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Understanding the Responsibilities and Risks of Acting as an Executor

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Acting as an executor is often considered an honor, a testament to the trust and confidence placed in you by a loved one. However, many family members agree to take on the role without fully considering the tasks and responsibilities involved. Administering an estate is a complex and time-consuming process that requires countless hours, numerous steps, constant communication with beneficiaries, and the ability to navigate financial and legal requirements. More importantly, it also can lead to personal and financial consequences.

Before you agree to act as a loved one’s executor, you may wish to consider the potential risks.

Responsibilities of an Executor

Fiduciary Duty

Executors must act in the best interest of theestate and its beneficiaries, maintaining honesty and integrity in alldealings.

Asset Management

Executors are responsible for identifying,collecting, and appraising all assets of the deceased. This includes protectingand maintaining these assets until they are distributed.

Debt andTax Settlement

The executor must pay off the deceased's debts and final expenses, including funeral costs, and handle tax obligations, such as filing the final income tax return and paying any estate taxes.

Distributing Assets

Executors must distribute the remaining assets according to the terms of the will, sometimes requiring court approval for the distribution plan.

Legal Compliance

Managing the probate process involves filing necessary documents with the probate court and notifying beneficiaries and potential creditors of the probate process.

Communication

Executors need to keep beneficiaries informed about the progress of the estate settlement and coordinate with lawyers, accountants, and other professionals.

Risks ofActing as an Executor

Financial Risk

Executors can be held personally liable to reimburse an estate if mistakes are made during the course of the estate administration. Innocent mistakes, such as failing to review or reduce the risk of an investment portfolio that later declines in value, can prove costly to the executor. Other common mistakes, including not obtaining adequate property insurance or misfiling tax returns, can also expose the executor to financial liability.

If you’re acting as an executor, ensure you meet with the deceased’s financial advisors as soon as possible to protect the estate’s assets. If you’re not yet acting as an executor, confirm you are comfortable with the potential financial risks of your upcoming role.

Relationship Risk

The death of a loved one can change family relationships, particularly when money is involved. Executors are often required to make difficult decisions in emotionally charged circumstances – decisions that are not always favored by all beneficiaries. Deciding how to distribute personal items between family members or choosing how often to make cash distributions to beneficiaries may seem simple in theory but are often the cause of estate disputes or litigation.

If you already have strained relationships with family members, consider whether you are willing to expose yourself to further emotional or stressful circumstances.

Mitigation Strategies

Seek Professional Help

Engaging attorneys, accountants, and financialadvisors can help navigate complex issues.

Clear Communication

Maintaining transparent communication withbeneficiaries to manage expectations and reduce conflicts

Meticulous Record-Keeping

Keeping detailed records of all transactions and decisions to protect against liability.

Understanding the Role

Fully understanding the responsibilities and risks before agreeing to serve as an executor.

By understanding and preparing for these responsibilities and risks, an executor can more effectively and efficiently manage the duties of settling an estate. Acting as an executor is a significant commitment, and being well-informed can help you fulfill this role with confidence and competence.

- Kondwelani Kalinda, Associate Investment Advisor

Kondwelani Kalinda is an Associate Investment Advisor atEndeavour Wealth Management with iA Private Wealth, an award-winning office asrecognized by the Carson Group. Endeavour Wealth Management providescomprehensive wealth management planning for business owners, professionals andindividual families.

This information has been prepared by Kondwelani Kalindawho is an Associate Investment Advisor for iA Private Wealth and does notnecessarily reflect the opinion of iA Private Wealth. The information containedin this newsletter comes from sources we believe reliable, but we cannotguarantee its accuracy or reliability. The opinions expressed are based onanalysis and interpretation dating from the date of publication and are subjectto change without notice. Furthermore, they do not constitute an offer orsolicitation to buy or sell any of the securities mentioned. The informationcontained here in may not apply to all types of investors. The AssociateInvestment Advisor can open accounts only in the provinces in which they areregistered.

iA Private Wealth Inc. is a member of the CanadianInvestor Protection Fund and the Canadian Investment Regulatory Organization.iA Private Wealth is a trademark and business name under which iA PrivateWealth Inc. operates.

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