Four 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. Prudence and due diligence are required when administering an estate, as estate trustees can be held personally liable for certain mistakes. While this is not an exhaustive list, below are some of the most common mistakes made by estate trustees:

4. They aren't aware of the scope of their duties

While it is often considered an honour 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. Estate litigation is expensive and can last for years and if the estate is not wound up on a timely basis. When money is on the line, beneficiaries can and often do sue the estate trustee for undue delay.

3. They don't 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. This accounting of estate assets can be done formally or informally. Generally, it provides details to the beneficiaries with respect to how the finances were handled, how money 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. To avoid personal liability, an estate trustee should stay organized from the start.

2. They don't secure all the assets

An estate trustee is responsible for locating, protecting and securing all estate assets pending their final sale or distribution. If the deceased owned property that is vacant, the estate trustee must ensure that the property is locked and secure. Inquiries should be made at banks where the deceased held accounts. This should be done immediately after the death of the testator.

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.

1. They distribute the funds too soon

This is a very 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.