Today’s Blog was written by Emily Papsin, Articling Student at Fasken LLP
Recently, the late James Brown’s estate was reported to have been finally settled after 14-year legal battle between his beneficiaries. The fallout from this serves as a reminder that the administration of an estate can have significant consequences, many of which may only become clear long after the deceased’s passing.
The administration of an estate may be delayed for a number of reasons, including:
- A grief-stricken family might not be emotionally or financially prepared to handle the task immediately following the death of their loved one;
- As was seen in the estate of the late James Brown, estate disputes may delay the distribution of assets until the beneficiaries are clearly determined; and
- The family of the deceased might also perceive the task of administering an estate as daunting, and they may be unaware of sources for support in the administration process, such as solicitors.
Whatever the reason for the delay, the consequences are important to discuss with clients, or potential client executors, before they occur.
Consider these eight consequences when advising clients on why it is in their best interest to expedite, or at least complete in a timely fashion, the administration of an estate:
- Valuation Challenges: The longer an estate is not administered, the harder it may be to obtain an accurate valuation of the deceased’s property as at the date of their death, increasing the likelihood of an under or over valuation. For example, if an estate that included a house in Toronto is not administered for 15 years, it is possible a valuation would have to be obtained for that house as at the date of death, 15 years ago. The inherent difficulty of that task might also increase the chance of disputes relating to valuations.
- Double Administration: Consider a testator’s Will that leaves real property to another person. If the testator dies and their estate is not administered, the property will remain in their name with the beneficiary having a beneficial interest. If that beneficiary dies prior to the administration of the testator’s estate, the property may have to be transferred to the deceased beneficiary’s estate, and only then transferred to the deceased beneficiary’s beneficiaries. Both the administration of the testator’s estate and the deceased beneficiary’s estate may have to occur to transfer the property to the ultimate beneficiaries. This delay essentially puts off administrative work that cannot be avoided, doubling the work at a later date.
- Tax Liability: there may be tax consequences to delaying the administration of an estate, including lost tax planning opportunities.
- Late Fees, Penalties, and Administration Costs: There may be fees associated with holding assets in trust, storage, or at banks for a long period of time.
- Inattention or Mismanagement: Not surprisingly, the longer it takes for an estate to be administered, the more easily certain aspects of it might be forgotten, or administered in ways that the testator may not have intended. For example, if the Will includes a wish and desire to follow the testator’s oral instructions with respect to distributing personal effects, the longer the estate is not administered, the greater the chances of such oral instructions being forgotten or remembered with a revisionist memory. Thorough record-keeping can help combat the effects of delay, but the more time passes, the more of a risk that some detail is lost in translation.
- Decay and Degradation of Property: If there are high-value, high-maintenance items to distribute, like vintage cars or art, beneficiaries may not be able to claim or care for the things they are entitled to until it is too late. This may especially be true in cases where beneficiaries do not know they were named beneficiaries under a Will. This issue also may increase executors’ exposure to liability for the manner in which they cared for and managed the deceased’s property and the consequences that resulted.
- The Delays May Be Self-Serving: not all delays are innocent – be mindful of reasons that delays are occurring, because delays may deprive beneficiaries of or otherwise impact their inheritance. It also may be a sign of self-dealing.
- The Delays Give Conflict a Chance to Brew: with a longer time period in which beneficiaries are without their entitlements comes a longer time period without releases obtained from such beneficiaries. Finally, the longer an estate takes to administer, the greater the chances are that conflict will develop between increasingly frustrated parties.
While not a comprehensive list, we hope these points are helpful and serve as guidance in conversations regarding the importance of prompt estate administration.
Jill BoneDecember 17, 2021 - 4:38 pm
Great article Corina, and timely from my view. I am helping a family administer their mother-in-law’s estate – she passed in 1992! Her only son passed away in 2020 so we are working with his surviving spouse who is in her 80’s, as the executor of his estate. Combine with being an intestate estate, this file is very interesting and most of your points are coming into play. We’re feeling lucky that her final tax return had been filed, but not much else during the intervening 29 years.