Common Mistakes Made By Estate Trustees
Administering an estate is no easy feat, depending on the size and complexity of the estate, the duties and responsibilities of the estate trustee will vary. Due diligence and caution is required when administering an estate, as estate trustees can be held personally liable depending on the circumstance. While this is not an exhaustive list, some of the most common mistakes made by estate trustees are as follows:
Unaware of Scope of Duties
While it is flattering to accept the role of an estate trustee, it is not a role to be taken on lightly without thorough knowledge of the legal risks involved on a personal level. Estate litigation is costly and can last for years and if the estate is not wound up on a timely basis, beneficiaries can and often do sue the estate trustee for undue delay.
Failure to Keep Proper Records
Estate trustees who have accepted the responsibility of administering an estate must provide an accounting of the assets of the estate to the beneficiaries. Accounting of estate assets can be done formally or informally. Generally, this accounting provides details to the beneficiaries with respect to how the finances were handled, how it was spent, why it was spent and what the remaining assets of the estate are.
Most courts require trustees to provide regular accounting to the beneficiaries. This means keeping comprehensive records of income and distributions, A great deal of care is required in preparing and keeping proper records as faulty records can be the subject of a lawsuit later by beneficiaries.
Failure to Secure All Estate Assets
An estate trustee is responsible for locating, protecting and securing all estate assets, pending their final sale or distribution. This should be done immediately after the death of the testator. Inquiries should be made at banks where the deceased held accounts. If the deceased owned property that is vacant, the estate trustee must ensure that the property is locked and secure.
Executors who fail to properly locate and protect all estate assets may find themselves personally liable to beneficiaries for any resulting loss in value or damage or other claims arising from negligent behaviour.
Distributing Funds Too Soon
This is a common mistake made by many trustees. Estate trustees should not distribute funds from the estate, until after a clearance certificate has been obtained by the Canada Revenue Agency. Without obtaining a clearance certificate, the estate trustee can be held liable for any funds that were dispersed before obtaining the certificate.