Have you ever considered what it means to act as a friend or family member’s estate representative? This role also has numerous responsibilities, many of which are complex. That’s why we strongly suggest you get professional advice to help you complete those tasks with the care and diligence they require. Here are some of the duties you may be required to fulfill if you accept the role of an estate representative.

Provide professional investment services

The will may or may not outline the investment powers of the estate representative. If these haven’t been outlined, you’re likely subject to the prudent investor rule or investment restrictions and duties under trust law or applicable intestacy laws. This includes a reasonable level of investment planning and generally requires a clear investment policy that considers the interests of the income and capital beneficiaries. Given the complexities of today’s marketplace, we recommend that you get the help of a professional investment consultant.

File tax returns

As an estate representative, you’ll need to file a final income tax return for the deceased that includes a report of all income earned in the year of death. Income from rights or things that haven’t yet been received, such as dividends, may be reported on separate tax returns, which may be advantageous. You’ll also need to file tax returns for the estate and pay taxes owing.

Given the complexities involved and possible exposure to personal liability, it’s a good idea to consider working with a professional tax advisor to properly file these tax returns before the deadlines. Also be sure to get the appropriate clearance certificate from Canada Revenue Agency and Revenu Québec, as applicable, indicating that taxes have been paid for the deceased and the estate.

Report capital gains

When they pass away, the deceased is deemed to have disposed of capital assets at fair market value. This artificial disposition could trigger a tax obligation on related capital gains—50% of capital gains are included in the deceased’s taxable income for the year of death. A rollover is available when property is left to a surviving spouse or common-law partner, so that the tax on deemed capital gains may be delayed until the survivor’s death or until the survivor disposes of the property. In this case, the entire capital gain will be taxed in the survivor’s hands. As the estate representative, you may be able to prevent this automatic rollover if it is beneficial (for example, it could be beneficial to trigger capital gains to absorb capital losses).

Identify special tax considerations

You may be able to access available tax benefits to minimize taxes for the deceased, the estate or the beneficiaries. These may include spousal or common-law partner registered retirement savings plan (RRSP) contributions, charitable donations, medical expenses or net capital losses at death.

Consider potential death benefits

Any qualifying death benefit paid by an employer is taxable to the recipient after a $10,000 exemption. The estate or surviving family members may also be entitled to the Canada Pension Plan or Quebec Pension Plan death benefit ($2,500 maximum) and survivor benefit, which may be taxed.

Probate or court appointment

Probate affirms that the will has been duly approved through court process. This means that third parties, such as financial institutions, can rely on the authority of the appointed estate representative. In provinces other than Quebec, if there is no will or if no one named as estate representative in the will can or will act, the court appoints the estate representative.

CIBC Trust Corporation is well equipped to be an estate representative or help those acting as estate representatives. Connect with us anytime for more information if you require professional management of your personal estate (to be managed on your death). We can also help if you’ve been appointed as an estate representative and need help to manage a complex or time-consuming estate.

This summary of the duties of an estate representative is not intended to replace the advice of legal, tax and other professionals. It’s a basic overview of some of the issues involved. In Canada, the role or title of the person who administers the estate of a deceased person may differ, depending on the province or the context. For example, they may be called a liquidator in Quebec and an estate trustee in Ontario. They may be called a personal representative in some legislation. Historically, and still in most provinces, they are also referred to as an executor if they were appointed in a will, or an administrator if they weren’t. Often, when referring to an estate, they may simply be called a trustee.