Probate & Trustee Support

Probate in a nutshell:

“Probate” means obtaining a document from the court stating that a specific will, or no will at all, applies to an estate and that a particular executor is in charge of that estate. 

Although probate is not always mandatory, an executor may need probate to administer an estate.  For example, an executor will usually need probate if there is no will, if an executor has to transfer or sell real estate, or if an executor needs to access money from a bank unwilling to release funds.  

Sometimes, a bank will give an executor a bank draft payable to our firm so that the executor does not have to pay our fee personally.  

Learn about what an executor must do, should do, and the extent of their personal liability by reading below:

Terminology:  

Executor:  someone who administers the estate of a deceased person.  The term “executor” is sometimes used on this page interchangeably with the more modern term “estate trustee”, even though the two terms are not necessarily the same.  “Executor” is also used as a singular in this article, even though there may be multiple executors administering an estate.  We will try to use the term “executor” whenever possible.  

What is probate?

Probate Historically in Ontario

Probate was the formal court procedure used to grant a person the legal authority to manage and distribute an estate when a deceased person passed with a will.  In other words, probate was how someone would obtain proof that they were in charge of an estate.   When probate was granted, the Court would issue “Letters Probate” in cases where the deceased passed with a will, or “Letters of Administration” when the deceased passed without a will. 

Modern Probate in Ontario

While the procedure for obtaining proof of control of an estate is now technically called an Application for Certificate of Appointment of Estate Trustee (with or without a will), most people still refer to this process as “probate”.  If someone’s probate application is accepted by the Court, they will be appointed Estate Trustee through a Certificate of Appointment of Estate Trustee.  

An Application for Certificate of Appointment of Estate Trustee (with or without a will) serves the following purposes:

Testate estates, meaning with a will:

• to seek the Court’s approval that the will included in the probate application is the deceased’s last valid will;
• to confirm the authority of the applicant to act as executor under the deceased’s will.  Ontario banks and the government will have to recognize the executor as the proper representative of the estate once probate is obtained.  Banks should release funds to the executor armed with a Certificate of Appointment of Estate Trustee; and
• some limitation periods for claims against the estate are triggered by the completion of probate.  

Intestate estates, meaning without a will:

• to confirm the authority of an applicant who wishes to be appointed as executor where the deceased passed without a will.  Ontario banks and the government will have to recognize the executor as the proper representative of the estate once probate is obtained.  Banks should release funds to the executor armed with a Certificate of Appointment of Estate Trustee;  
• to confirm that the deceased’s estate will be distributed according to the laws of intestate succession; and
• some limitation periods for claims against the estate are triggered by the completion of probate. 

When should I apply for probate?  

Since it can sometimes take the court several months to review a probate application, it is best to get the application into the court’s hands as soon as possible after the death of a deceased person.  Where we can demonstrate undue hardship to beneficiaries or a time-sensitive risk to the estate, your lawyer may ask the court to expedite the application to obtain probate sooner.  

When is probate required and do I really need to obtain probate?

No one wants to obtain probate as it can result in the payment of taxes and legal fees. Unfortunately, probate may be necessary when the deceased passed without a will. If the deceased did have a will, probate may also be necessary to access funds in a bank account, sell some types of estate property, or prove the validity of a will. 

Probate is often required when:

1. it is necessary to validate a deceased’s will;
2. a deceased died without a will, referred to as an intestacy;
3. the deceased owned real estate, such as a house, that is not subject to a real estate exemption called “first dealings”; or
4. the executor cannot access the deceased’s bank accounts. 

Do I need to hire the lawyer that drafted the deceased’s will?

No.  An executor does not need to hire the lawyer that drafted the will and may hire any lawyer that they choose to obtain probate.  It is important that an executor feel comfortable with their lawyer as they will be working closely with this lawyer through the estate administration process.  The lawyer represents the executor, not the estate or beneficiaries.

Who can apply to be an executor?

Almost any adult and some corporations in Ontario can apply to be an executor.  An executor is responsible for managing the affairs of a deceased person’s estate, including collecting and managing the assets of the estate, paying debts and taxes, and distributing the remaining assets to the beneficiaries according to the terms of the will or the laws of intestacy.

To be appointed as an executor, a person must apply to the Ontario Superior Court of Justice for a Certificate of Appointment of Estate Trustee. The Court will consider the application and may appoint the person as the executor if it is satisfied that they are suitable for the role. In making this decision, the court may consider factors such as the person’s financial knowledge, ability to manage the estate, and their relationship with the deceased and the beneficiaries. This is especially true if multiple people wish to be appointed or if the application for appointment is opposed by another person.

If the deceased person had a valid will, the will may identify an executor. If the will does not name an executor or if the named executor is unable or unwilling to act, the Court may appoint someone else as the executor. 

Estate Administration Tax 

At the time an application for probate is made, the person applying will need to provide a bank draft or certified cheque to the Court to satisfy any Estate Administration Tax owing. Estate Administration Tax is a small percentage of the total value of the estate at the time of deceased’s death. If an executor does not have the money to pay the Estate Administration Tax at the time that they apply, does not know the value of the estate, or cannot access the deceased’s bank accounts to satisfy the payment of Estate Administration Tax, they can request that the Court delay the payment of the tax until after probate is granted. 

Estate administration bonds 

The Court may require a person applying for probate to obtain an estate administration bond, which can be tremendously expensive. A bond is a type of insurance policy that protects the estate’s creditors and beneficiaries should the executor act improperly or mismanage an estate’s assets. Not all executors are required to obtain a bond at the time of their application. A bond will generally not be required if a deceased person named a proposed executor in their will and that person lives in Ontario. The requirement for a bond can be waived by the Court using a few exceptions. A Katzman Estate Law lawyer can assist you in dispensing with a bond when applying for probate

Compensation for acting as executor:

Acting as an executor is difficult work often worthy of compensation.  Section 61(1) of the Trustee Act sets out that an executor is entitled to such fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the Estate.  While the Trustee Act does not specify what a “reasonable allowance” is, generally speaking, in Ontario executor is entitled to compensation in the amount of 2.5% of all money that comes into an estate and 2.5% of money that leaves an estate.  This does not always mean 5% of the total value of the estate.  The court may also award a “care and management fee” of 0.4% on the average annual value of an estate’s assets.  Confusingly, this is often worded in the caselaw as “two fifths of 1%”.  The Court will also consider the following five factors, as outlined in a case called Toronto General Trust Corp. v. Central Ontario Railway, 1905] O.J. No. 53, when reviewing whether an executor’s claim for compensation is reasonable:

1. the magnitude of the estate or trust;
2. the care, responsibility and risks assumed by the executor or trustee; 
3. the time spent by the executor or trustee in carrying out their responsibilities;
4. the skill and ability required and displayed by the executor or trustee; and
5. the results obtained and degree of success associated with the efforts of the executor or trustee. 

Being an executor can be a difficult job.  While being an executor comes often comes with power and discretion, even before probate is granted, it also comes with significant legal liability.  An executor can be sued by creditors and beneficiaries for failing to perform their duties properly.  An executor will likely need legal advice to guide them through the estate administration process, as discussed in the section below.

Executor/Trustee Support

How do I administer an estate?

Executors are generally given one year to settle a deceased’s estate. There are several tasks that must be completed within the span of that one year. The list below is not exhaustive and there will be other tasks that an executor must complete.

1. Secure estate property

An executor must secure and maintain estate property. This includes all financial accounts and investments, all personal property, and real property (such as real estate) belonging to the deceased.  An executor should complete the following tasks:

1. secure and maintain insurance for real estate;
2. change the locks to real estate;
3. secure the keys to vehicles, sheds, and storage lockers;
4. locate, secure and catalogue all valuables including jewellery and move these items to a secure location;
5. locate all of the deceased’s ID and bank cards, including passports, drivers license, health card, credit and debit cards, etc.;
6. pay property taxes and utilities; and
7. secure bank accounts and investments in a separate estate account.  Failing to separate personal and estate funds is called comingling funds and can get a trustee in trouble with the court.
8. Notification

Depending on the deceased’s circumstances, the following individuals or entities should be notified of the deceased’s passing:

1. banks and financial institutions;
2. mortgage providers;
3. vehicle financiers; 
4. insurance providers;
5. employers;
6. personal or group life insurance providers;
7. utility providers;
8. landlords;
9. tenants;
10. service providers or subscription-based services;
11. loyalty rewards programs;
12. Service Canada;
13. Service Ontario;
14. Family Responsibility Office;
15. Employment and Social Development Canada;
16. Ministry of Community and Social Services;
17. Passport Canada; and
18. Veteran Affairs.
19. Other Professionals that may be Assistance

An executor can retain the assistance of professionals as they administer an estate, including:

1. accountants;
2. real estate lawyers;
3. real estate agents;
4. investment experts; and
5. auctioneer services.
6. Taxes and Liabilities

1. Taxes:  With the help of an accountant, an executor will need to determine whether a deceased owed any income tax at the time of their death.  Further, an accountant can help identify what tax an estate owes as a result of an executor selling assets.  Selling investments or real estate can trigger capital gains liabilities for an estate.  An executor who fails to pay estate taxes properly can be personally liable to the government.
2. Other liabilities:  If an estate has any legitimate non-tax debt, including a mortgage, line of credit, or credit card debt, it should be paid off.  An executor may be put in a difficult position if the value of the debts exceed the assets.
3. Estate Distribution
4. Selling, Distributing, or Transferring a Vehicle:

If you, as the executor, sell a vehicle belonging to the estate you should make sure to have the following paperwork in order:

1. 1. a Used Vehicle Information Package – see https://www.ontario.ca/page/used-vehicle-information-package;
   2. a signed Bill of Sale containing the executor’s name, the buyer’s name and address, the date and purchase price;
   3. a complete and signed Application for Transfer found on the back of an ownership permit, under the vehicle portion; and
   4. a certificate that verifies the vehicles meets safety requirements.

If possible, it is best to attend a Service Ontario location with the individual receiving the vehicle. The new owner has only six days to register with Service Ontario.  Make sure to obtain a receipt whether the vehicle is sold, distributed to a beneficiary, or transferred. Return the plates to Service Ontario. Service Ontario will require proof of death and proof of your appointment as executor.

2. Distribution:

Distribution of estate assets should not occur until all of the following steps are completed:

1. 1. specific distributions under the will are dealt with;
   2. all remaining assets are liquidated and placed into the estate’s bank account;
   3. all estate debts are satisfied and taxes paid or, more dangerously, money has been set aside to cover the tax liability;
   4. CRA Tax Clearance Certificate has been obtained;
   5. the waiting period has expired.  The waiting period is 6 months where the deceased died with a will or 12 months where the deceased died without a will; and
   6. beneficiaries have been presented with an accounting of estate transactions and have signed and returned a release form.

We recommend that you speak with a lawyer before making distributions from the estate.

3. Passing of Accounts:

A passing of accounts is the formal process of submitting an account of all estate transactions as well as a claim for executor’s compensation to the Court for its approval. This process is usually voluntary given that it provides protection to executors. Beneficiaries may also bring a court application forcing an executor to pass their accounts.  The court can reduce the amount of executor’s compensation claimed or order that an executor pay money back to an estate if it disapproves of a transaction or the treatment of an estate asset.  For example, if an executor moves into an estate’s house and refuses to leave or sell the house for an unreasonable amount of time, on a passing of accounts the court can order that the executor pay rent for the use of the house and also reduce the executor’s compensation as a result of the improper conduct.  If an estate’s vehicle is sold for less than fair market value to one beneficiary without the approval of the others, the executor may be liable for the difference between the sale price and fair market value and may not receive compensation on that transaction.

4. Estate Account Closed:

Once all of the estate has been distributed to the beneficiaries and no estate matters remain, the estate account can be closed.