It would be an honour! Avoiding hidden problems in an estate.

• Author: Hargreaves, Kary

When a close friend or relative approaches you to act as the executor of their estate, your first response might be "It would be an honour". Once that particular friend or relative has passed away, your response may be something more like "What did I get myself into?"

Being asked to act as an executor for someone's estate is a compliment to your honesty and abilities. It can, however, be a very onerous and time consuming task. Unfortunately, it is also a task which brings with it the potential for personal liability.

Generally, the assets of a person's estate will be used to pay all of the liabilities at the time of death. If there are insufficient assets to pay all of those liabilities, the executor would generally not be responsible for the payment of the debts which exceed the assets of the deceased. This general rule, however, is based upon the assumption that the executor has done everything that he or she was required in law to do.

The actual duties of an executor will depend upon the particular estate that they are administering. Some estates are simple and the tasks straight forward. Other estates are quite complex with the tasks being varied and requiring different forms of expertise. A partial list of the duties of an executor include the following:

* Locate and review the deceased's will;

* Arrange for the cremation/burial of the deceased;

* Locate and protect assets;

* Protect business interests;

* Ensure all estate assets are insured;

* Determine if there are any agreements in place that apply to the assets of the deceased (example: Shareholders' Agreement);

* Cancel credit cards;

* Make application to the court to obtain a Grant of Probate;

* Ensure that the debts of the deceased are paid in full before distributing the estate assets;

* File tax returns with Revenue Canada and obtain a Clearance Certificate(s);

* Prepare an accounting of the administration of the estate;

* Obtain Releases from the beneficiaries;

* Distribute the estate property to the beneficiaries.

If the executor fails to undertake certain of these duties, personal liability can arise. For example, the executor should ensure that the residence of the deceased is insured against damage or destruction by fire. If the executor has assumed administration of the estate, and a number of months later the house burns down, the executor might well be personally liable for the damage to the home if it wasn't insured. The executor had a duty to ensure that the property...