Katzman Estate Law assists estate trustees who need or want to pass their accounts as well as beneficiaries who are considering objecting to an estate trustee’s accounts. This area of law is rather technical as it is the intersection between law and accounting. The first few paragraphs below will provide most readers with enough information about passings of accounts to decide whether to contact a law firm like Katzman Estate Law. The “More Detail” section is for readers interested in the mechanics of the passing of accounts process.
A passing of accounts is the process by which a Court passes judgment on the transactions made during a specific period of time by an estate trustee, executor, or administrator. For simplicity, this webpage will use the term “estate trustee” for all three positions. The purpose of passing accounts is to have the Court approve or reject transactions made by the estate trustee, to award or disallow estate trustee compensation, and to allow a beneficiary to object to, or dispute, specific transactions or the compensation claimed by the estate trustee.
Example: The deceased dies on January 5, 2023 and the estate trustee completes her accounts on April 14, 2024. To pass her accounts with the Court, she lists all the transactions she made on behalf of the estate from January 5, 2023 to April 14, 2024. If the accounts are passed by the Court, the approval of the accounts covers only that specific period from January 5, 2023 to April 14, 2024.
If an estate trustee has already passed their accounts through the Court, a beneficiary is generally prohibited from disputing transactions or compensation for the specific period that has been passed.
Example A: If an estate car is sold for $40,000 and this transaction was included in accounts that have been passed, a beneficiary typically cannot later sue the estate trustee for failing to get more for the property.
Example B: If an estate trustee pays an accountant $3,500 in fees and this transaction is in accounts that have already been passed, a beneficiary cannot claim later that these fees were inappropriately high.
Successfully passing accounts gives estate trustees peace of mind and brings finality to an estate. When passing their accounts, an estate trustee includes, among other documents, several charts showing a list of all their transactions. Each transaction is listed as a line item. This information is served on the beneficiaries of an estate and it is open to the beneficiaries to object to transactions made by an estate trustee. After reviewing the accounts, a judge may order transactions reversed and that money be returned to an estate.
Example: An estate trustee lists a transaction as follows:
Capital Disbursements
| Transaction # | Date | Description | Amount |
| … | |||
| 53 | June 14, 2024 | Repairs and renovation of the estate property located at 1500 Willow Ave. | $35,000 |
| … |
If a beneficiary objects to the transaction, in their Notice of Objection document they could write:
I object to Capital Disbursement transaction 53. Repairs and renovations were not necessary to put 1500 Willow Ave. into a sellable condition, did not improve the sale price of the property, and was an unnecessary expense. These funds should be returned.
It would be for a Court to decide whether repairs were a reasonable use of the estate trustee’s discretion, or whether the estate trustee should repay some or all of the $35,000.
Often, an estate trustee’s application on a passing of accounts will include anticipated distributions to beneficiaries. Distributions are the payments to beneficiaries towards their interest in the estate. The application will also include the estate trustee’s claim to compensation. This compensation is often the subject of dispute on a passing of accounts. To learn more about estate trustee compensation, click here. It is dangerous for an estate trustee to take compensation before their accounts are passed if they do not have the consent of every beneficiary.
A passing of accounts is generally not the proper venue for beneficiaries claiming damages against estate trustees for breaching their duties, compelling an estate trustee to do or not do anything, or removing an estate trustee. These types of claims should be litigated a different way in a separate application. Click here to read more about claims against estate trustees. For example, if an estate trustee takes estate property for themselves that should have been sold and deposited into estate accounts, the Court will not want a beneficiary to seek the return of the property on the passing of accounts. However, the trustees’ improper actions and transactions are relevant to the compensation payable to the estate trustee.
Example: An estate trustee takes an estate vehicle that was owned by the estate, puts it in his name, and refuses to return it even though the car was willed to one of the beneficiaries. That beneficiary brought an application to Court for an order that the car be returned, which was successful. It would not have been appropriate to seek the return of the vehicle at the passing of accounts, but it is appropriate to argue that the Court should reduce compensation for these misdeeds on a passing of accounts.
No. If each beneficiary of an estate to signs a proper release for the actions taken and compensation claimed by an estate trustee, a passing of accounts is usually unnecessary.
A passing of accounts is recommended when an estate trustee cannot get every beneficiary of an estate to sign a release. This often happens when one or more of the beneficiaries dispute a transaction made by the estate trustee and when a beneficiary is under the age of 18 or otherwise unable to make decisions on their own. An estate trustee may be compelled to pass their accounts by a beneficiary.
An estate trustee brings an application to pass accounts that comply with requirements found in the Rules of Civil Procedure. An estate trustee will usually need a lawyer or accountant’s help generating the accounts. The requirements for a passing of accounts are rather specific and the rules dealing with compensation are sometimes difficult to apply. Katzman Estate Law, or some qualified accountants and bookkeepers, can help generate the accounts.
The accounts created by the estate trustee and the Court application are served on all of the beneficiaries to the estate and sometimes on the Public Guardian and Trustee and the Office of the Children’s Lawyer. Beneficiaries are given the opportunity to object to transactions in writing, including the level of compensation claimed by an estate trustee. If there are no objections to the compensation or transactions, no hearing is required.
An estate trustee can pass accounts as often as they please, especially if the estate is expected to take several years or more to administer. An estate trustee may choose to pass their accounts every few years in these situations. Given the level of work involved, the decision to pass accounts should not be taken lightly. For most estates, passing accounts once at the end of the administration is enough.
This section is written for readers who are interested in a punishing level of detail about passings of accounts.
Estate trustees have a duty to keep a complete and accurate set of accounts for the assets under administration. Estate trustees also have a duty to provide information to beneficiaries and anyone with a beneficial interest in the estate. To fulfill this duty, the estate trustee must promptly respond to information requests. Beneficiaries have a right to inspect estate documents, including financial documents. If an estate trustee is doing a good job, the evidence should not be kept secret.
As soon as they begin acting, an estate trustee should maintain impeccable records of the administration process. This involves keeping track of the initial value of estate assets and maintaining copies of bank records and appraisals. Additionally, records of all transactions carried out using estate funds like cancelled cheques, receipts, and invoices should be preserved and organized. Having comprehensive and detailed records is crucial as it helps the estate trustee to promptly respond to beneficiaries’ information requests. This promotes trust in the estate trustee and contributes to a smooth estate administration.
Keeping clear records makes the final accounting process much easier; especially if the estate trustee is called upon to present the estate’s accounts to beneficiaries. This also helps an estate trustee prove their entitlement to compensation.
If an estate trustee must pass their accounts, it is important to have the estate receipts ready for beneficiaries to review if they ask for them or if there are any objections filed. To ensure everything is organized, the receipts should be numbered and cross-referenced to the accounts. This way, the process can proceed smoothly, and all necessary information will be readily accessible for everyone involved. Beneficiaries are less likely to object to accounts that are well-organized and well-evidenced. Messy or confusing accounts invite objections.
A passing of accounts is a formal Court proceeding where the Court is asked to grant judgment to “pass”, or approve, accounts submitted by an estate trustee for a specific period of time. These accounts can be approved as they are or if necessary, they may be changed by the Court and then approved. Accounts may not be approved if there are errors in the accounts that cannot easily be corrected, if the Court is not satisfied with the accounts, or if the Court finds issues with how the estate was managed.
Under section 39 of the Estates Act, R.S.O 1990, c. E.21, estate trustees are required to take an oath and affirmation in obtaining a Certificate of Appointment of Estate Trustee or similar probate certificate that they will render a just and full account of their executorship when lawfully required. It is important to note that there is no obligation under Ontario law on estate trustees to pass their accounts unless called upon to do so by someone with a financial interest in an estate.
Section 50 of the Estates Act, R.S.O 1990, c. E.21, clarifies that estate trustees shall not be required to render an account of the property of the deceased unless at the instance or on behalf of some person interest in such property or of a creditor of the deceased.
Under Rule 74.15(1)(h) of the Rules of Civil Procedure any person who appears to have a financial interest in an estate may move for an order for assistance requiring an estate trustee to pass their accounts. The financial interest necessary to compel a passing of accounts can be a beneficial interest in the estate, either vested or contingent. Creditors of the Estate may have a financial interest in an estate if that interest has crystallized.
Beneficiaries have a right to be informed about the full value of an estate and regarding the ongoing administration of the estate. A passing of the accounts allows beneficiaries to examine all financial transactions that have occurred during the administration of the estate. This is done using a document the estate trustee must prepare called a statement of accounts. The statement of accounts includes a list of the estate’s original assets, capital receipts, capital disbursements, revenue receipts, revenue disbursements, and the estate trustee’s claim for compensation.
The statement of accounts is accompanied by additional financial records showing each of the expenditures, credits, payments, receipts, and invoices related to the estate. This document is the intersection between accounting and law. An accountant or bookkeeper can generate the document, but usually with the assistance of a lawyer. A Katzman Estate Law lawyer can generate a statement of accounts for you.
Estate trustees may want to voluntarily pass their accounts to safely collect compensation from the estate or to protect themselves from liability by having the Court approve their actions to date. Once passed, beneficiaries generally cannot later challenge or re-open the accounts unless there was a mistake or fraud involved.
Estate trustees are obligated to keep estate accounts but are not legally required to pass or present them unless requested to do so by a beneficiary or creditor of the estate. The duty primarily revolves around maintaining appropriate records that could be required for a full accounting when needed.
In situations where a trustee and at least one beneficiary are unable to resolve a disagreement with respect to one or more transactions, or more often compensation, an estate trustee should consider voluntarily initiating a passing of accounts rather than face an attack later. If an estate trustee refuses to pass their accounts when requested to do so, they may face significant personal cost consequences.
A typical accounting must include:
Whether one is passing accounts or objecting to accounts, retaining an experienced estate lawyer is important. Katzman Estate Law uses specialized software to prepare the documents required for a passing of accounts and to calculate estate trustee compensation. While we do not insist that we generate the accounts ourselves, it is easier to defend accounts that we generated.
The statements of accounts should give a clear and full picture of the financial position and progress of the administration of the estate. Supporting documentation, such as bank statements, cancelled cheques and receipts should be available. Depending on the stage of administration, accounts should also show the past and proposed distributions from the estate.
Beneficiaries should be able to understand the accounts that are presented to them. Each transaction recorded in a statement of accounts should be organized, clear, and provide sufficient details such that the beneficiaries know why and when a transaction occurred. If the accounts that are presented to the beneficiary are lacking in any of these areas, or if the accounts raise more questions than they answer, a beneficiary can object to the estate trustee’s accounts. Katzman Estate Law lawyers are experienced in reviewing accounts for beneficiaries and objecting to transactions. This process involves a forensic review of the accounts to see if any money is missing and testing the compensation calculations used by an estate trustee. It is not uncommon for compensation to be improperly charged on transactions as explained below.
When an estate trustee claims compensation from an estate, it is important to examine the transactions an estate trustee is claiming compensation on. Unless otherwise permitted in the Will or a contract, estate trustees are generally entitled to fair and reasonable compensation from an estate based on the value of their services. The Court will be mindful of several factors, including the complexity and value of the estate, the time it took to administer, the skill required and demonstrated by an estate trustee, and the result of the administration. An estate trustee who does a poor job with poor results will usually get less compensation.
An unofficial, and unenforceable, rule of thumb for transaction compensation is 2.5% of the capital receipts, capital disbursements, revenue receipts, and revenue disbursements, being the money coming in and out of the estate. Particular attention should be given to the following principles:
An estate trustee might be able to charge a care and management fee for estates that require more than one year of administration, or where the estate trustee is required to administer an ongoing trust. Care and management fees for estate trustees are generally calculated at 2/5th of a percent of the average value of the managed assets over the period of time in which the assets are managed. Care and management should not generally be claimed in the first year of an administration, absent some special circumstances.
It is a myth that compensation for an estate trustee is 5% of the value of an estate. The examples below show what goes into the calculation for transaction compensation and that it does not always equal 5%:
Example A: An estate vehicle is worth $10,000 at the date of death. No compensation is payable when the estate trustee receives the vehicle. The estate trustee sells the vehicle for $10,000. Compensation is chargeable on the sale of the vehicle, and the trustee seeks 2.5% for that transaction. The estate trustee then distributes the cash that was generated from the sale of the vehicle and claims 2.5% for the distribution. If the beneficiaries or possibly the Court agrees that 2.5% is a fair amount to charge for these transactions, then the estate trustee receives $250 for selling the vehicle and $250 for distributing the cash.
Example B: When an estate trustee begins to administer an estate with $10,000 in cash in the deceased’s savings account. No compensation is chargeable for taking over the $10,000, even if this money is moved from the deceased’s accounts into a different estate account. The $10,000 is distributed to the beneficiaries of the estate and the estate trustee claims 2.5% on this transaction. If the beneficiaries or possibly the Court agrees that 2.5% is a fair amount to charge for this transaction, the estate trustee receives $250.
The examples above assume that 2.5% in and out of the estate is appropriate not only for these transactions, but also in the context of the administration of the estate, generally. That is a significant assumption. An estate trustee who misappropriated $1 Million of estate assets and who was removed as estate trustee for poor performance is unlikely to receive standard rates even on legitimate transactions. To the contrary, if the estate trustee did an exemplary job in difficult and complicated circumstances, they may be entitled to more than 2.5% in and out. The calculation of 2.5% in and out of an estate can be helpful as a guide to be adjusted up or down depending on the surrounding circumstances.
Yes. Estate trustee compensation is taxable as income.
An estate trustee has two options to get approval for their accounting:
The first way is to present the accounting to the beneficiaries without a Court proceeding and to have the beneficiaries sign a release acknowledging that the beneficiary has reviewed the accounts, approved the accounts, approved the estate trustee’s claim for compensation, and that the beneficiary releases the estate trustee from any liability associated with the administration of the estate for the relevant period of time.
This may not be possible if some of the beneficiaries are legally incapacitated, such as minors or people who are not competent to make decisions about their property. This is also the case where there are unascertained beneficiaries. In such situations, it may be impossible to obtain approval from all beneficiaries.
If any of these complications arise, or if there are hostile beneficiaries, the estate trustee’s only alternative is to pass their accounts or risk objections later.
An estate trustee who fails to get proper releases and who does not pass their accounts faces several risks. First, the estate trustee may be compelled to pass their accounts after the funds in the estate have been distributed. This means that there will be no funds left in the estate to pay the estate trustee’s legal fees for the passing of accounts, which is a terrible outcome for the estate trustee. Second, the more time in between the end of the administration and the hearing of the passing of accounts, the harder it will be for the estate trustee to defend their transactions. Memories fade and receipts can get lost; it is better to get the passing of accounts out of the way while the administration is fresh in the estate trustee’s mind. Finally, even though the estate trustee and a beneficiary may have an understanding with respect to the administration, a beneficiary may die and that beneficiary’s estate trustee may take a different position.
Under Rule 74.18 of the Rules of Civil Procedure, an Estate Trustee may commence an Application to Pass Accounts by filing with the Ontario Superior Court of Justice the following documents:
The application must be served on all persons who have a contingent or vested interest in the estate. Those who are served with these documents, the beneficiaries, can respond to the application by filing a Notice of Objection to Accounts.
An applicant can obtain judgment on the passing of accounts without a hearing under two conditions:
To receive judgment without a hearing, the estate trustee must file specific documents with the Court at least five days before the application’s hearing date.
If even one Notice of Objection to Accounts is filed with the Court and is not later withdrawn, the Application will need to be heard by the Court for a Contested Passing of Accounts. An estate trustee should be represented by an estate litigator for this process.
Estate accounts for Court purposes have a specific format. Preparing them for a passing of account can be a time consuming and difficult process. It is advisable for an estate trustee to reach out to skilled legal counsel with experience in preparing these documents for Court.
The general costs awarded by the Court to an estate trustee for having to prepare the estate’s accounts falls within a range of $2,500 to $7,500. The exact amount the estate trustee receives is determined by the value of the assets being presented during the passing of accounts.
Additionally, any person with a financial interest in the estate who has retained a lawyer to review the accounts, makes no objection to the accounts, and serves and files a request for costs is entitled to one half of the amount payable to the estate trustee. This encourages beneficiaries to retain counsel to review the accounts of an estate trustee on the estate’s dime.
Where an estate is particularly complicated, costs of preparing the accounts may exceed the legislated costs allowed on a passing of accounts without a hearing. Where this occurs, the estate trustee can make a request for increased costs under Rules 74.18(8.6) & (11) of the Rules of Civil Procedure.
Beneficiaries are under no obligation to accept the accounts as presented by an estate trustee, whether it is through an application to pass accounts or from an informal accounting. They have the right to scrutinize the accounts and raise any concerns or objections if necessary. A beneficiary has a few options if they choose to challenge an accounting which has been brought through an Application to pass accounts: a beneficiary can object to the accounting by serving on the estate trustee, and filing with the Court, a Notice of Objection to Accounts; or, a beneficiary who wants to participate in a hearing of a passing of accounts but does not want to file an objection can serve the estate trustee with a Request for Further Notice and file the request with the Court. This gives the beneficiary a right to further notice of any steps in the application, obtain additional documents within the application, submit material regarding costs, and be heard at the hearing if there is one.
Beneficiaries should be careful when deciding to challenge an estate trustee’s accounts. Challenging without strong grounds can lead to significant costs for a beneficiary. For example, if a beneficiary questions the estate trustee’s honesty without evidence, they may have to cover some of the trustee’s legal expenses.
To avoid unnecessary costs, beneficiaries should only challenge issues of genuine importance and avoid pursuing trivial matters, even if the challenge is valid. It is crucial to weigh the potential benefits against the costs before proceeding with any challenge. A beneficiary should not challenge a $2.50 Tim Horton’s receipt in the context of a $5 Million estate, or at least not with Katzman Estate Law. The Court would likely take a dim view of such an objection.
A “contested passing of accounts” is where one or more of the beneficiaries dispute the executor’s handling of the estate.
Contested passing of accounts commonly occur for following common reasons:
In the lead-up to the Court hearing for the passing of accounts, some objections can often be addressed to streamline the process. Beneficiaries who initially file a Notice of Objection to Accounts but subsequently find their concerns resolved have the option to submit a Notice of Withdrawal of Objection. This withdrawal should be submitted a minimum of 15 days before the scheduled hearing.
When one or more Notices of Objection to Accounts have been submitted but not withdrawn in advance of the hearing, the estate trustee will combine these outstanding objections and is required to prepare a comprehensive Reply to Notices of Objection, which will then be served on all parties entitled to notice and filed with the Court with proof of service. Beneficiaries are then granted the opportunity to respond to the estate trustee’s Reply to Notices of Objection.
As the hearing date approaches, a series of essential documents will be submitted by the estate trustee to the Court. These documents include the Application to Pass Accounts, a compilation of consolidated Notices of Objection to Accounts and the corresponding Reply to Notices of Objection, any responding documents to the reply, a draft order outlining the proposed outcome, and any cost-related requests.
In a contested hearing, both the estate trustee and beneficiaries who have submitted responses to the Notice of Application to Pass Accounts are afforded the opportunity to present their positions to the Court. In contested passing of accounts hearings, the Court can pass the accounts either entirely or partially, or schedule the passing of accounts to be heard at a longer hearing or a trial.
Usually, the principles that apply to an award of costs on a contested passing of accounts are the same principles that apply in general civil litigation. That is, the unsuccessful party will be responsible to pay a portion of the successful party’s costs.
Nonetheless, if an issue raised by the unsuccessful party was reasonable and required the Court’s assistance, the Court may exercise its discretion so that the unsuccessful party does not bear the Costs of that issue. In these situations, the Court may order that the unsuccessful party is entitled to have their costs payable from the estate. If a passing of accounts proceeds to trial, costs can become significant.
To compel an estate trustee to pass their accounts, a beneficiary must issue a Notice of Application seeking an Order for Assistance under Rule 74.15(1)(h) of the Rules of Civil Procedure. At the hearing of the Application, the Court decides whether to grant the Order compelling the passing of accounts.
After a beneficiary has obtained an order requiring the estate trustee to pass their accounts, or if the estate trustee chooses to voluntarily pass accounts at that point, the estate trustee must apply to the Court to have their accounts passed. Once the estate trustee serves their Application to Pass Accounts, the beneficiaries can then file a Notice of Objection to Accounts to challenge the estate trustee’s transactions or claim to compensation. Beneficiaries should be careful when making objections as they could be exposed to cost consequences for failed objections, meaning that they could have to pay some of the estate trustee’s legal fees.
Rule 74.15(1)(h) of the Rules of Civil Procedure, R.R.O 1990, Reg. 194, as amended, under the Courts of Justice Act, provides that any person who appears to have a financial interest in an estate may move for an order for assistance requiring an estate trustee to pass accounts.
Estate trustees generally have one year to make distributions; however, it often takes an estate trustee more than one year to administer an estate in its entirety. If the only reason a beneficiary seeks an accounting is that they have not received their inheritance within the first year, the Court may exercise its discretion to deny the compelled passing of accounts. Where there are other concerns present, such as worries that the estate trustee is comingling estate funds with their own personal funds or where an estate trustee is refusing to provide information regarding the administration or estate documents, the Court may use its discretion to compel a passing of accounts. A beneficiary should discuss whether compelling an estate trustee to pass accounts is the right course of action with an experienced estate litigator before applying to the Court half-cocked. Even if the application is granted and an estate trustee is compelled to pass their accounts, this might only serve to deplete estate assets to the detriment of the beneficiaries.
Beneficiaries have the right to review an estate trustee’s statement of accounts related to the ongoing administration of the estate. Normally, informal accounts are enough and a beneficiary should consider accepting these, at least for awhile. However, if the estate trustee refuses to provide any accounts, gives incomplete or incorrect information, or delays estate distributions, a beneficiary should consider compelling the trustee to pass their accounts. This can be done on an interim or final basis. Final accounts will also often include a Court Order detailing the estate’s final distribution.
When it comes to passing accounts, skilled legal counsel is essential for both estate trustees and beneficiaries. Estate trustees often require the assistance of legal counsel to help with the complicated process of generating accounts, making the application to pass those accounts, and defending those accounts from criticism. Likewise, beneficiaries who retain experienced estate lawyers can ignore minor or unsupportable objections to focus on real issues in an estate trustee’s accounts, if they exist. At Katzman Estate Law, we excel in this complex area of litigation, armed with the knowledge and experience required to prepare accounts or object to them. Contact Katzman Estate Law for a free consultation to discuss your case.
Eric Katzman is an experienced lawyer at Katzman Estate Law who can help with estate matters. Within a few minutes on the phone, Eric will get to the heart of your estate issue, whether it is a litigation or probate matter.
No-obligation, confidential phone calls with Eric are completely free. Call 1-844-602-4242 for more information.