FIRST THINGS FIRST
When a loved one dies, and you are responsible for dealing with their affairs after death, including for administering their estate, you may be experiencing uncertainty about your role, on top of all the emotions that come when grieving a loved one. One of the first duties of the estate trustee, usually along with the deceased's immediate family, will be to deal with the funeral and interment of the remains. It is important for family and friends to take the time to begin the grieving process, and to come to terms with the deceased's passing.
Matters Which May Need Immediate Attention
However, there are a few matters which may come up and which should be taken care of soon after a person's death.
- To determine any immediate needs of the deceased's dependants who relied upon him or her for financial support.
- Insurance companies providing coverage for assets such as a house or automobile should be contacted to notify them of the death and to ensure ongoing and adequate coverage in case of accident or fire etc.
- It is also important to secure any vehicles and usually to ensure they are not used in the interim period of the estate administration.
- For the estate trustee to obtain preliminary legal advice, which often provides not only clarity and answers to initial questions, but also peace of mind that nothing of immediate importance is being overlooked
- It is important to review the Will and confirm the estate trustee's authority to act or confirm that no valid Will appears to have been made by the deceased, and as a result determine who the applicable court rules provide will be entitled to apply to court to administer the estate.
Income Tax Returns
When a taxpayer dies after the end of a year or no matter the time during the year, but before filing their income tax return, the estate trustee has six months to file the return. However, six months can pass quickly, and it is important to contact a tax advisor on a timely basis regarding the preparation of tax returns for the deceased and to diarize applicable filing deadlines.
Next Steps
General Legal Responsibilities of an Estate Trustee
Estate trustees are fiduciaries, and are subject to fiduciary duties which attach to their role, including:
- they must exercise ordinary care and prudence.
- they must follow the directions contained in the will or other governing document or legislation (unless the court authorizes changes or the beneficiary’s consent);
- they must treat all beneficiaries impartially and with an even hand unless otherwise directed in the will.
- they may not delegate their authority to make decisions in connection with the administration of the estate assets to anyone else.
- they may not place themselves in a position to be acting in conflict with the best interests of the beneficiaries.
- they must keep and maintain records and produce accounts upon reasonable notice; and
- they must not unreasonably delay the estate's administration.
Recordkeeping
An estate trustee is to maintain accurate and complete records showing his or her dealings with the estate, including regarding the real and personal property, cash and investments which is important, and beneficiaries of an estate have a legal right to request from the estate trustee a detailed account of the estate trustee's dealings.
Complete records include:
- all bills, receipts and invoices.
- all banking records, such as bank statements, passbooks, cancelled cheques.
- investment statements showing all transactions.
- reporting letters for all real estate dispositions.
- tax returns, notices of assessment/reassessment, and any other communications with tax authorities.
Estate trustees should start their records at the beginning of the estate administration to avoid having to recreate them later. They should also keep an ongoing record of all the time they spend on the estate, and a detailed description of the activities on which the time was spent.
Determine Assets and Liabilities
Determining the estate assets and liabilities is of primary importance in any estate administration, including for the following purposes:
- distributing the estate.
- completing tax returns.
- completing the probate application (application for a Certificate of Appointment of Estate Trustee under Ontario court rules) and related Estate Administration Tax filings (discussed below).
- ensuring the estate is solvent (an insolvent estate has unique rules); and,
- ensuring the estate trustee does not fail in their responsibilities, and therefore open him or herself to personal liability.
It may be necessary to correspond with multiple financial institutions to discover or verify assets and liabilities and their various date of death values. Real estate title records may need to be searched, requiring the assistance of a lawyer, safety deposit boxes accessed, and inventoried, personal effects catalogued, etc.
It will also often be necessary to obtain valuations for various assets. Values for financial assets are usually easily obtained from the institutions holding the assets upon request and production of proof of death and authority to make such a request. Other assets, including personal effects, may require the help of real estate brokers or other professionals, including qualified appraisers. These valuations will often be necessary for the probate application and may also be important for income tax filings.
You will have liabilities, and most will usually be patient regarding repayment upon being advised of the deceased's death. In some cases, an advertisement for creditors may be necessary. There may also be litigation or spousal, dependant or other claims to be dealt with, in which case a lawyer's assistance will be necessary. Tax filings, of course, must be completed, and are discussed further below.
Probate Applications and Estate Administration Tax
Obtaining a probate certificate (referred to as a Certificate of Appointment of Estate Trustee under Ontario court rules) or other court appointment of an estate trustee will be necessary in many estates to prove to third parties the authority of the estate trustee to deal with the assets of the deceased. A certificate of appointment or other court grant confirming the estate trustee's authority to act will be dictated by the financial institutions holding the deceased's assets, or in real estate, by the land registry system. In some cases, it is prudent for an estate trustee to apply for a court grant of authority, regardless of whether it is necessary to administer the assets, in order to confirm the validity of the will and protect the estate trustee in administering and distributing the estate.
Ontario Estate Administration Tax (previously and colloquially known as probate fees) is calculated based on the value of the estate and is payable at the time the estate trustee or his or her lawyer files the application for a certificate of appointment. The tax is computed as follows:
- $5.00 for each $1,000.00 of the first $50,000.00 of the value of the Estate; and,
- $15.00 for each $1,000.00 by which the value of the Estate exceeds $50,000.00 (rounded up to the next highest $1,000.00).
Further, the Ontario Government enacted regulations to the Estate Administration Tax Act which came into effect January 1, 2015, and which impose substantial compliance requirements on estate trustees who apply for a certificate of appointment. To summarize, under these reporting requirements, an initial Estate Information Return must be filed within 90 days of the Certificate of Appointment of Estate Trustee being issued by the Court. The Estate Information Return requires certain information, in particular detailed information regarding the estate assets and their fair market value. There are penalties for non-compliance with these requirements. Asset values must be substantiated with appropriate documentation such as appraisals should an Estate Information Return be audited by the Ontario Ministry of Finance, the government body e collection of Estate Administration Tax in Ontario.
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