Releases From Beneficiaries Before Final Distribution in Ontario

You have paid the debts, filed the returns and are ready to make the final payments. The beneficiaries are waiting, and your lawyer or a family member suggests asking each of them to sign a release first. What does that document do, and what if someone says no?

This article explains the purpose of a release, what a sound one usually covers, and the Ontario alternative when a beneficiary will not sign. It is general information, not advice on your estate.

What a release is and why trustees ask for one

A release is a document a beneficiary signs, usually when they receive their share, to record that the administration has been dealt with. What it covers depends on its wording, so it is worth having a lawyer draft or review it. It is usually paired with a statement of the estate's receipts, payments and the beneficiary's share.

Trustees ask for releases because they are personally responsible for the estate. The estate trustee pays taxes, bills and other debts, and the estate is normally distributed after assets are liquidated and funeral, burial and debts are paid. A trustee who distributes before a CRA clearance certificate can be personally liable for unpaid tax, up to the value of the assets distributed. How much a release lowers the risk of later disputes depends on its wording and the facts, so it is worth confirming with a lawyer.

If a beneficiary will not sign a release, a court-approved passing of accounts is the formal way to get protection. Whether a release is needed in your estate depends on the facts, so it is worth confirming with a lawyer.

What a good release usually covers

The wording should be prepared or reviewed by a lawyer, because a vague release may protect no one. In general, these are the elements to look for:

• The names of the deceased, the beneficiary and the estate trustee, and the date of death.
• The accounts or statement of the administration that the beneficiary has reviewed, attached to the release.
• The amount and form of the payment or property the beneficiary is receiving.
• A statement that the beneficiary had the chance to ask questions and to get independent legal advice.
• The claims being released, and any claims deliberately left out.
• An acknowledgement about any holdback for taxes or debts, and what happens if more money is later due, since beneficiaries who received a share must refund their rateable part of a debt established later.

A release works best when the beneficiary has seen full information. A release signed without proper accounts may be hard to rely on later.

Beneficiaries who cannot sign for themselves

Some beneficiaries, such as minors or people who are mentally incapable, may need special handling, so it is worth confirming with a lawyer how this applies to your situation. Where minors or incapable persons are involved, conveying or dividing the estate needs the approval of the Children's Lawyer or the Public Guardian and Trustee. The Children's Lawyer must be served on an application to pass accounts if a beneficiary is under 18.

When final accounts are passed and money is held for a minor, a mentally incapable person or a person at an unknown address, the trustee must pay it into the Superior Court of Justice. Where the Public Guardian and Trustee is the person's guardian of property, the money is paid to the PGT instead. Where a child's inheritance is in play, speak to a lawyer before handing over money to a parent.

If the deceased may have had a child born outside marriage, the personal representative must make reasonable inquiries for persons related that way. The representative is not liable for failing to distribute to such a person if the inquiries and the registry search were made and the entitlement was unknown.

If a beneficiary refuses to sign

A refusal does not mean the trustee must keep the estate open forever. The trustee can apply to pass the accounts. The estate trustee applies on Form 74.44, and a person with a financial interest may file a notice of objection. If no objection is filed or all are withdrawn, the trustee can obtain judgment without a hearing (Form 74.50), including a compensation order. A court-approved passing is the formal way to get protection if a beneficiary refuses to sign a release.

Be aware that filing a notice of objection to the accounts is not commencing a claim under the Limitations Act, 2002, so the two-year limitation period does not bar it. This is one reason a release, or a passing, matters to a trustee who wants certainty.

Trustee compensation and honest mistakes

Beneficiaries often refuse to sign because of compensation or unexplained expenses. An estate trustee who takes compensation without approval risks a reduced award and repayment to the estate. Keep clear records and be open about fees.

If something does go wrong, the court may relieve a trustee from personal liability for a breach of trust if the trustee acted honestly and reasonably and ought fairly to be excused. That relief is discretionary, which is why careful documentation and approvals are better than hoping for forgiveness.

What to do next

• Prepare clear accounts of receipts, payments, fees and each beneficiary's share.
• Send the accounts to every beneficiary and give them time to review and ask questions.
• Have a lawyer draft or review the release and suggest that each beneficiary can get their own advice.
• Identify beneficiaries who are minors or incapable, and plan for the Children's Lawyer or Public Guardian and Trustee.
• Check taxes: returns filed, assessments received and the clearance certificate.
• If someone refuses to sign, ask a lawyer about applying to pass the accounts.

Frequently asked questions