NOTES FOR THE ASSISTANCE OF THE PERSONAL REPRESENTATIVE OF A DECEASED PERSON
The following notes are intended to assist you in performance of your responsibilities as the Executor (if there is a Will) or Administrator (if there is no Will) of a deceased person. Please note that this is a general outline only and we, as solicitors, will be able to provide you with answers and solutions to specific questions and problems which will arise.
NEW ESTATE ACT TERMINOLOGY
Please note that the new Estates Act officially replaces the terminology of “Letters Probate” and “Letters of Administration”. A “Certificate of Appointment of Estate Trustee with a Will” replaces the term “Letters Probate” or “Letters of Administration with Will Annexed”. The term “Certificate of Appointment of Estate Trustee without a Will” replaces the former “Letters of Administration”. For the purposes of familiarity, brevity and continuity we will continue to use in this Memo the terms “Executor” (or “Executrix) and “Administrator” rather than the up-dated terminology of “Estate Trustee”.
DUTY OF A PERSONAL REPRESENTATIVE
Immediately following the death of the deceased it is your duty as personal representative to examine the Will if there is one, and note any special terms which require immediate attention. It may be necessary for you to notify relatives and beneficiaries who would not ordinarily learn of the passing of the deceased, see that funeral arrangements are made, attend to the immediate care or disposal of perishable assets of the deceased, and make provision for the immediate needs of any dependents of the deceased.
BUSINESS AFFAIRS OF DECEASED
Once the matters related to the funeral have been attended to, you must familiarize yourself with the business affairs of the deceased and make a complete inventory of the assets of the deceased, and of his/her liabilities. You will normally examine the safety deposit box, books of account, employee benefit plan, insurance policies, deed(s) and/or leases, mortgages, savings bonds, or certificates, stock, bank passbooks, motor vehicle ownership documents, collect any valuables of the deceased for safe storage, deposit any cheques or cash in the account of the deceased, advise banks and the post office of the death of the deceased and arrange for delivery of mail to yourself, apply for death and pension plan benefits, make certain there is adequate insurance to protect the deceased’s interest, and generally represent the deceased. If the deceased owned a business or farm the personal representative must attend to the continued operation thereof and possibly the winding up or sale of the business or farm in an economical and prudent manner. These duties are, or course, subject to any specific directions in a Will of the deceased, and vary depending on the nature of the deceased’s assets.
DEFERRAL OF RESPONSIBILITIES
Many Executors defer to lawyers for the responsibility of the above noted duties. The division of duties will be clarified between yourself as Executor and ourselves as solicitors on the initial interview.
As personal representative you must also attend to the general protection of any residence of the deceased including the locking of the premises and maintenance of adequate heat and insurance. If there are children of the deceased and both parents are deceased you must normally attend to the welfare of the children.
You need not concern yourself with liability for succession duties on assets in Ontario as the Province of Ontario has revoked the Ontario succession Duty Act.
As personal representative, you must see that the appropriate income tax returns are filed with the federal government and that any tax payable is paid or, in the alternative, that any refunds due are received. It is necessary for you to file the normal income tax return of the deceased and, further, a terminal return covering the time from the first day of January of the year in which the deceased died until the date of death. It may also be necessary for you to attend to the preparation and filing of trust returns for each year in which the estate is under administration by you showing any taxable income earned by the estate during the period of your administration. You should be aware that the Income Tax Act of Canada provides that a personal representative shall not distribute any of the assets of the estate to a beneficiary unless and until he or she has obtained an income tax clearance certificate with respect to the deceased and also with respect to the estate of the deceased and, further, that the Act makes any income tax, interest or penalties thereon, payable personally by the legal personal representative, that is to say out of the legal personal representative’s own pocket, unless such tax is paid by the legal personal representative from the Estate assets. The ordinary lay Executor may not be capable of preparing these income tax returns on their own. We often arrange to have the tax returns done for the executor or if the deceased had his/her tax returns prepared by someone else such as a chartered accountant, who specializes in such matters, and may already be familiar with the deceased’s tax affairs, then we recommend that that person may be in a better position to prepare such returns expertly, swiftly, and relatively inexpensively.
ADMINISTRATION OF THE ESTATE
Once Letters Probate (if there is a Will) or Letters of Administration (if there is no will), have been obtained from Superior Court, you can proceed to deal with the assets of the deceased in accordance with the terms of the will, and if there is no will, in accordance with the Succession Law Reform Act of Ontario which sets forth the method of distribution of assets. You will first attend to payment of the debts and thereafter see that any assets required to be converted to cash or other investments are so converted and that the assets are distributed to the persons entitled. As part of so doing you will normally work very closely with ourselves. You, as personal representative, may have to advertise in a local newspaper for any creditors of the deceased, and, upon receiving any claims in response thereto, satisfy yourself that same are valid or, in the alternative, dispute such claims and see to their resolution. Upon receipt of your instructions we can arrange for the advertising for creditors.
If you are administering the estate for the benefit of others you must keep a complete set of accounts regarding your administration showing the original assets of the Estate, all subsequent receipts, all subsequent disbursements, and amounts or items remaining on hand and it may ultimately be necessary to obtain the approval thereof by the beneficiaries or the Superior Court Judge. Needless to say if you are also the only beneficiary of the Estate this will not be necessary although such a record may prove very helpful to you in the future, particularly having regard to income tax liability. Because of the use of legal technology in this firm and in particular our legal accounting program, we can competently and efficiently keep the complete set of accounts for you as executor. There are various banking institutions in Billings Bridge Plaza that we deal with and because we are a relatively high volume user of banking services we can, in some Cases, obtain a better rate of interest for the estate than you could obtain as executor. Either daily interest savings accounts with pass books are used or limited 30 day guaranteed investment certificates which earn relatively high rate of returns are utilized on behalf of our estates. Our networked legal accounting programs provide up to the minute information on all financial matters involving each estate.
COMPENSATION OF THE PERSONAL REPRESENTATIVE
You are entitled to be compensated from the estate assets for your time, care and trouble in connection with the handling of the estate, although obviously if you are the only beneficiary this would not occur and, in some other cases you may decide that you do not wish to be compensated. The compensation to which you are entitled will vary considerably depending on the nature and quantity of the assets of the deceased. The appropriate sum is normally determined by the Superior Court Judge as a percentage of the value of the estate. It would normally range as high as 5% of the value of the estate. As solicitors we will usually be able to provide a close approximation of the amount which the Surrogate Judge will authorize. In fact, most executors designate some or all responsibility for executor’s work to solicitors. Clearly whatever compensation that you wish to take as compensation would be appropriately lowered by our increased responsibilities in doing the work of the executor on the estate. These responsibilities should be discussed and appropriate compensation not only for yourself as executor and ourselves as solicitors should be verified at the initial interview.
LEGAL FEES AND DISBURSEMENTS
Legal fees will be determined by the time spent on the file and the complexities of the individual estate. It should further be noted that if we are requested to provide any of the services which are normally your responsibility as the personal representative, we will expect to receive a portion of your compensation. We will discuss this matter with you immediately if it becomes evident that you require such assistance and an agreement will be reached at such time as to the division of responsibilities and compensation.
Disbursements of the estate can be extensive. Estate tax on the first $50,000.00 of Probate value fees are payable in the amount of $5.00 per $1,000.00 and thereafter tax is payable at the rate of $15.00 per $1,000.00. Unfortunately HST is also payable on our fees and certain non-exempt disbursements. We will endeavour to provide as much information as possible on the initial interview.
Finally, we feel these notes would be incomplete if we did not impress upon you the high and rather complex degree of care imposed by law on an executor. You will be at all times completely personally accountable to the Superior Court Judge, and to the beneficiaries, for your handling of the estate assets, for keeping proper financial records and distribution of the assets, as well as being potentially personally liable for any failure to pay proper debts of the deceased to creditors such as, for instance, Revenue Canada, or for failure to properly distribute the assets of the deceased.
ESTATE TAX ADMINISTRATION ACT AND CHANGES EFFECTIVE JANUARY 1, 2013
The Ontario Government has always collected revenues from the administration of Estates of deceased persons where the Will required submission to Probate (Application for Estate Trustee Certificate). The incidence of this tax is generally .5 to 1.5 % of the value of the KMH | LAWYERS
Estate and the Estate Administration Tax Act (EATA) defines which properties and their respective values are subject to this tax.
There are generally accepted methods of avoidance but, where such is not possible, as of January 1, 2013 the onus on the Executor/Administrator/Estate Trustee of a Will to ensure compliance is dramatically increased. On that date, the responsibility for collecting the EAT shifts to the Ministry of Revenue Ontario from the Ministry of the Attorney General and reporting to that Ministry will be subject to it’s significant audit, verification and assessment powers.
The implications of this change for Estate Trustees include:
- More financial disclosure required.
- More form filling.
- More lengthy record keeping.
Professional appraisals and expert evaluations will become the prudent practice.
Reserve for assessments and re-assessments will be recommended.
- Beneficiaries will have to be informed of the possibility that the Ministry, having broad audit powers, may very well subject them to investigation.
Estate Trustees may be wise to purchase administration insurance.
Whatever the other possible implications may be, one certainty is that this change will only serve to further delay the already protracted process of Estate administration and lead to greater associated costs.
We trust the foregoing will be of assistance to you and will be pleased to answer any specific questions you may have.
(Source:)For all matters in relation to estates, wills and/or estate planning please see any of the following lawyers: Edward G. Manthorp Sean B. Kelly Elisha M. E. Kelly