The purpose of this article is to explain in a brief way what must be done to settle properly the affairs of a person who has died.
The first matter that must be resolved is to choose what person or persons are in charge of administering the estate of the deceased person. If the deceased had a valid will, then the will would name the person in charge. This person is called an estate trustee (formerly called an executor or executrix). If there is no will, then the law has a procedure which allows anyone with a close connection to the deceased to apply to the court to be the person who administers the estate. Generally the closest relative to the deceased will be chosen. The person so approved by the court is called an estate trustee without a will (formerly called an administrator or administratrix). The government’s Public Trustee does not automatically administer the estate if there is no will. The Public Trustee will only reluctantly get involved if there is no proper relative or creditor who will step forward to apply for the job of administrator.
An estate trustee gets his or her authority to administer the estate from the will and therefore need not necessarily apply to the court to get the court’s authority to act in the estate’s name. However, when the value of the assets of the estate are high (generally assets over $25,000.00 in value) or for certain types of assets such as stocks, the estate trustee will have to apply for court authority. If he or she does not, the people with whom he or she must deal with to transfer assets will not accept his or her authority. The estate trustee applies to the Ontario Court (General Division) to obtain “Certificate of Appointment of Estate Trustee with a Will” (formerly called letters probate). The Certificate of Appointment of Estate Trustee with a Will show to persons dealing with the estate that the will has been duly proved and registered with the Court and that the estate trustee has authority to act on behalf of the estate. In a small estate, a notarial copy of the will (a lawyer certifying that the copy is a true copy of the original will) will often convince people that the estate trustee has authority so that the estate trustee will not have to go to the expense and time of obtaining probate.
If there is no will, the person who wishes to be the “estate trustee without a will” applies to the Court for “Certificate of Appointment of Estate Trustee without a Will”. Unfortunately in small estates, if there is no will a Certificate of Appointment of Estate Trustee without a Will will usually have to be obtained because it is the only authority people dealing with the estate accept. Sometimes however those third parties will accept a statutory declaration from a widow or widower that the estate was only a certain size and that the widow or widower is the only person entitled to the assets of the estate.
The first obligation of an estate trusteeis to to make proper funeral and burial arrangements. Technically, the estate trustee does not have to follow the wishes of the deceased but will do so unless the deceased had a strange request concerning his or her burial which would offend the deceased’s family.
The second obligation of the estate trusteeis to determine all of the assets of the deceased and make an inventory list. He or she must also manage the assets until they are transferred to the beneficiaries. Determining the assets would also include determining any monies due from insurance policies, death benefits and pension plans due not only to the deceased’s estate but to the beneficiaries. For instance, Canada Pension Plan pays a death benefit to the estate and pays a survivor’s benefit to the surviving spouse and dependant children. The federal government’s superannuation plan pays survivor benefits based on the deceased’s contribution to the date of death.
The third obligation of the estate trustee
is to settle the deceased’s debts and liabilities. The estate trustee would pay all valid claims of creditors. He or she would also defend all claims thought not to be valid. If there is not enough money in the estate to satisfy creditors, the deceased’s family is not responsible for those debts but the creditors would get paid less in accordance with the legal rules as to the preference of creditors. A special liability of the estate which might have to be resolved is a claim by a spouse or dependant of the deceased under the Family Law Act for an equalization of assets or for support under the Dependant Relief provisions of the Succession Law Reform Act or claims under both acts. The estate trustee would prepare the final year’s income tax return and make sure that all previous years tax returns have been filed. He or she would apply for a final tax clearance certificate. There are no estate taxes or succession duties in Ontario presently but death may result in additional taxes owing in the year of death. For instance, if one dies owning a stock which has increased in value since the time it was bought and the stock is not passed on to the deceased’s spouse, then in the year of death there is a deemed disposition, and capital gains tax is payable.
Once all of the debts and liabilities have been paid the estate trustee can distribute the estate as dictated by the will. If there is no will, then the estate trustee without a will distributes the estate to relatives as prescribed by law in the Succession Law Reform Act. The government does not get any share of the estate unless there are no relatives. A spouse does not necessarily get all of the estate but the children may share depending on the amount of the estate.
This has been a very simplified explanation of what an estate trustee does. I did not discuss other obligations estate trustees may have such as administering continuing trusts, tax planning or accounting to the beneficiaries and the courts. I did not discuss what compensation estate trustees are allowed to take for their work.
The role of the lawyer is to advise firstly the estate trustee of his or her duties and all matters in connection with administering the estate. Secondly, if necessary, the lawyer will prepare the application to the court to obtain authority. Thirdly, the lawyer will prepare the documents necessary to transfer assets. And fourthly, the lawyer will prepare relevant documents to be signed by the beneficiaries.