Administration bonds are more than a procedural step: they’re a critical safeguard, especially when minors are involved. Recently, the Office of the Children’s Lawyer (OCL) has adopted a more assertive stance on motions to waive these bonds in intestate estates. As a result, navigating administration bond requirements now demands a heightened level of diligence, transparency, and attention to both procedural detail and the OCL’s expectations.
What Is an Administration Bond?
An administration bond is a financial guarantee that an estate trustee will properly administer the estate, including paying debts, distributing assets, and fulfilling fiduciary duties. If the trustee fails, the bond provides a mechanism for recovery. In intestate estates, where trustees are often family members with little to no legal experience, this protection is essential.
The Legal Framework
Under section 35 of Ontario’s Estates Act, a bond is required when applying for probate:
- Without a Will;
- With a Will, but where the applicant is not named as the estate trustee under the Will; and/or
- When the applicant does not reside in Canada or a Commonwealth country.
In addition to the available exemptions under the Estates Act, the court has the ability at any time under specific circumstances to either reduce the amount of the bond or dispense with it entirely.
When minors are involved, parental consent is not enough, nor is the consent of the OCL. A formal Rule 37 motion must be brought, and the OCL must be served. The updated Form 74A now makes this requirement clear.
The OCL’s New Approach
Historically, the OCL deferred bond decisions to the court, but too many cases have gone wrong: missing funds, no accounting, and trustees disappearing.
Today, when an application for a Certificate of Appointment of Estate Trustee without a Will signals an intent to waive or reduce a bond, the OCL assigns counsel immediately to assess risk. Their goal: protect minors’ interests and minimize litigation.
What the OCL Expects
Given this heightened scrutiny, it’s essential to proactively address the OCL’s expectations when preparing your motion materials.
To ensure your application stands up to review, consider addressing the following:
- Trustee’s financial capacity and Ontario-based assets;
- Experience with estate administration or financial management;
- Administration plan for real property or business assets;
- Understanding of fiduciary duties and obligations to the OCL; and
- Commitment to remain in Ontario during administration.
Include responses to questions such as:
- Has the trustee applied for a bond and been rejected?
- Do they understand minors’ shares must be paid into court or to a guardian of property?
- Will they be represented by counsel throughout the proceedings and the estate’s administration?
When the OCL May Consent
In modest estates, where the minor’s interest is small and the trustee poses minimal risk, the OCL may agree to dispense with the bond if undertakings are signed by both the proposed estate trustee and the estate trustee’s lawyer. These undertakings typically require:
- Liquidating all estate assets and holding the resulting funds in the estate trustee’s lawyer’s trust account, along with the original Certificate of Appointment of Estate Trustee;
- Legitimate estate debts, liabilities, and administration expenses may be paid from these funds, subject to a potential review on a passing of accounts;
- Other disbursements require either the OCL’s consent or a court order; and
- Upon completion of the estate administration, minor beneficiaries’ shares will be paid into the Accountant of the Superior Court of Justice.
When the OCL Will Oppose
The OCL is more likely to oppose waiving the bond if the minor’s interest is large, the trustee’s background is questionable, or the plan lacks clarity. Expect opposition if:
- The minor’s interest exceeds $100,000.00;
- The estate includes corporate assets, and/or real property where the plan of administration is unclear;
- The proposed trustee has a history of bankruptcy, criminal charges, is likely to leave Ontario, or has limited financial experience; and/or
- The administration plan is vague or inappropriate for an intestate estate.
Practical Tips
These practical tips are directly informed by the OCL’s updated approach and the challenges practitioners face when dealing with questionable trustees or unclear administration plans:
- Engage early with the OCL: Engaging early with the OCL helps clarify expectations and address concerns before issues escalate.
- Provide detailed affidavits: Providing detailed affidavits, especially when a trustee’s background is questionable, ensures transparency and supports the OCL’s mandate to protect beneficiaries.
- Educate clients about fiduciary obligations: Educating clients about fiduciary obligations not only reinforces their responsibilities but also helps avoid inadvertent breaches that could trigger litigation.
Bottom Line
Ultimately, the OCL’s renewed policy aims to set a higher standard for trustee selection and administration, prioritizing the interests of vulnerable beneficiaries and reducing litigation.
It’s not just a matter of paperwork; this is a cultural shift that, when approached proactively and thoroughly, ultimately saves time, money, and stress for everyone involved – including your clients, colleagues, the court, and yourself.
Thanks for reading!