How much time does it take to settle an estate?

Settling an estate after someone dies can take a considerable length of time to complete, usually longer than you anticipate. Can it be settled in 6 months? Maybe, but it’s unlikely. 12 months? Sometimes, but in my experience it takes 12 – 18 months to settle most middle-class estates. “But I just have to cancel a few pensions and close the bank account”, you say. There is usually more to it than that, so without boring you with all the finer details, let’s talk about some of the time-consuming tasks.

The funeral is over now, family members have gone back home, and everyone is beginning to settle back in to their daily routine. But not the executor… that person’s role has just started. Since the will likely needs to be probated let’s begin with generating a list of assets and liabilities, including the values as of the date of death. This is an iterative process, requiring you to communicate with numerous companies and, since most of these companies require a copy of the death certificate, one will have to be mailed to them, or you will have to attend in person. Here are a few questions to get you thinking:

• Where are the bank accounts, and what are the balances?
• What is the outstanding balance on the mortgage of the house?
• Are the monthly condo strata fees up to date?
• Have property taxes been deferred?
• What is the value of the Canada Savings Bonds and/or GIC’s? Hint: need to determine accrued interest.
• If the person was self-employed, what is the value of the corporate shares?
• Are there any assets and/or debts outside of Canada, such as a home in Arizona or Florida? Don’t forget about timeshares. You may have to file for probate again in these other jurisdictions.
• What is the coin collection worth? Art? Hockey cards? Jewelry?

OK, the list of assets & liabilities is finished and you (or your lawyer) have prepared the probate documents. In my experience the probate registry usually takes 2 – 3 months to process the documents. Sometimes sooner, but don’t bank on it.

While you’re waiting for the Grant of Probate to be issued, we can prepare the home for sale, including deciding what to do with all of the possessions. Some things can be given to family members, some can be sold, and other items will need to be thrown out. Complete any necessary work in the home, such as painting and carpet cleaning.

If the deceased was self-employed there may be a company to manage. Someone will need to oversee the staff and there may be customers requiring attention. This company likely has value, so the executor needs to ensure the value is maintained. Consider professional assistance.

The terminal income tax return will need to be filed and, possibly, a Trust return for the estate itself. Each one will take time for Canada Revenue Agency to process, and you should also request Tax Clearance Certificates, again, each taking time for CRA to process.

Well, so far, so good. Although we’ve been at it for a number of months now, at least everything is progressing. But wait! One of the children is upset because he was written out of the will, so he files a lawsuit to challenge the terms of the will. Now all bets are off because it’s anyone’s guess how long it will take to settle this estate. Don’t kid yourself… this is becoming all too common, especially with the ever-increasing value of estates.

Now it’s time to distribute the proceeds of the estate. The assets have been sold, debts paid, tax returns filed, and lawsuits settled. Before distributing the money, the beneficiaries need to pass the accounts, meaning they need to approve the expenditures. This can be quick & easy, or long & drawn out. By the way, you were maintaining detailed bookkeeping records, right? Sorry, I forgot to mention that little detail earlier.

In addition to everything described above, the executor likely has other obligations, too, such as family and work. The executor may also have to research how to settle an estate in the first place, may be uncomfortable using a computer, and might simply procrastinate. But the clock keeps ticking while the beneficiaries are waiting.

To summarize, settling an estate can take a surprisingly long time and it can be very time-consuming.

Gregg Medwid is the owner and president of Executor Support, a firm based in Coquitlam, BC with expertise assisting executors and administrators in settling estates. The project management expertise and customer service focus Medwid brings to Executor Support ensures questions are answered and help is given when it is most needed.

This article is in no way intended to substitute for competent legal advice.

Gregg Medwid, Owner
Executor Support
gregg@executorsupport.ca
604-999-2106
http://www.ExecutorSupport.ca

Tax Returns Required When Settling an Estate

Only two things are guaranteed in life: death and taxes. And the tax requirement lingers on even after death.

When someone dies, Canada Revenue Agency (CRA) needs to know how much money the person earned in the (partial) year in which they died, so a T1 Personal Income Tax Return will need to be filed. This tax return is also referred to as the date-of-death return or terminal tax return. Depending on the type of assets owned, and whether or not there are any joint owners or named beneficiaries, there can sometimes be a large tax bill payable, so it is wise to have an accountant review the estate at the outset. Let’s hear the bad news now so that we can plan to pay this tax debt later.

Must the tax return be filed by April 30^th, like everyone else? Sometimes.

· Date of Death from January 1 to October 31: Due date is April 30^thof the following year.

· Date of Death from November 1 to December 31: Due date is six months after the date of death.

If last year’s tax return was not filed, then last year’s tax return and any amount owing are due 6 months after the date of death. CRA can provide you with the necessary T4/T5 tax information slips they have on file.

We are frequently asked how to claim the $2500 Canada Pension Plan Death Benefit. The CPP Death Benefit should not be included in the final tax return for the deceased. Rather, if there is only one beneficiary receiving 100% of the proceeds of the estate, then the CPP Death Benefit should get included in the beneficiary’s own personal tax return. But if there are two or more beneficiaries in the estate, then the CPP Death Benefit should get included in the T3 Trust Income Tax Return (described below).

Does an accountant need to prepare the final tax return? No, you’re permitted to prepare that tax return by yourself, but an accountant may be able to make valuable suggestions, such as applying for a Disability Tax Credit.

In addition to the personal tax return, the estate itself will likely need to file a tax return, too, known as a T3 Trust Income Tax Return. CRA needs to know how much income was earned by the estate. A T3 Trust Return will need to be filed each year, 3 months after the anniversary of the death, until the proceeds of the estate have been fully distributed (there are other reasons, too, for filing). And the last T3 Trust Return will likely be required for the partial year, up to the date of distribution. You might want to consider hiring an accountant to prepare these tax returns rather than doing them yourself, and you will need to include the names, addresses and SIN’s of the beneficiaries.

How do you get through this without pulling your hair out? Be extremely organized with your paperwork, and maintain a detailed list of revenue and expenses.

Gregg Medwid is the owner and president of Executor Support, a firm based in Coquitlam, British Columbia, with expertise assisting executors and administrators in settling estates. The project management expertise and customer service focus Medwid brings to Executor Support ensures questions are answered and help is given when it is most needed.

This article is in no way intended to substitute for competent legal advice.

Gregg Medwid, Owner
Executor Support
gregg@executorsupport.ca
604-999-2106
http://www.ExecutorSupport.ca

An Introduction to Executors and Probate

It is no wonder there is confusion around executors, estates and probate. No one wants to consider their own demise so discussions tend to be avoided. Death, however, is a certainty, and with this in mind you need the basics in place to protect your loved ones.

In this article, I will explain what an executor does, why you need one and will also provide an introduction to probate.

An executor carries out your final wishes as detailed in your will. When there is uncertainty, your executor plays a part in sorting through the details and in essence, does their best to act as you would in distributing your assets within the confines of the law. Without a will, an administrator is selected. This individual manages the estate similarly to an executor; however, the absence of a will can make for a much more involved process.

While an executor may or may not be a beneficiary, it is essential that the person you assign is responsible, organized and a good communicator. Communication plays a key role as managing an estate can be complex and an executor must keep the family and other beneficiaries informed at all points.

Among their first tasks, the executor arranges a funeral and informs others of the death. Informing extends beyond friends and loved-ones to organizations such as government agencies, banks, etc.

The executor must also complete the very detailed task of settling the estate. This begins with cataloguing all assets and liabilities and determining what items form part of the estate and what passes directly to a beneficiary. Assets with an assigned beneficiary (RRSPs, insurance products, etc.) will avoid going through probate which is another reason why pre-planning will benefit your family.

Because the process of taking inventory of assets, settling debts, and liquidating the estate can be complex and take a long time, detailed financial records must be kept for all amounts flowing into and out of the estate. Additionally, the final tax return must be prepared and submitted by the executor, as well as possibly a tax return for the estate itself.

Probate certainly has its myths and uncertainty. Most people have heard of probate, but have little understanding of how it works.

For estates with a value of more than $25,000, probate is usually required. Probate grants the executor the authority needed to settle the estate by proving that the will, and the executor’s role, is valid to banks, pension offices and other organizations.

Within the Lower Mainland, there are probate registries in Vancouver, New Westminster and Chilliwack, with others around the province. Probate filing documents can be prepared by the executor (a kit is available in many office supply stores) or by a lawyer, and must include the list of assets and liabilities with values. The fee to file is $200 plus probate fee – approximately 1.4% of the value of assets within the estate.

Generally the courts will process the application within 2 to 3 months granting the executor the authority necessary to finalize details of the estate.

Obviously the process can be time-consuming and up to 5% of the value of the estate is available for the executor for their service, however, it is important to note that this money comes out of the estate and will reduce the asset value available to beneficiaries.

Mortality is far from a fun topic, but planning and preparation will make things easier for your executor and loved ones. No one has yet figured out how to live forever, so take the time now to ensure your estate is in order.

    Gregg Medwid is the owner and president of Executor Support, a Coquitlam based firm with expertise assisting executors and administrators in settling estates. The project management expertise and customer service focus Medwid brings to Executor Support ensures questions are answered and help is given when it is most needed.

This article is in no way intended to substitute for competent legal advice.

Gregg Medwid, Owner

Executor Support

gregg@executorsupport.ca

604-999-2106

http://www.ExecutorSupport.ca