Tag: estate administration
Were you recently appointed as Estate Trustee and needed to obtain a Certificate of Appointment of Estate Trustee (otherwise known as “probate”)? In that case, you need to know that an Estate Information Return must be filed with the Ministry of Finance within 90 days of the date of the appointment, setting out the assets in the Estate and their corresponding date of death values.
Typically when an Application for Certificate of Appointment is filed with the Court, a trustee may not have access to every asset of the Estate such that that the value of the Estate may not necessarily be accurate.
As a result, when an Estate Information Return is filed following the Certificate of Appointment being granted, all of the assets of the Estate must be listed. Depending on the values of the assets as confirmed by the trustee following the Certificate of Appointment being granted, a refund may be issued in the event that Estate Administration Tax was overpaid or additional tax may be payable in the event that the value of the assets as listed on the Application is lower than what was listed on the Estate Information Return.
The Estate Information Return may be audited by the Ministry of Finance for up to four years after it is filed. As such, it is important to retain all relevant records in the event of such an eventuality. Another important consideration is that the Ministry of Finance will not typically provide confirmation of receipt of an Estate Information Return so it is prudent to send it via means that would provide you with confirmation of delivery such as fax.
Finally, if a trustee finds out any additional information regarding the value of the assets of the Estate that has any bearing on the Estate Administration Tax payable, an amended Estate Information Return must be filed within 30 days of the new information being uncovered.
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The duties owing by an Estate Trustee are plentiful and onerous. It is important for an Estate Trustee, as soon as stepping into office, to understand their obligations and prioritize the steps to be completed.
There have been concerns rising out of Australia where firms have been billing clients, now deceased, for services that they are no longer providing. The Australian Broadcasting Corporation, as well as Bloomberg, have reported that many financial institutions have been billing clients notwithstanding their own internal documents confirm that services are not being provided and that their client is dead. In some instances, clients who had passed away ten years prior, were still being charged.
This serves as a helpful reminder that Estate Trustees should immediately take steps to cancel the deceased’s numerous accounts/subscriptions that are no longer needed and that may automatically renew. These include, telephone, internet, magazine/newspaper, and the gym. And of course, the bank! An estate account should also be opened in order to deposit income and to pay any necessary expenses that may arise.
An Estate Trustee does not want to deliver an accounting, replete with payments for services that are no longer necessary. This would certainly impact a claim for compensation.
Solicitors assisting an Estate Trustee with the administration of an estate often provide checklists to ensure such obligations are met.
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The “Executor’s Year” is a common law rule that gives estate trustees one year to administer the estate before beneficiaries have a legal entitlement to demand payment. In general, interest on a legacy will be payable to a beneficiary with calculation commencing one year after the testator’s death or after obtaining the certificate of appointment of estate trustee, where applicable, unless otherwise specified in the will. There is nothing in the rule that prevents the estate trustee from making an earlier distribution. If the year has passed and the estate trustee has not made satisfactory progress with the administration of the estate, the beneficiaries may be entitled to take action for unnecessary delay.
The executor’s year is commonly referred to as a “rule of thumb” or an informal rule, because of its flexibility. The rule assumes the estate in question is relatively simple. In fact, many estates take longer than one year to be fully administered. Applying for a Clearance Certificate from the Canada Revenue Agency will often extend the time before final distribution, as it can take months to receive the Clearance Certificate.
The executor’s year was recently considered by the Supreme Court of Prince Edward Island in Cornish Estate, Re. In this case, the executor did not administer the estate in a timely manner, but the court found this was because of the high degree of conflict between the beneficiaries of the estate. The court declined to penalize the executor, even though she was well beyond the one year guideline in winding up the estate. The court held: “The Executor’s Year is still the proper benchmark, but it assumes only normal difficulties, and certainly no outright rebellion or action against the Executor by a sibling or siblings who raise and attempt to enforce baseless claims not mentioned in the Will, as appears to have happened in this case.”
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An estate trustee must ensure that the deceased’s debts have been discharged prior to making any distributions. This is usually done by advertising for creditors in a newspaper. With today’s emphasis on technology, however, is advertising in a newspaper still the most efficient way to reach potential creditors?
The Standard Practice
An estate trustee will usually not be personally responsible for paying the deceased’s debts, as debts are paid from estate assets. The estate trustee may be found personally responsible for debts, however, if they begin to distribute the estate prior to paying the deceased’s debts.
An estate trustee may avoid personal liability for failing to pay a debt of the estate if they advertise for creditors. Section 53(1) of the Trustee Act provides personal protection for an estate trustee who advertises for creditors prior to distributing the estate assets.
The standard practice for advertising for creditors is to advertise in a newspaper three consecutive weeks in a location where the deceased lived and worked, and then wait at least one month from when the advertisement was first published to begin administration of the estate. The newspaper publisher will then usually send an Affidavit certifying that the estate trustee has properly provided notice to creditors. The Affidavit can be filed with the court as proof that the estate trustee has taken the proper precautions to advertise for creditors.
Does the Standard Practice Need an Update?
While the newspaper may be the most common means of advertising for creditors, is it the most efficient way to reach a creditor?
It is worth considering advertising for creditors online. Advertising through an online service may be more cost effective than in a newspaper. We have previously blogged on a service that provides online advertisements for creditors, and provides affidavits in support of the estate trustee’s advertisement. Using a service to publish notice to creditors has the potential to reach a larger majority of individuals, in a more cost-effective manner. Furthermore, the internet has the ability to provide information to creditors that may be located outside of the deceased’s jurisdiction, allowing for the advertisement to reach more individuals as compared to a newspaper advertisement that is generally confined to one jurisdiction.
As the Trustee Act does not specify the proper form of advertising for creditors, there is the potential for online services or cellphone applications to provide advertisements for creditors in a more efficient and effective way.
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Given the intrigue and extensive coverage that the current US election has had north of the border, it is only fitting that we dedicate today’s Hull & Hull Blog to reviewing the position taken by Clinton and Trump with respect to changes to estate tax.
A recent article in Forbes explains that current US laws exempt estates worth $5.45 million or less from paying estate tax. Estates valued higher pay 40% tax.
Hillary Clinton seeks to increase the taxes owing by the wealthiest from 45% to 65% based on the value of the estate, apparently the highest it’s been since 1981. Specifically, estates over $10 million would be taxed at 50%, those over $50 million at 55%, and those exceeding $500 million (for a single person) at 65% As well, Clinton also seeks to lower the exemption for estates valued at $5.45 million to $3.5 million.
Trump, on the other hand, seeks to eliminate the estate tax altogether.
According to the Wall Street Journal, the Republicans see the tax as “a patently unfair confiscation of wealth that punishes family-owned business”, while the Democrats view it as “a levelling tool necessary to combat concentration of wealth”.
In Ontario, while there is no inheritance tax, estate administration tax is charged on the total value of a deceased’s estate. Subject to certain exceptions, this includes the following assets: real estate; bank accounts; investments; vehicles and vessels; all property held in another person’s name; and, all other property, wherever situated, including goods, intangible property, business interests, and insurance proceeds.
As discussed in prior Hull & Hull LLP blogs, new provisions came into force on January 1, 2015, which requires payment of $5.00 for each $1,000, or part thereof, for the first $50,000 and $15 for each $1,000, or part thereof, of the value of the estate exceeding $50,000. There is no estate administration tax payable if the value of the estate is $1,000 or less.
Being a trustee of a trust can be perilous, with trustees facing potential personal liability should they make the wrong decision. As a safeguard against such potential liability, when issues arise in the administration of a trust, trustees may consider commencing an Application for the opinion, advice or direction of the court in accordance with the Trustee Act. Section 60(1) of the Trustee Act provides:
“A trustee, guardian or personal representative may, without the institution of an action, apply to the Superior Court of Justice for the opinion, advice or direction of the court on any question respecting the management or administration of the trust property or the asserts of a ward or a testator or intestate.”
Should the court accept such an Application, and provide the trustees with directions regarding the issue, the trustees are insulated from liability as it relates to the beneficiaries regarding such an issue so long as they act in accordance with the directions of the court. This is made clear by section 60(2) of the Trustee Act, which provides:
“The trustee, guardian or personal representative acting upon the opinion, advice or direction given shall be deemed, so far as regards that person’s responsibility, to have discharged that person’s duty as such trustee, guardian or personal representative, in the subject-matter of the application, unless that person has been guilty of some fraud, wilful concealment or misrepresentation in obtaining such opinion, advice or direction.”
Notably, while section 60(1) of the Trustee Act allows trustees to direct a specific issue for the “opinion, advice or direction” of the court, the court has been clear that on such an Application the court will not exercise discretionary decisions on behalf of the trustees. Such a point was recently made clear by Justice Broad in Keller v. Wilson, where at paragraph 25 the court states:
“The fact that trustees are expressly permitted by the Trustee Act to apply for the opinion advice or direction of the Court does not authorize the court to exercise discretionary powers on behalf of trustees, thereby shifting responsibility from the trustees, on whom the settlor of the trust placed such responsibility, to the court. This is so even though subsection 60(2) of the Trustee Act provides a specific indemnification to trustees who act upon the opinion, advice or direction of the court.” [emphasis added]
Cases like Keller v. Wilson make it clear that on an Application for opinion, advice, or direction, the court will not exercise discretionary decisions on behalf of the trustee, with their jurisdiction to provide directions being limited to questions of a “legal” nature relating to the discharging of the trustees’ duties. To this effect, the court’s direction can be thought of the court advising whether the trustee “can” not “should” do a particular action. While the court will advise whether the trustee has the legal authority to do a particular action, they will not make such a discretionary decision on behalf of the trustee.
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The appointment of an estate trustee, although an honourable duty, carries with it onerous obligations and responsibilities. Often, family executors are not familiar with the administration process and require some sort of assistance in administering the estate. Interestingly, I came across a new service, Easy Estate Closure, which seeks to connect family executors with estate experts to help finalize the administration of the estate.
According to its website, Easy Estate Closure provides a streamlined and efficient service that suits the specific needs of an executor. The procedure is as follows:
- The executor contacts Easy Estate Closure to explain their estate needs/challenges, and a free assessment is provided on what the executor is required to do.
- If the executor decides that they need help to complete those requirements, Easy Estate Closure then reaches out to their database of estate experts to see who is available to complete the tasks and at what price.
- Easy Estate Closure then presents the executor with a list of experts who have agreed to assist, along with price quotes, hourly rates, past client feedback ratings, and other information as needed (for example, languages spoken, meeting location and time preferences).
- The executor then chooses which expert they want to connect with, and Easy Estate Closure facilitates those introductions and the direct relationship between the executor and expert commences.
- Easy Estate Closure maintains communication with the executors throughout the process in order to receive feedback on the expert with whom they are working.
- Once the expert completes the work, the executor pays them directly according to the initially presented quote rates.
- Easy Estate Closure does not charge a fee to the executor.
It is always interesting to follow the technological innovation in the estates community.
The recent decision in Bunn v. Gordon demonstrates how a breakdown in the relationship between an estate trustee and beneficiary may lead to the removal of the estate trustee.
The Testator made a Will naming his girlfriend of three and a half years as estate trustee. The Will, amongst other things, leaves real property and a portion of the residue to his two children to be held in trust by the estate trustee until attaining the age of 21. As a result of the age of the children, the estate trustee’s office will last until at least the year 2021.
From the outset, the administration of the estate was contentious, such that the children commenced an application under s 37(1) of the Trustee Act for the removal and replacement of the estate trustee. The law with respect to estate trustee removal has remained relatively consistent with the governing principle being the welfare of the beneficiaries and whether the continuance in office of an estate trustee will likely prevent the estate from being administered. From this the courts do not take lightly the wishes of the deceased as expressed in the Will.
The children raised four examples in support of their application to remove the estate trustee:
- failing to provide the children with a copy of the death certificate, despite multiple requests;
- failing to account for a Kodiak trailer demonstrating a lack of care with the estate assets;
- selling a desk and cupboard which was of sentimental value to the children, showing a disregard for the interests and wellbeing of the beneficiaries; and
- failing to report on the sale of real property.
Individually, the evidence in and of itself was not sufficient to call for the removal of the estate trustee. However, the court held that collectively the relationship between the estate trustee and children had broken down and that the antipathy towards the beneficiaries precluded the dutiful administration of the estate. Although the behaviour was not solely the fault of the estate trustee, the court indicated that it is the estate trustee who owes the fiduciary obligation. Therefore, the estate trustee was removed.
This week on Hull on Estates, Natalia Angelini and Nick Esterbauer discuss security bonds within the context of estate administration and guardianship of property, as well as certain situations in which security is typically required and applicants may request to dispense with the requirement to provide security.
Should you have any questions, please email us at email@example.com or leave a comment on our blog below.
After considerable research and public consultation, The Law Commission of Ontario (“LCO”) released its final report for the Simplified Procedures for Small Estates Project on November 19, 2015.
The LCO’s mandate for this project was to recommend law reform measures to enhance and improve the estate administration procedure such that its current benefits would be more accessible to small estates with a gross value of up to $50,000.
After considering a range of alternatives to the court-based supervision that should be used in the small estates process in Ontario, the LCO ultimately concluded that a court-supervised model would be most appropriate in keeping with the protective function of the regular probate system. In this regard, it is recommended that amendments to Rule 74 of the Rules of Civil Procedure and the Estates Act should be amended to provide for a simplified small estate procedure which will result in the issuance of a Small Estates Certificate that will have the same legal effect as a Certificate of Appointment of Estate Trustee.
The only difference between a court-issued Small Estates Certificate and a Certificate of Appointment of Estate Trustee is that estate trustees pursuant to a Small Estate Certificate will only have the authority to deal with the estate assets listed in the application.
To determine whether an estate qualifies for access to the small estate process, the LCO recommends that the value of the estate be calculated in accordance with section 32(1) of the Estate Act and should include all assets belonging to the deceased at the time of death, including those discovered after the issuance of the Small Estate Certificate.
The LCO recommends that a formal application process which mirrors the current probate process should be adopted for small estates with the exception of some of the evidentiary requirements. For example, an applicant under the small estate process would not be required to file proof of the validity of a will and their legal entitlement to administer the estate. Instead, an application would simply be required to make a declaration to this effect. The only evidence required would include:
- a copy of the death certificate;
- a copy of the will if there is one; and
- a form declaring that the application was sent to the beneficiaries, including the Ontario Public Guardian and Trustee and/or the Office of the Children’s Lawyer,
Applicants under the small estate process would also be required to send a copy of the application and an explanatory form to all known persons with an entitlement to a share of the estate, including the OPGT and/or the OCL. This must be done at least 30 days before filing the application. However, payment of security would not be a requirement of the application process.
The LCO also makes recommendations to the Ontario Government and the Ministry of the Attorney General with respect to amendments to the Estate Administration Tax Act and the development of an on-line filing system and paper filing procedures. Other recommendations include information guides specifically for unrepresented applicants with step-by-step instructions and public awareness campaigns to educate the public regarding the importance of making a will and appointing an estate trustee.
To find out more about the LCO’s recommendations and to read the full report visit http://www.lco-cdo.org/en/small-estates-final-report
Thank you for reading and have a great weekend!