Can a Creditor Still Collect After a BC Estate Has Been Distributed?

You may be an executor who has already paid out an estate, a beneficiary who has received money or property, or a creditor who only now learned that someone died owing you money. In each case the same question comes up: is it too late to collect?

The short answer is that it depends on what notice was given, what the executor did before distributing, and how much time has passed. This article explains the main British Columbia rules in plain language so you know what questions to ask.

This article covers the law of British Columbia.

A debt does not disappear when someone dies

Under the Wills, Estates and Succession Act (WESA), the estate is the property of the person who died. A claim against a deceased person is not annulled by the death alone, and it can continue against the estate with the personal representative as the party.

For ordinary debts, the estate's assets are the source of payment. The personal representative, whether called an executor or an administrator, must use their authority to administer and distribute the estate and to account to beneficiaries and creditors. Federal guidance for legal representatives also lists settling unpaid debts, including taxes owed to the CRA, before distributing the remaining assets to the beneficiaries under the will.

An applicant for an estate grant must also make a diligent search for the deceased's property and liabilities and make the required disclosures. That search is the first line of defence against a surprise claim later.

How a notice to creditors protects the executor

A personal representative may publish a notice to creditors in the Gazette under WESA s. 154. The notice requires claims to be presented within a stated period, which must not be less than 30 days from the date of publication in the Gazette.

Once that period ends, the personal representative is not liable for claims that were not presented in time. This is the main way an executor reduces the risk of personal liability for a creditor who appears late.

That protection has a limit. A s. 154 notice does not prejudice a creditor's right to recover estate assets from whoever received them. So the executor may be protected, while a creditor who missed the deadline may still pursue the beneficiaries or others who received distributed assets. How far that can go in a particular case depends on the facts and is worth confirming with a lawyer.

The waiting period before distribution

A personal representative must not distribute the estate within 210 days after the grant, except by court order. Earlier distribution is allowed with the consent of all beneficiaries and all persons who may bring a wills variation claim.

The wait gives time for debts and claims to surface before assets leave the estate. Beneficiaries who are asked to consent to an early payment should understand that receiving assets early does not necessarily end a creditor's ability to look to those assets later.

Where the executor and recipients stand

• Executor and the estate: a personal representative is liable for the deceased's wrongful acts or breaches only to the extent of the assets belonging to the estate, subject to the exceptions in WESA s. 149.
• Executor who renounces: a representative who renounces and has not intermeddled in the estate is not liable under WESA s. 149(2).
• Executor and tax: a legal representative who distributes property without a CRA clearance certificate while tax is owing is personally liable for the unpaid amounts, up to the value of the assets distributed.
• Recipients after a certificate: once a CRA clearance certificate is issued, liability for unpaid tax shifts from the legal representative to the estate, trust, corporation or the people who received the assets.

The request for a clearance certificate is made on Form TX19. Personal liability for an executor tends to come from their own acts, such as distributing improperly, rather than from the debts themselves.

Time limits that still apply to the creditor

A creditor is not free to wait forever. Under the Limitation Act, a claim must not be commenced more than 2 years after the day it is discovered. A claim is discovered on the first day the person knew or reasonably ought to have known that injury, loss or damage had occurred. There is also an ultimate limit: a claim must not be commenced more than 15 years after the day on which it arose, with the Act's listed extensions.

A written, signed acknowledgement of liability, or part payment of a liquidated sum, can restart the clock for a debt.

Separately, a personal representative can give written notice disputing a claim under WESA s. 146. If the claim is already due, the claimant must then start a proceeding within 180 days after notice is given, and if they do not, the claim is forever barred. The Limitation Act does not apply where another enactment sets its own period, so this 180-day period is separate from the 2-year and 15-year periods. It does not apply to beneficial-interest claims by beneficiaries or intestate successors, or to wills variation claims.

What to do next

• If you are an executor, keep a record of your search for debts and of any notice to creditors you published.
• Confirm whether a CRA clearance certificate has been requested on Form TX19 before any assets are distributed.
• If you are a beneficiary, ask what notices and steps were taken before you received anything, and keep records of what you received.
• If you are a creditor, gather proof of the debt, note when you first learned of the loss, and save any written acknowledgement or payment record.
• Get legal advice early, because the deadlines that apply depend on the notices given and the type of claim.

Frequently asked questions