matter common to all executors and substitute decision makers is the need for initial advice and guidance in carrying out their responsibilities.
As outlined in our Client Advisory Estate Administration Basics, executors must complete a number of tasks and consider a variety of issues in administering an estate. From funeral to financial advice, teacups to taxes, paperwork to paperclips, decisions must be made, professionals consulted, assets liquidated, beneficiaries informed, forms completed.
Obtaining initial advice will assist the executor to ensure that he or she (or they if more than one) does not overlook anything. Often a helpful checklist of matters to be considered or completed is provided. Having such advice will not only help keep executors on track but also give much needed reassurance that they are not missing important matters or deadlines. A checklist can also assist co-executors who may be having difficulty deciding on priorities to make decisions and move matters forward on a timely basis.
Attorneys and guardians who are acting as substitute decision makers during a person’s lifetime can also greatly benefit from initial advice on their duties and responsibilities. Because the individual who has appointed them (sometimes referred to as the grantor) is still alive, but not able to make decisions, attorneys and guardians must always act in the best interests of the grantor alone. This involves not only practical matters in administering property or making medical decisions, but a variety of unique considerations in making those decisions. Record-keeping for attorneys or guardians for property, as for executors, will be extremely important. Initial advice for such matters can avoid problems, frustrations and financial losses for both the grantor and the attorney or guardian.
Unfortunately, many executors and substitute decision makers do not get initial legal, financial or tax advice when they begin their roles. This can happen for a variety of reasons, most notably that no one has thought to explain to them why this is critically important. Examples of situations where executors, attorneys and guardians can run into problems, sometimes resulting in potential personal liability for the executor, attorney or guardian, due to inadequate initial advice include:
•Not keeping adequate records;
•Not properly investing funds;
•Making unauthorized gifts to themselves or family members;
•Filing income tax returns late;
•Not making complete investigations of assets.
We have witnessed the adverse results of a lack of initial advice on numerous occasions. While often the problems created can be solved, it is usually at much greater expense and loss of good feeling than if the problems had never arisen, in addition to attracting potential personal liability. While it is important to avoid financial loss, the problems that can arise can cause irreparable damage to family relationships, something which no amount of money will heal.
Starting out with the right advice can not only help start things out on the right foot but will keep things going on the straight and narrow, and also keep the executor, attorney or guardian out of harm’s way.
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The comments offered in this article are meant to be general in nature, are limited to the law of Ontario, Canada, and are not intended to provide legal or tax advice on any individual situation. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your personal circumstances.