Generating a List of Assets for the Estate

When someone dies they are deemed to have sold all of their assets at fair market value immediately before death. So, the big question is, what did they own, and what are the values? Answering this question is one of the first big tasks in settling an estate… generating a list of assets and liabilities, as of the date of death (ie. Balance Sheet). The contents of the balance sheet will be used by the person preparing the probate forms, either the executor or their lawyer.

Generating a list of assets can be very easy in many estates, but very complex and frustrating in other estates. Firstly, is there a will? If there is, then the bank will likely share information with you, such as account numbers and balances. But if there’s no will then most companies will refuse to provide any information due to privacy concerns. Write letters to any banks, financial institutions, insurance companies, service providers, pension offices… everyone who the deceased did business with. Ask them for account numbers, values and any other details you can think of, with respect to the assets (possibly) owned and debts owing.

Most people are helpful, but sometimes you’ll hit a dead end, in which case you’ll have to dig deeper. Search through the deceased’s home. Look in filing cabinets, desks, closets, boxes, drawers. Speak with their lawyer, accountant, financial planner, relatives, friends. Contact any and all companies whose documents you find. And if you ask yourself, “Should I bother contacting this company?”, my answer would be, “For the price of a stamp, why wouldn’t you”.

Seek whatever help you may need to establish market values, such as professional appraisals for jewellery, antiques, real estate and companies. Calculate interest earned up to the date of death on financial investments such as bonds and GIC’s. Research those stock certificates you found in the safety deposit box. The company may have changed its name or been sold.

The CPP Death Benefit as well as the final pension cheques need to be shown as assets, even if they haven’t arrived yet. And then there’s the assets that can easily get overlooked, such as the damage deposit from the apartment rental, or the trust/comfort account at the care home. The condo or timeshare in Florida needs to be shown. Insurance policies where there is no named beneficiary must also be included, because the estate will be the beneficiary.

You do not need to include joint bank accounts where there’s a right of survivorship, or real estate owned in joint tenancy, because the surviving owner simply continues to own them.

Now that you have your list of assets & liabilities, what’s next? In most cases, filing for probate.

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

Assets That Do Not Form Part of the Estate

When somebody die, they are deemed to have sold all of their assets just before death. Of course, in reality, nothing has been sold yet, and it will be up to the executor to sell or bequeath the assets of the estate, following the terms of the will. However, in many estates there are assets which are not owned by the estate. But how can that be? How can the assets be owned by the deceased while he was alive, but not owned by his estate after death? If the estate doesn’t own those assets, who does?

Some assets are owned jointly, with each owner having the right of survivorship. For example, a joint bank account. Each of the two owners owns the entire bank account, and when one of them passes away, the name of the deceased is removed from the account, leaving the survivor as the only owner. The estate is not the owner of that bank account, but rather the survivor is the owner. Another common example is the family home, which is often times owned by a couple in joint tenancy. When one of the two owners dies, the name of the deceased is removed from title, leaving the survivor’s name on title. Once again, the house does not form part of the estate.

There are other common examples, too, such as insurance policies and retirement savings. Most insurance policies and retirement savings accounts have one or more named beneficiaries, so the proceeds of the policy will go directly to the named beneficiaries, meaning the policy and RRSP/RRIF do not form part of the estate.

If you need to file for probate, only those assets owned by the estate will get included, meaning you will not have to pay probate fees for those other assets. So why then are insurance policies sometimes included in the probate application? If the policy owner never named a beneficiary, or if the beneficiary died, then the estate becomes the beneficiary, meaning the value of the policy needs to be included in the list of assets, on which probate fees are calculated.

By now some of you might be thinking you could save a lot of time and money if you became a joint owner on your parents’ house. You’d save on probate fees, and you might even eliminate the need for probate altogether. Well, you’d be correct on those two points, but there’s more to consider, especially for your parent(s), so you’d be well-advised to speak with an accountant before going on title.

Sometimes real estate is owned by two or more people as Tenants in Common, rather than Joint Tenancy. If one of the owners dies, that person’s share of the property forms part of the estate, can be sold or bequeathed, and does not automatically transfer to the surviving owner(s). You’d rarely see this type of ownership for the family home, but you would frequently see it for investment properties.

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

Settling an Estate by an Objective Unemotional 3rd Party

In many families settling an estate can be quite difficult and take a long time because the family members don’t get along with one another, don’t speak with each other or just don’t trust each other. This can make an executor’s job that much harder. How would you react as an executor if one of the beneficiaries accused you of hiding something? Are you able to remain objective when there are long-standing issues between you and your siblings? Will you continue to move the estate forward if someone threatens to challenge the terms of the will in court? Is someone bitter because they weren’t selected as the executor? Are the beneficiaries second-guessing your actions and decisions?

The list of possible issues can go on and on… every family is different… so the executor needs to remain objective and unemotional. Either that or the executor can hire someone to assist who will communicate with everyone else. How can these difficult situations be diffused? Better yet, how can we prevent them from arising in the first place? Really, it isn’t that difficult, but it can feel impossible if you’re caught up in the emotion.

The top 3 solutions are these: communication, communication, communication. Beneficiaries deserve to receive frequent status updates, including what has recently been accomplished, what is still left to do, and where any pitfalls may lie. All reports provided should be clear, complete and easy to understand. In a word, transparent.

Next, the financials. Eventually, the beneficiaries will be provided with the financial reports and asked to pass the accounts, so another idea is to provide interim financial reports. You will likely prepare a list of assets & liabilities for probate, so you could start by providing that report. Next, all bank transactions should be recorded, so you could also provide that list. Then there’s the list of revenue & expenses… this report could also be provided, which should clearly show all of the expenses incurred by the estate since the date of death.

What else? Do not procrastinate. It’s so easy to do, with all of the other obligations we have in our lives. If you believe you’ll have to justify your every action, sometimes it’s easier to just put it aside and do something else, but then that task stays on your mind, preventing you from relaxing. Don’t procrastinate, just continue to be objective and complete the task now, not later.

People tend to not tell their ‘story’ to anyone acting professionally and objectively. I rarely hear unreasonable statements. People tend to keep their comments/questions brief and factual. It’s this objective person who can maintain an open dialogue with family members. Not only will beneficiaries say more, they’ll also hear more.

Most importantly, let’s remember why we’re doing this work in the first place: we’re respecting and fulfilling the final wishes of the deceased. Yes, settling an estate can be a big job, but it doesn’t have to be a negative one. Remain objective, professional and unemotional, and the estate will be settled before you know it… without conflict.

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

Owning Shares in a Company When You Die

What happens to your company when you die? Does it die with you? Live on? Who will supervise and pay the staff? Or, perhaps the deceased was a 1-person-show… no staff… does that mean we can just ignore the company? Are there partners? Other shareholders? Was the company incorporated, or was it a sole proprietorship? Or, perhaps the deceased didn’t run his/her own company, but rather played the stock market, meaning there are shares in a few publicly-traded companies. Every scenario is different, so this article will touch on a few of the more common issues.

Sole proprietorship – These companies are usually very small, often times a 1-person-show. Typically, with the death of the owner, the company dies with them. There may well be assets and liabilities which will need to be dealt with, 3^rd parties who need to be contacted, staff, customers, unfilled orders… but likely everything will likely be on a smaller scale. The good news is that there’s no corporate entity to dissolve or sell, and any revenue & expenses of the company are included in the deceased’s final personal tax return.

Small, incorporated company – Small doesn’t necessarily make it easy. First thing, find the Minute Book, which might be in the deceased’s office or the lawyer’s office. This will provide a breakdown of the corporate ownership, information about directors and officers and, hopefully, information about how shares owned by the deceased are to be treated. You will need to determine the value of the company, possibly with professional assistance, so that you can determine the value of the deceased’s shares. After probate has been granted, the shares can be transferred as set out in the Minute Book. For instance, they might get sold back to the company at fair market value or for the original purchase price. Or, they might get transferred to other shareholders. Again, the sale price is important. You will need to determine if the deceased owed money to the company, or vice-versa, as this will impact the list of assets and liabilities. Someone may need to be brought in to run the company, especially if there is staff, customers and unfilled orders.

Publicly-traded shares – You will need to determine the value of the shares as of the date of death, so just look up the closing price for each company on the date of death, multiple by the number of shares, and that’s the value. Those are the easy ones. The tough ones are those ancient certificates you find in the safety deposit box, where the company has been bought and sold numerous times, amalgamated with other companies, and the name has been changed. You will need to do some research to find out the current name of the company, or find out if/when the company was de-listed. Researching old companies can be quite a chore. After probate has been granted the shares will need to be transferred to the executor or someone else, which requires you to find out the name of the transfer agent and then fill out a few forms. Sometimes the transfer fee is more than the shares are worth, so you will have to decide if you even want to bother.

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

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

Bookkeeping Requirements When Settling an Estate

There is more to settling an estate than just probating the will, selling the house and distributing the proceeds to the beneficiaries. I wish it were that easy! Many people understand that the T1 Income Tax Return needs to be filed for the year of death, but many people are unaware that the estate itself may also need to file an income tax return, known as a T3 Trust Income Tax Return. The accountant will need to be provided with the list of assets & liabilities and the list of revenue & expenses, so these figures need to be documented.

When I speak of bookkeeping requirements, I’m referring to the following:

1. List of all transactions in all bank accounts. In other words, generate a long bank statement that covers many months. I tend to re-create the bank statements, replacing any ‘bank talk’ with easy-to-understand English descriptions, and the new list of transactions shows where every penny went;
2. List of all revenue earned and expenses incurred. An example of revenue is interest earned in the bank, and an example of an expense is the realtor commission for selling the home. Where appropriate I also include cheque numbers and brief descriptions to add context; and
3. List of assets & liabilities. This is the list you would have generated in order to apply for probate.

Creating such financial documents doesn’t need to an onerous task, but the documents do need to be complete, accurate and easy to understand. Keep it clear and simple.

In addition to the tax returns, the beneficiaries need to Pass the Accounts, meaning the beneficiaries need to review and approve the expenses of the estate. In order to add context for the beneficiaries and to keep everything as transparent as possible, I like to also include the list of assets & liabilities as well as the list of bank transactions. All of this bookkeeping data should be provided to each beneficiary.

Some estates are considered to be insolvent, meaning the value of the debts exceeds the value of the assets. In these estates the creditors will receive either nothing at all or only cents on the dollar, but either way, the creditors deserve to receive proof of your statement that there are insufficient funds. The financial documents will need to be provided to each creditor, along with a covering letter explaining the insolvency.

If all of this sounds a little tedious, well, it is. So, here are a couple of ideas which can simplify matters. Firstly, separate your own money from the estate’s money by using an Estate bank account, leaving you with fewer accounts to manage. Next, if the deceased had numerous bank accounts, close all but one of them as soon as possible. Again, this simplifies matters. Lastly, since executors need access to available cash in order to pay expenses, often times it is helpful to open a Line of Credit. Invoices can be paid from the LOC, and the interest expense gets charged to the estate.

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

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