A thorough understanding of your duties and responsibilities is essential if you’re an executor of a will in Alberta. While many of these duties pertain to the general administration of the estate, one of the most critical responsibilities relates to proper recordkeeping. The estate executor is responsible for keeping a precise, accurate accounting of the estate’s finances and related activity.

Executors may face legal risks without the appropriate understanding and accounting practices. The law places the duty to be fiscally responsible in estate management on executors, and they may be personally liable for mismanagement or wrongdoing. Read on for additional information on key practices to know and implement.

General Accounting Requirements for Executors

The law stipulates that estate executors must provide the beneficiaries with specific accounting information. The first financial report is due to the beneficiaries within the first 2 years after the decedent’s death. The law also requires an additional report at least every two years afterward for as long as the estate remains open and active.

Reports should include, at a minimum, the following facts:

• Information about the assets the estate continues to hold.
• An accounting of outstanding or remaining debts and obligations owed by the estate.
• Detailed information on any financial transactions conducted by the estate, including any estate expenses and income.

These reports provide an accurate snapshot of why and how the estate’s value may have changed throughout the accounting period. Executors should keep detailed records of all actions related to the estate’s finances from the beginning of their administrative process.

What Should Estate Accounting Include?

Let’s drill down more specifically about some items that should appear in an accounting report. What else should beneficiaries receive?

Reports should contain a complete and accurate list of all the property held by the estate and all its outstanding debts. There should be one list for these items created at the start of the accounting period and one made at the conclusion. This will allow beneficiaries to understand overall changes.

Include statements related to all assets received by the estate during the period. Categorize these assets as either capital or income and include the following:

• Date of transaction
• Description of property or income
• Information about who provided the assets to the estate.

Including this data will help you build more accurate reports to satisfy your accounting obligations.

The Accounting should also include a breakdown of all Estate expenses that have been incurred since the date of death. Make sure to keep all receipts and invoices that can support each expense and withdrawal from the estate bank account. The beneficiaries will be entitled to see exactly where the estate funds have come in and exactly where the funds have gone out.

Avoiding Common Estate Accounting Mistakes

An executor can fall into many potential pitfalls during the accounting process. Common mistakes can lead to unnecessary issues, such as:

• Payments or disbursements from estate funds without related records.
• Improperly timing or ordering disbursements.
• Financial transaction data without appropriate detail.
• Failing to include all the estate’s assets or obligations.
• Failing to provide accounting on the correct timeline or missing court-ordered deadlines.

Working with estate lawyers provides an informative resource for information on avoiding such mistakes.

About Executor Fees

Executors are entitled to receive compensation from the estate for the work they do to administer the estate. In Alberta, the Surrogate Rules (procedural guidelines governing estate administration) only establish guidance on executor compensation, not mandates. An individual’s will may establish the compensation guidelines, or you may need to negotiate an agreement directly with the estate’s beneficiaries.

In some cases, a court may determine executor’s compensation based on factors such as the estate’s value or the level of effort required to administer the estate. Suggested fees typically correspond to the gross value of the estate before deducting expenses and obligations. These rates may be between 3% and 5% of the first $250,000. The percentage drops to 1-3% on the following $250,000 and lowers to 0.5-1% of the remaining estate balance.

Making Navigating Estate Accounting Simpler

As a will executor in Alberta, proper accounting does not need to be a source of stress and anxiety. Understanding your obligations and taking timely steps to maintain the appropriate level of detailed recordkeeping can do much to satisfy your commitments for accounting and reporting.

At Lypkie Henderson, our team is vastly experienced in supporting proper estate executor accounting practices. Speak with us today to learn more about your duties and find assistance in meeting the requirements of the law.