6 tips to help you avoid problems that arise in estate management
Over time, you may develop close relationships with some of your clients. They begin to trust you with more than just their annual financial statements, and you become their main advisor. It is therefore not surprising when certain clients ask you to guide their families as liquidator of their estate. Be careful, as this show of trust could become your worst nightmare.
- Think carefully before agreeing to become a liquidator or co-liquidator; family relationships are often complicated, and you are a stranger getting involved in their affairs.
Relationships between parents and children are very complex. When someone dies, issues that sometimes go back to childhood can resurface. Be aware of family conflicts and remain objective.
- Consider that you may lose the independence required to perform your assurance engagements if you become a liquidator.
You certify the financial statements for your client’s companies. You must therefore examine how the situation affects your independence: as a liquidator, you hold the shares of these companies in trust until the estate is fully settled.
- Do not accept a mandate that exceeds your competencies.
Even if the request comes from a long-time client, you should be humble enough to recognize you are unfamiliar with certain areas. If this is the case, be forthcoming with the beneficiaries and consult the appropriate specialists (e.g. notary, lawyer, tax practitioner). Liquidators can certainly use the services of professionals to help them settle an estate, even if these professionals are not named as liquidators.
- Understand the difference between professional fees and liquidator fees.
Liquidators are entitled to reasonable remuneration if they are not beneficiaries. If you are one, you could be compensated, provided this is set out in the will or the other beneficiaries agree. Liquidators are also entitled to be reimbursed for expenses they incur while carrying out their duties.
- Be aware that some beneficiaries are very impatient and want their inheritance immediately.
If a beneficiary calls you, answer his or her questions. Clearly explain the steps you have yet to complete and how long they will take. Always maintain regular contact with all the beneficiaries. Inform them that the time needed to settle an estate varies depending on its complexity.
- You can avoid a lot of problems by keeping complete records.
It is important that liquidators have complete and detailed files and keep them up to date. Settling an estate involves a considerable amount of paperwork, especially in the short term. As a liquidator, you may be asked to provide evidence that you performed your duties competently and to the benefit of the estate. The more complete and organized your files are, the more ready you’ll be if you have to undergo a detailed review.
Think carefully before agreeing to become a liquidator. Your clients trust you, but they may unknowingly be placing you in an untenable situation. Know what you’re getting yourself into and avoid saying yes to everything on impulse. Remember: managing an estate requires a great deal of tact, transparency and availability!