Estate Accounts Explained: Capital, Revenue and Disbursements

If you are an executor, someone will eventually ask you what came into the estate, what went out and what is left. Estate accounts are the written answer. They can look intimidating, mostly because of the labels: capital, revenue, disbursements.

This article explains how those sections generally work and what usually goes in each one. It describes the general approach rather than a fixed form, so your own estate may be laid out differently. A lawyer or accountant can confirm the right format for your situation.

Why estate accounts matter

An executor is the person who winds up the deceased's affairs, pays taxes, bills and debts, collects the assets and distributes what remains to those entitled. Accounts are your record of doing that job.

An executor or administrator does not have to give an account of the deceased's property, other than by inventory, unless a person interested in the property or a creditor asks for one. So there is no automatic duty to go to court, but if a beneficiary asks, you need to be ready. Even where nobody asks, clear records protect you and make the final distribution easier.

A trustee who wants to pass accounts can also file them in the Superior Court of Justice. Passing accounts is the formal process where the court reviews them.

The three building blocks: capital, revenue and disbursements

Most estate accounts sort money into three groups. Capital is what the deceased owned at death and what replaces it, such as a house, investments and bank balances. Revenue is what the estate earns after death from that capital, such as interest, dividends or rent. Disbursements are payments the estate makes, such as debts, funeral costs, taxes, professional fees and distributions.

Some payments could reasonably sit in more than one place, and how a particular item is classified can depend on the facts and on the will. That is a good question for the lawyer or accountant preparing the accounts.

Starting point: what the estate was worth

Accounts begin with the value of the property. Before a grant, a sworn statement of the value of the deceased's property is required, and if you later discover more property you must file a sworn statement of its value within six months of discovering it.

The estate administration tax uses the value at the date of death and is paid when the application is filed. For certificates applied for on or after January 1, 2020, there is no tax on an estate of $50,000 or less, and above that the tax is $15 for each $1,000 (or part) over $50,000. This payment is one of your first disbursements.

Not everything counts toward that value. Items such as CPP death benefits, RRSPs, RRIFs and TFSAs with beneficiary designations, and out-of-province real estate are excluded for the Estate Information Return. Keep a separate note of assets that pass outside the estate, so beneficiaries understand why they do not appear in your capital section.

What a judge can look at

On a passing of accounts, the judge may make full inquiry into and accounting of the whole property of the deceased and its administration. The judge may also consider complaints of misconduct, neglect or default by an executor that caused a loss to the estate, and may order payment of damages or other relief, subject to appeal.

Where a trustee has invested trust property, the standard is the care, skill, diligence and judgment that a prudent investor would exercise. A trustee who breached trust but acted honestly and reasonably may sometimes be excused, but that relief does not apply to a loss arising from investment of trust property.

Executor compensation is usually dealt with alongside the accounts. A trustee or executor is entitled to a fair and reasonable allowance for care, pains, trouble and time spent, as allowed by a judge. On a passing of accounts the judge may allow that allowance. If the will fixes compensation, or says the executor acts without pay, the will governs.

What to do next

• Open a separate estate bank account and run all receipts and payments through it.
• Keep every statement, invoice and receipt, and note the date and reason for each payment.
• List each asset with its value at the date of death.
• Record income earned after death separately from the assets themselves.
• Track your own time spent on the estate if you plan to claim compensation.
• Hold back distributions until taxes are dealt with; a legal representative who distributes without a CRA clearance certificate can be personally liable for unpaid amounts, up to the value distributed.

If beneficiaries are asking questions or you are unsure how to classify an entry, speak with an Ontario estates lawyer before you send anything out.

Frequently asked questions