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Paying Debts, Estate Accounting & Executor Accountability

It is a common law rule in Ontario that an estate trustee has a year following the date of death to finalize an estate. During the first twelve months, the executor must conduct many important tasks under a high standard of care for the benefit of the beneficiaries. Last week we discussed that an estate trustee should locate all important documents and assets as well as notify beneficiaries, creditors and multiple government institutions of the death. Today we will discuss additional tasks that must be completed within the executor’s year. These tasks are outlined below.

Pay Debts and Other Liabilities

All debts and other liabilities of the deceased from the estate need to be dealt with, including credits cards, taxes and any claims against the estate. Tax returns need to be filed for the deceased, including any prior unfiled returns, and for the estate for an income received after the date of death. A tax clearance certificate should be obtained.

Conduct an Informal or Formal Estate Accounting

It will be critical for the executor to keep a detailed account of the assets, receipts, disbursements and investments of the estate and provide this information to those lawfully entitled, such as the beneficiaries of the Will before making an interim or final distribution to anyone and in the event that the accounts need to be passed (approved). The executor may opt to conduct an account passing in court even if there is no dispute or uncertainty about the estate assets or proposed distribution and all beneficiaries are of legal age of majority, mentally competent and in agreement. A formal accounting will protect the executor in the context of an estate dispute by limiting the period for a beneficiary who received the proper notice and raised no objection to bring an action at a later date. Legal advice is usually obtained and a decision is made whether to pass accounts in court if the beneficiaries are not already asking for the account passing.

Obtain Releases to Make a Partial or Final Distribution

The executor should obtain releases from the all the beneficiaries before making a partial or final distribution. If an interim distribution is made, it is imperative to hold back sufficient funds as a reserve for possible additional liabilities (e.g., additional taxes found owing by CRA in the Tax Notice of Assessment). Only after satisfaction of all liabilities of the deceased and the estate has been obtained, including a clearance certificate from CRA, should the final distribution be made.

Executor Accountability

Although there is much to be done in settling an estate, the executor must not unreasonably delay the process. It is understood that the administration may take longer than a year when a Will provides the executor with latitude in determining how and when to realize the estate. Because of the Supreme Court of Prince Edward Island decision in Currie v. Currie & Ors, 2005 PESCTD 64 (CanLII), however, the beneficiaries have the right to demand interest on their gift and can call upon the executor to explain why the estate administration is not complete. An interim distribution usually helps to extend patience of the beneficiaries in waiting for the rest of their inheritance.

Contact Us at Epstein & Associates, Estate Lawyers in Richmond Hill

Much is involved in the executor’s year and failure to perform any of the duties can result in personal liability to the executor for a breach of trust. At Epstein & Associates, we can help to take steps that protect you against personal liability in your role as estate executor. We are also capable of representing your interests to the executor as a beneficiary of the deceased’s estate. Contact our Newmarket and Barrie estate lawyers at 1-866-463-2266 today for a free consultation.