Episode 36 - Essential Steps to Prepare Your Estate and Ease the Burden on Your Heirs with Katrina Yaworsky
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In this week's episode, Nicole and Greg are joined by estate lawyer Katrina Yaworsky from Lindsay Kenney LLP. Together, they explore the fundamentals of estate administration, including the roles and responsibilities of executors, the probate process, and the challenges of managing an estate. Katrina offers practical advice on choosing executors, updating wills, and planning for tax implications, especially with non-resident beneficiaries. The discussion emphasizes the importance of organization and proactive planning to ease the burden on loved ones and ensure a smooth estate administration process.
Transcript:
Nicole 00:00:02 Hello and welcome to Your Estate Matters with your hosts, my colleague Greg Brennand and myself, Nicole Garton of Heritage Trust.
Greg 00:00:09 Your Estate Matters is a podcast dedicated to everything estates, including building and preserving your legacy.
Nicole 00:00:16 If it's estate related, we'll be talking about it. We're having the conversations today that will help Canadians protect their families, their assets and their legacies tomorrow.
Greg 00:00:34 With us today on Your Estate Matters is Katrina Yaworsky, a lawyer with Lindsay Kenney LLP. Katrina's practice focuses on estate planning and administration. Katrina works with clients as they put their wills into place and create incapacity plans involving powers of attorney and representation agreements. She advises clients that have stepped in to the important role of executor administrator, guiding them through applications for the grant of probate and administration. Katrina's expertise further includes navigating the competition process for families with different abled family members. Katrina, thanks for being with us here today to discuss a state administration basics. Could you tell us about yourself and your journey to your current role as a lawyer with Lindsay Kenny LLP?
Katrina 00:01:28 Hi Greg and Nicole, thanks for having me.
Katrina 00:01:31 Yeah, I'm currently an estate planning and administration lawyer at Lindsay Kenney, but I started out over ten years ago in a more broad legal field. So I did a little bit of litigation, a lot of insurance, defense work. So I was in court often enough, much to my chagrin, in part, I did a lot of commercial real estate M&A type work and wills and estates, and I really liked the wills and estates work that I did, and I latched on to those. Practitioners and my colleagues in that area, and since then narrowed my practice more and more into just wills and estates. And here I am. I've now been at Lindsay Kenney for just a few months now, but fully focusing in this area and really enjoying it.
Nicole 00:02:17 So tell us about your current practice and approach to state administration.
Katrina 00:02:21 I was just talking to Greg about this a bit earlier this morning, and I was saying that, you know, clients come to me in a difficult situation in their life. You know, someone has passed away or is about to pass away.
Katrina 00:02:35 And so I try to make it as simple as possible and as practical as possible, given the circumstances. You know, every estate is unique and different, and we can only make it as simple as possible in in certain scenarios. But I really try to make it easy and straightforward. And yeah, I handhold clients along the way in a difficult situation.
Greg 00:02:58 So you're talking about being a solicitor in drafting wills and estates. But what is exactly is it the state administration?Katrina 00:03:06 Yeah, that's a good question. And sometimes I do need to sit back and remind myself of exactly what that is. A state administration is when someone passes away. It's really the organization, management and eventual payout of someone's assets, property and funds.
Greg 00:03:24 So are you generally assisting clients with that or do you act as executor as well?
Katrina 00:03:29 I don't act as executor. I work with clients that either have been appointed as executor under someone's will, so appointed as the person to manage everything. or I work with clients when there isn't a will, and that client has decided to step in and manage everything.
Greg 00:03:46 In the case of an intestacy.
Katrina 00:03:48 That's right. So intestacy when someone has passed away without a will.
Nicole 00:03:53 So what is probate then?
Katrina 00:03:55 It's just a document issued by the court. And in BC it's the Supreme Court of British Columbia. A state law is governed provincially, so every province is a little bit different. But in BC grant of probate, just a document issued by the court that gives the executor or the personal representative legal authority to manage everything on behalf of a deceased person. So really, it's just a document and it confirms that a will is in fact the final valid will, and the legal representative is the person that can access and deal with everything.
Nicole 00:04:29 So when do you need probate?
Katrina 00:04:32 It's not needed in every case when someone passes away. It's really only needed if someone asks for it and that someone could be the land title office. They generally need it in every case. Banks, institutions, insurers, anyone like that? Any institution may request grant of probate because their risk averse. So they want proof of who you are, who the executor is, and that you, in fact, are the right person to access and be provided with these funds on behalf of a deceased person.
Nicole 00:05:05 So isn't there a financial threshold where banks will require probate over a certain level?
Katrina 00:05:11 I would say generally, yes, but each bank is a little bit different. So it depends who you speak to at the bank. I would say we sometimes see the threshold being $25,000 and under, and a bank won't mandatorily require grant of probate. But again it's somewhat depends. In the first instance, an individual will be asked for probate regardless of the dollar value in my experience. And then sometimes I do work with clients to say, let's write to the bank. Let's tell them the circumstances. Simple estate. Maybe there isn't lots in terms of the funds. Let's see what the bank is willing to accept rather than this court issued grant to probate.
Greg 00:05:54 Right. And another reason for that is, is people walking around may not realize some people have multiple wills. That's right, and are quite frequent will writers and constructors. So you may not have the valid newest will.
Katrina 00:06:07 That's right. Sometimes it's hard to keep track.
Katrina 00:06:09 And there is a Wills registry in British Columbia. It's with the vital statistics agency and someone can file notice of their will. It's not a copy, it's just a notice. But that's not mandatory, which is sometimes a little bit confusing because you don't necessarily need to file that will or keep a record of it. If you do, it is good practice because it would show, okay, Greg had a will in 2025 and then as he keeps updating, we see the the more recent will and then the final will might be recorded there.
Greg 00:06:42 Absolutely. So what happens if there's no will.
Katrina 00:06:46 So as we were saying earlier, that's an intestacy, meaning that there isn't a will. There is law that steps in to say who can administer, who has prior right to administer to become that personal representative. And at the end of the day, who inherits? So there is default law in place just in case. That order of priority. Generally speaking, is typically a spouse. If there isn't a spouse, adult children, and down the line to family members and all the way through to, you know, trusted friends.
Katrina 00:07:18 It's just somewhat difficult at times because you don't have that document that will to give to the bank or any institution to say, you know, I'm the right person. Someone needs to step in.
Greg 00:07:31 Right. And actually, within that list of persons eligible, you would have public bodies like the Public Guardian, which would step in and often will step over more distant relatives, saying, well, we don't believe you're probably a beneficiary or an heir.
Katrina 00:07:47 That's right. And do you want the government to step in to manage your estate if you don't have a will? Something to think about and you have to pay or your estate does have to pay that. Public guardian and trustee if they do administer.
Greg 00:08:00 Right. And so there's a list of who's eligible to administer when there's no will. How is the distribution done when there's no will.
Katrina 00:08:09 Right. So if you don't have a will and you haven't pre-decided your beneficiaries, who inherits. again you look at the legislation to say who gets what. And it's a similar scheme in terms of who receives the bulk of your estate.
Katrina 00:08:23 So again, spouse would have priority in terms of a portion of the estate. Children would also have a right to a portion. And you know, the percentages differ depending on whether those children are in fact the biological or adopted children of you in that spouse. Or maybe that's a stepparent. The percentages would differ. And if you don't have close next of kin, those spouses or children, it would go to parents and then siblings and again down the line.
Greg 00:08:53 Right. The cut off is cut.
Katrina 00:08:55 That's right. I always have to look at the chart, though, because, Yeah, every situation is unique. And sometimes people have those distant cousins or family members that don't live within Canada. And it gets a little complicated.
Nicole 00:09:10 So who manages the estate.
Katrina 00:09:12 Two situations and we've somewhat touched on this. If there's a will you as the will maker get to a point. Your executor. And it's always best practice. My clients always appoint primary executor or executors and alternates maybe 1 or 2 alternates as backup.
Katrina 00:09:28 Again we like to consider all these hypothetical situations, these just in case scenarios. So it's the executor in the first instance with a will. If there isn't a will, someone again needs to step in to be the administrator or personal representative.
Nicole 00:09:45 And what are their main responsibilities?
Katrina 00:09:47 I could go on for hours. Nicole. An administrator really needs to. look at all the assets, property, debts, taxes of an individual and consolidate everything and settle those debts. Keep beneficiaries and other parties that are interested in the estate notified and eventually pay out. So that's super high level. I could go into great depth on on each of these points. But yeah, I would say it's really about organizing, managing, notifying and eventually settling and paying out.
Greg 00:10:28 A question I was going to ask you because it confuses people. So when there's a will and the executor or alternate executor doesn't administer, then who may apply.
Katrina 00:10:39 Right? Again, the law does provide for this situation and says that anyone that's interested in the estate can prompt the executor, provide them with a formal notice to say you have to administer in accordance with the will.
Katrina 00:10:55 If that executor doesn't step up, then anyone can then apply to the court for probate. So there is a recourse under the law in case an executor doesn't, in fact step into their role.
Nicole 00:11:09 So what are some of the common challenges executors face?
Katrina 00:11:13 There are a lot, and I would say the first thing that comes to mind is it's a significant role. It's a significant job, and it's all about time. An executor does need to take a lot of time and put in a lot of effort in their job. And I would say many of my clients, when they're thinking about who to name is executor, they don't quite realize until I bring it up, just the significance of the of the role and the number of things that an executor needs to do. So time and effort is a huge thing, and I guess that's why they rely on a lawyer to assist them. It's helpful. But one of the other things that comes up often enough is is all about organization. So an executor is legally required to put together an accounting, a listing of like ins and outs of a state, funds for beneficiaries or successors.
Katrina 00:12:07 And sometimes my clients come to me and they've already expended a ton of funds out of pocket, expenses and whatnot, and they haven't kept good receipts or accounting of that. Going back and trying to put that together is difficult. So, you know, the organization and putting together an accounting is sometimes tricky for my clients.
Greg 00:12:29 Absolutely. So you've talked about some of the key steps in administering the estate. I think one that we left out was the tax portion. And do you find that really it's, you know, a stopping, you know, ground for executors that they get very confused by it. The person may not have kept up with their taxes in the past. That's right. They might have complicated assets.
Katrina 00:12:51 Definitely an executors best friend. I would say after the lawyer is the accountant and I always remind clients, I would say my favorite line is I'm not your tax advisor and I recommend that you speak to an accountant. Definitely an executor needs to bring a deceased tax returns up to date. They need to, at the end of the day, make sure that that final held the date of death return is filed.
Katrina 00:13:18 It's a regular T1 for that year of death. So let's say someone passed away March 6th, 2025. That tax return needs to be from January 1st to the date of death, the March 6th date, and then an estate. It remains its own legal entity going forward, so it needs to file an estate, return a T3 for as long as the estate continues. And so a reminder to executors to my clients is, let's try to wrap up the estate as efficiently, as quickly as possible so that tax returns can be completed and it doesn't need to go on for years and years.
Greg 00:13:56 I think some executors may find themselves in this situation where their deceased friend or family member may have been an owner of a company or the sole director, and they may need to be appointed.
Katrina 00:14:09 That's right. So they need to step in and deal with that company if it's an active business. Well, hopefully the filmmaker, the person that's passed away has considered who will continue to run that company in the interim, whether it is the executor, if there may be a business partner, or if they put together a scheme for backup management.
Katrina 00:14:32 It is a lot to think about. And yeah, business owners are a significant portion of my client base. And I would say there are methods to ensure that the business continues, but also ways of dealing with those shares in a tax efficient manner and also in ways to save on probate fees.
Nicole 00:14:51 So how long does the process usually take from start to finish?
Katrina 00:14:55 It depends. My favorite answer after the saying that I'm not a tax practitioner. If it's a fairly simple estate, not too many pieces of real estate, you know, maybe no businesses or whatnot. It can take anywhere from about a year or so. That would be pretty efficient, pretty quick. But it depends because if grant or probate, if that court approval is needed, that takes time. Right now, the court is taking about four months to review applications, which is somewhat lengthy. And that's only at the point of the executor filing their application asking the court for probate before they can file, they actually need to gather all the deceased assets, secured liabilities, and put that together in a list, and then submit that to the court so that asset gathering can take quite a while.
Katrina 00:15:48 And then as we were chatting about earlier, you know, the final item to jump ahead after the probate is issued by the court is, settling debts. The taxes can take a while and then paying out to beneficiaries. And there are timelines that the law imposes that you just can't get around. One of them, for instance, is even once the grant of probate is issued to an executor or an administrator, they must wait 210 days before paying out to beneficiaries paying out funds unless they have everyone sign off. You know, everyone being all the individuals involved in the estate, that 210 days is long. And so even if something is simple and the court is quick by chance, 210 days without everyone's approval must be followed.
Nicole 00:16:42 So Greg and I, when we're administering estates at Heritage Trust, often we can take a long time for the banks to get us information. You know, you've got to file a notification to all the beneficiaries and any and test it errors. You got to wait I think 21 days before after the sending the notice.
Nicole 00:17:00 So there are a lot of statutory timelines. And then tell us about the clearance certificate process because that's quite a delay often from the CRA.
Katrina 00:17:10 That's right. So a clearance certificate is long and short of that is the CRA. Seeing someone is all clear and all paid in terms of their taxes. It is required to request a clearance certificate. So a personal representative or executor, once they've submitted the deceased's and the estates final returns, needs to request a clearance certificate, typically through an accountant, and that can take several months to obtain. Of course, clients can make an interim distribution of estate funds to beneficiaries before they understand or they they have that clearance certificate in hand to know, okay. Deceased taxes and debts are all settled. And then I always say maintain a hold back, a conservative chunk of change just to settle any unknown taxes or debts. So things don't necessarily need to be fully held up before obtaining the clearance certificate. But there are a number of institutions that an executor needs to wait on.
Nicole 00:18:14 What happens if the executor distributes the state funds and then a creditor pops up, or the CRA decides it wants more taxes.
Katrina 00:18:23 An executor could be found personally liable, meaning that they would have to pay for that debt that CRA tax out of pocket. At times, they may be able to claim that amount back from beneficiaries, but once funds are paid out to beneficiaries, it's hard to get it paid back. You know, beneficiaries spend money that they receive at times, and once that car is purchased or that down payment is paid. The executor might not be able to get it back, so it's definitely best to 110% to ensure that everything is known and settled.
Greg 00:18:58 And I think following the tax clearance is really a risk management tool for the estate. But another one would be could you speak about advertising for creditors as an executor's duty?
Katrina 00:19:10 Yeah, there's the option of posting a notice to creditors, which in BC it's published in a government publication. It's called the Gazette, and it puts forward a notice saying I am executor or administrator of an estate.
Katrina 00:19:25 And I, I put a call out to any creditors of this deceased person. They must respond within a set period of time. I believe it's 30 days. And if a creditor does not come forward during that time, then the executor is protected from that claim. So a creditor could not come after the executor. If they have a valid claim now, a creditor could come forward, make a claim against any beneficiaries of the estate once funds are paid out to them. But at least the executor is protected following that publication.
Greg 00:20:00 Right. Because in general, if they're a secured creditor, that's generally easy to find out. It should be on the car note, or they own they're on the mortgage, etc. but it's the general creditors. Typically that would be a risk. Right. It's always good to do. And also so what can individuals do now to make a state administration easier for their loved ones?
Katrina 00:20:25 I would say two things. One is the most obvious put a will in place. put your incapacity planning documents into place like a power of attorney or representation agreement.
Katrina 00:20:36 key to the will is the naming of the executor. The second thing, and I would say I even need to do this, is putting together that just in case binder. So something physical or you know, it can be digital but all consolidated together. And that should include your key contacts, contact information for people like lawyers, financial advisors, bank contacts, all of that. It should also include those estate planning documents all together. And, you know, one of the biggest things these days are digital assets. So, you know, will your executor or your family members know what accounts you have? usernames, passwords, all of that. Things get locked, like our iPads, our phones. And if someone doesn't have the password to that, well, it can be difficult to access. So something consolidated all together that your executor knows about is a really good idea. These days.
Nicole 00:21:39 We should mention we have a Canadian estate organizer guide available at a state club. If people want to check that out.
Greg 00:21:48 Right. And just speaking of time, length of administration. If you have something like that for an executor, everything is already there. The information you to contact. That's right. Access it quickly.
Katrina 00:21:59 What banks? A deceased person used to deal with what insurers so that it's limited, versus needing to write to every single big bank in Canada or credit union. That takes many, many, many months. Most banks have head offices on the East coast and their estate departments are slow. As soon as someone passes away, I would say, in my experience, banks aren't that quick at getting information out because they're losing a client. They've passed away. So definitely best to put that all together for family members and loved ones.
Greg 00:22:35 Especially people you would often see in eastern B.C.. Not unusual to have Alberta accounts in credit unions or Alberta Treasury board or a people going to the states might have something down in California or Texas. But, you know, people know they have an account. Where's it at?
Katrina 00:22:53 You know.
Katrina 00:22:53 Yeah, accounts are hard, right.
Greg 00:22:55 And those are very difficult to to obtain.
Katrina 00:22:57 Another thing about our assets and accounts these days, a lot of it is online versus getting paper statements. Back in the day, you know, an executor would check the mail and start to see all the accounts and information that would be received. Not so these days. So best.
Greg 00:23:16 Yeah. Without a mail. I mean, mail redirect was very informative before and now it's you get flyers and. Oh yeah.
Katrina 00:23:23 You don't want that. Yeah.
Greg 00:23:25 You know what? The sales are at the shopping market, but no thank you.
Katrina 00:23:28 Yeah.
Nicole 00:23:29 So how does someone choose the right executor?
Katrina 00:23:32 It goes back to needing someone that's organized. They should be good with finances. Good at keeping track of all the ins and outs. So that's one of the key responsibilities of an executor and traits that they should have. The other one is trust. You know you want to name someone that you fully trust because you're giving them a big role, and you need to know that they're going to do it properly.
Katrina 00:23:59 You should trust them. And then your family, your beneficiaries, should be able to trust them as well. And some people don't necessarily have that. One key person with all of those traits that they want to appoint. So there is of course, the option of naming more than one executor. They would have to those co executors would have to act together, sign off on everything together. But it may be good to think about that one person that's good with taxes, good with money, and then that other person that knows your family and is that, trusted advisor on on the back end. Of course, there's always the option of a professional trust company. They're in the business of this as as you guys know, of course Heritage Trust does this and they're efficient and they know what's going on. So that's always an option for a client.
Greg 00:24:52 And in reviewing the documents, creating wills etc., was the executor. That was the right executor 15 years ago. Correct today.
Katrina 00:25:00 Right. Let alone age.
Katrina 00:25:02 Yes. yeah. Yeah, definitely worth it to review documents I would say every few years. But Wills in my experience, have about a five year lifespan. Review them and update them as needed.
Nicole 00:25:16 So can executors get paid?
Katrina 00:25:19 Definitely. There is a default law that says an executor may claim a fee, a reasonable amount of up to 5% of the value of an estate and an ongoing management fee if there's trusts. so ongoing work, it's I believe the prescribed rate is 0.4% and that's statutorily set And a filmmaker can limit that percentage as well. So we could say my executor may only claim a maximum of 2%, for instance, or no executors fee. So that's what the law sets as well. With a professional executor, a fee agreement would have to be reviewed and signed by the filmmaker in advance, and it would form part of the will. So to ease some client's mind, that percentage won't increase in future because you're agreeing to it now.
Greg 00:26:11 And that's an advantage, because if your assets increase, the fee structure will stay in place for that portion.
Greg 00:26:18 That's right. Right. If we've talked about choosing the right executor, I think one of the things to is also, do they have complexity if the family is not local, you know, like foreign beneficiaries, when we talk about tax issues, distributing to a foreign beneficiary without the right documents in advance can cause you a lot of problems.
Katrina 00:26:41 That's right. Tax advice. Right from the get go is very important. Not only looking at what assets the estate has, but also who may be the final beneficiary, because a non-resident beneficiary may be subject to their own jurisdictional tax. for instance, I believe that in the UK there's inheritance tax that is significant. So a filmmaker needs to think about, speak to their lawyer about does the estate pay for that non-residents tax? Typically not. Or is it taxed in the hand of that beneficiary, meaning that that portion of that beneficiary's inheritance is maybe less than the other beneficiaries. So yeah. Non residency status is is a significant issue that comes up often.
Greg 00:27:30 I can say I have a non resident beneficiary.
Greg 00:27:34 And they've been complaining because our currency has depreciated to their currency. So they feel they're getting less.
Katrina 00:27:41 That's right.
Greg 00:27:42 You know. But that's just the nature of two currencies, right? Yeah.
Katrina 00:27:47 Yeah.
Nicole 00:27:48 So, Katrina, this has been amazing. Do you have any final tips for our listeners?
Katrina 00:27:53 I guess we've touched on this, but plan ahead. Make it easier on your family and loved ones. Get that will in place so that you can name the executor. And although it's not fun and it takes time yourself to turn your mind to these things and maybe put that just in case binder into place, it does make it a lot easier on everyone. You know, I always say anything that takes you 5 or 10 minutes to do with your bank, or your advisor will take your executor a lot longer, many months. So take a little bit of time now and plan ahead.
Greg 00:28:27 Katrina, thank you for being with us today. And where can our listeners find you?
Katrina 00:28:32 I would say the easiest way to find me is to Google Katrina at Lindsay Kenny LLP, And my page will come up.
Katrina 00:28:41 You'll find my email and phone number there and and feel free to reach out at any point.
Greg 00:28:46 Terrific.
Nicole 00:28:46 Great. Thank you so much for joining us.
Katrina 00:28:48 Thank you.
Nicole 00:28:49 This podcast is for informational purposes only and should not be considered individual, legal, financial, or tax advice. Make sure to consult the advisor of your choice to advise you on your own circumstances. Thank you for joining us for this episode of Your Estate Matters. If you like this podcast, make sure to follow it on your podcast platform of choice.
Greg 00:29:11 Whether you are planning your own estate or you're acting as executor for somebody else's. Heritage trust can help partner with heritage trusts to protect your family, your assets, and your legacy.
Nicole 00:29:22 If you would like more information about Heritage Trust, please visit our website at Heritage Trust Company.
Greg 00:29:35 This podcast is produced by Podfather Creative.