Recently I had the pleasure of attending Osgoode PD’s Passing of Accounts & Fiduciary Accounting module, which is part of the Intensive Program in Wills & Estates. This segment of the program was chaired by Kimberly A. Whaley of WEL Partners LLP, and we saw a stellar line-up of speakers such as our very own, Ian Hull and Nick Esterbauer, as well as Professor Albert H. Oosterhoff, Katherine Antonacopoulos, and Tracey Phinnemore.
Ian kicked off the session with a concise overview of the fundamentals of passing of accounts. Similarly, this is the focus of this blog entry.
As Ian pointed out, it is best to always review statute and codification before taking any steps. Starting at rule 74.16 (and onwards) of The Rules of Civil Procedure, we find the core elements of passing of accounts. Similarly, section 49 of the Estates Act, lays out the foundational aspect of the audit experience and allows for wide powers of the Court to assess and consider issues relating to passing of accounts in a contentious application.
Who should pass accounts
A fiduciary who has managed financial affairs is the appropriate party to obtain a blessing from the Court of their activity. The fiduciary could be an executor of an estate, a trustee of a trust, or an attorney for property under the Substitute Decisions Act.
The Court’s involvement is not an absolute necessity. It is possible for the fiduciary to obtain a full and final release from all beneficiaries who have a financial interest, subject to that all said beneficiaries are sui juris. However, this cannot happen if there is a gift-over or an interest by way of trust, or if there are minor children with interest in the accounts. More often than not, a formal passing of accounts will be needed.
Good Practice Tips
To commence the passing of accounts, the fiduciary swears an affidavit regarding the accuracy of the accounts, which affidavit is filed by way of an application and served on everyone with a financial interest. The beneficiaries then have the opportunity to file a reply or a Notice of Objection, i.e. a complaint about the accounts. A good practice tip from Ian is that the fiduciary should seek an order for directions specifying procedural steps in the matter, inclusive of a timetable to filing of replies or notices of objection.
Passing of accounts is no easy endeavour, especially considering the fairly complex account format prescribed by The Rules. In order to get ahead, Ian referenced the old saying that “Accounts need to be in hand”, that is to say – a fiduciary should be ready to provide particulars as soon as they are asked. Typically, the fiduciary will need to provide accounting in chronological order with summaries identifying the core elements of the account. Diligent and accurate record keeping of receipts of disbursements is a must. A fiduciary can become personally liable if account entries do not meet the threshold of sufficient accuracy in the eyes of the judge.
In estate matters, the administration of an estate can take a long time – often over a year. To avoid scrutiny, a fiduciary may chose to circulate a monthly newsletter reporting on various estate transactions. Ongoing transparency, Ian notes, is always the best diffusion.
Fun Fact
Effective April 20, 2022, the Consolidated Practice Direction Concerning the Estates List in the Toronto Region was amended to clarify the procedure of passing accounts. Be mindful that confirmation forms for those proceedings are now due 5 days before hearings.
Thank you for reading,