Losing someone close is never easy. It takes to time handle the emotional loss and dealing with the legal process can be an added stress -hard to understand and hard to manage. When someone passes, however, there are things that need to be handled and it’s good to have a general road map to guide you in the right direction. Below is a brief list of steps to make the process easier and manageable.
Step 1 – Locate the Will
You’ll need to locate the Will to get direction on who is responsible for carrying out legal tasks, collecting assets and for distributing them accordingly. The Will may also indicate specific instructions for funerals, ceremonies, organ donation or cremation.
No Will? The law will dictate who the beneficiaries are. It’s important to talk to a lawyer to determine who these people are under the law, and how they will be entitled to assets.
Step 2 – Advise Banks, Life Insurance Companies, and other Asset Holders
Each company will have their own way of how they will release control of assets. If assets were held in sole ownership, the company or bank will tell you exactly what they’ll want in order to let go of their control. Often this means that the estate will need to be probated.
What is probate? It’s the legal process of appointing someone to be legally responsible for collecting and distributing assets (among other things). This person is typically called an estate trustee, executor, or administrator. When there is a Will, it should identify just exactly who that will be. If there is no Will, all the beneficiaries will have to jointly decide who this person, or people, will be.
What happens if there’s a conflict or disagreement over who will take the role? Well sometimes that means going to court. The court may have to step in to decide just who is appropriate to handle the affairs and assets left behind.
Once an executor, trustee or an administrator is appointed, they will receive a Certificate of Appointment of Estate Trustee from the Court. This certificate gives authorization to obtain control of the assets and finish the legal process of distribution and taxes.
Step 3 – Determine Who is Entitled
When someone leaves a Will, the terms will dictate who is entitled to what. The executor will follow the terms and once assets are collected, they must distribute accordingly.
When there is no Will, the beneficiaries listed under the law will each be entitled to a share. It is the Estate Trustee’s responsibility to then distribute according to that formula. It’s important to speak to a lawyer to be certain who is entitled at law.
Step 4 – Determine the Value of Assets
Property held jointly with another person or entity will often have the right of survivorship. This means that they don’t fall under the Will or the law as being part of the Estate. They will automatically be excluded and will remain the property of the surviving owner(s).
Life insurance, or registered investments, that have named beneficiaries will also be handled outside of the Will or the Estate under law, and flow directly to the named beneficiary.
For other assets, however, we must determine their value. This is important because it will dictate how we distribute things, and to who. It’s also an important part of the probate process. Estate Administration Tax will be owed on the value of the assets. While it’s a small tax (compared to income tax, for example) it is paid upon an Application to the Court for a Certificate of Appointment of Estate Trustee (i.e. Probate), and therefore must be determined as part of the process.
Step 5 – Probate
If a Certificate of Appointment of Estate Trustee is required to deal with assets (such as property, banks, investments, etc.), an application for such appointment must be made to Court. This is what initiates what is often referred to as the probate process. The executor(s) identified under a valid Will will typically apply, or in the absence of this, an application can be made for an estate which has no Will, with the consent of the beneficiaries.
Once granted, the Court issues a Certificate of Appointment of Estate Trustee and this document is used to provide authority to the person(s) named to handle estate property. It also becomes a public process where the estate is documented and made public within the legal system.
Step 6 – Determine the Debts and Taxes
As Estate Trustee has a responsibility to pay the debts of the deceased, should there be assets to do so. There are also many tax considerations when it comes to estates. Most notably, when assets are passing outside of a spousal relationship, there can be a significant amount of capital gains taxes payable on assets which are not exempt. For example, if the estate held more than one property, any properties which do not qualify for the principle residence exemption would be subject to capital gains. The gain would be calculated based on the fair market value of the asset at death. The same can be true of investments or shares in corporations.
The Estate Trustee will be legally responsible to calculate the debts and tax payable, and to ensure the estate pays what is owed, prior to distributing or transferring all the assets of the estate. If assets are transferred out of the estate and taxes become payable – the Estate Trustee will be personally liable to the tax authorities and may be liable to creditors.
Prior to distributing all the assets, an Estate Trustee determines the debts and taxes owed, and pays or holds this amount before finalizing the distribution. We always recommend an application for a Clearance Certificate also be made to the tax authority, which once received, confirms that all estate taxes are paid up and finalized.
Step 7 – Winding Up the Estate
Once all liabilities are paid and a Clearance Certificate obtained, the estate may be fully distributed. As a measure of protection against conflicts or claims, we always recommend that beneficiaries that have an interest in the estate have the opportunity to review the financials as handled by the estate trustee. Once all are satisfied, releases and approvals are received, the estate trustee can comfortably finish distributing what’s left.
Of course, beneficiaries who do not approve on the manner in which estate assets or funds are handled can be entitled to have the estate trustee pass accounts before the Court. In these cases, as in most estates, it’s best to speak to a lawyer.
While there is no better substitute for seeing a lawyer early on in the process, the above is a brief summary of the main points to be dealt with in handling an estate. It shouldn’t be taken as legal advice, as each estate is different and nuances can significantly change one from another, but should serve as a general guide for understanding the process. If you have someone who has passed, our condolences are with you. Feel free to call and set up an appointment for a chat on what’s next.