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Navigating Responsibilities: What Happens when an Executor is Named

Unless you are in a simple situation and you are the only beneficiary, perhaps the first question you should ask yourself is – do I need Executor Insurance before I act as an Executor?

The Executor’s job is complicated. Did you know that Executors can be held personally liable for their mistakes? Many Executors underestimate how challenging their work can be. It’s often difficult to know in advance what you are getting yourself into. This is why most Executors should have insurance to protect themselves. The growth of online estate planning resources makes it easier for beneficiaries to inform themselves about their entitlements.

Every situation is different but bad things can happen to good people. That’s where insurance comes in. Executor’s Insurance was created to meet the needs of the increasing possibilities that Executors can get themselves into trouble without even knowing it.

There is more estate litigation now than in the past. Laws are more complex, and that increases the complexity of the estate. Tax issues are constantly changing, as are legal issues. As an Executor, you can expose yourself to a long list of things that can get you sued for making honest mistakes. Improperly interpreting the terms of the will, favouring some beneficiaries (or creditors) over others and not maximizing sale value on estate assets are just a few examples of mistakes that can get you into trouble. Beneficiaries have become more assertive. They are no longer willing to just assume that the Executor and lawyer are doing what they were supposed to be doing.

Policy premiums will depend on a number of factors but generally run around $2,000 to $3,000 for three years of protection – time enough to close the average Canadian estate. We suggest where ever possible having the testator include a clause in his/her will to authorize the estate to pay the insurance premiums.

In addition to financial protection, a really important feature is that most insurance policies will insist that Executors work with an estate lawyer; without such an agreement, Executors can’t purchase the insurance. Working with an estate lawyer likely means the chance of mistakes are greatly reduced.

An Executor should first identify the estate’s potential risks. Things like complicated business assets or any history of family conflict should be considered.

If you are a third party Executor who doesn’t know all the family members, you are at a higher risk. Having this protection is a really good idea. Remember the saying “better safe than sorry”.

Before purchasing coverage be sure to make yourself aware of exactly what is covered and what is not covered as well as any limits on the coverage. Insurance will not remove any of your responsibilities or obligations but should provide you with peace of mind as you carry out your duties.

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