Can I Distribute an Alberta Estate Before the Debts Are Paid?
This answer covers the law of Alberta.
Generally, you should not distribute an Alberta estate until the debts have been dealt with or you have taken the notice steps that protect you. A personal representative must satisfy the debts and obligations of the estate, and must also distribute as soon as practicable.
Once you comply with the notice-to-claimants steps in the Act and the Surrogate Rules, you may distribute having regard only to the claims you know about, and you are not liable for a claim you did not know of. That protection has a limit: a claimant who was not notified can still pursue the person who received the property, so beneficiaries can lose what they received, up to its value. Tax is separate: distributing without a CRA clearance certificate makes you personally liable for unpaid amounts, up to the value of the assets distributed. CRA says that assessment can take up to 120 days if all necessary documents are provided.
Because a personal representative has all the liabilities and duties of a trustee, paying out early can create personal risk. How long to wait depends on the notice steps and the estate's debts, so confirm your timing with a lawyer or accountant before paying beneficiaries.
Key takeaways
- A personal representative must satisfy the estate's debts and obligations, and must also distribute as soon as practicable.
- Once the notice-to-claimants steps are followed, you may distribute having regard only to claims you know about.
- A claimant who was not notified can still pursue the person who received the property, so beneficiaries can lose what they received.
- Distributing without a CRA clearance certificate makes you personally liable for unpaid amounts, up to the value of the assets distributed.