Executor Expenses in Ontario: What Can Be Reimbursed

Many executors pay for things themselves at first: a locksmith, a funeral deposit, a court fee. The question is which of these the estate must repay and how you prove them.

This article explains the basic Ontario rules on expenses, how they differ from compensation, and how to keep your claim clean. It is general information, and a lawyer can apply it to your estate.

The basic rule on expenses

Under the Trustee Act, if a trustee is of the opinion that an expense would be properly incurred in carrying out the trust, they may pay it directly from the trust property, or pay it personally and then recover it from the trust property.

The key idea is that the expense must be properly incurred in carrying out the trust. Whether a particular cost meets that test depends on the facts.

In practice, this gives you two routes. You can pay a bill straight from the trust property, or you can pay it yourself and then recover it from the trust property. Either way, the same test applies: was the cost truly part of carrying out the estate's affairs? If you are unsure about a particular cost, it is worth confirming with a lawyer before you pay it.

Expenses are not the same as compensation

An estate trustee is entitled to a fair and reasonable allowance for their care, pains, trouble and time spent on the estate, as allowed by a judge of the Superior Court of Justice. That is payment for your effort, while expenses repay money you actually spent.

Compensation can be settled even when the estate is not before the court in an action, and a judge passing the accounts may allow a fair and reasonable allowance. Where a lawyer is the trustee and provides necessary professional services, the allowance is increased by a fair and reasonable amount for those services.

Costs that commonly arise

Whether a particular cost is proper depends on the facts, but these are typical categories to consider:

• Funeral and burial expenses, which are paid before the estate is distributed.
• Fees to keep or secure estate assets, such as insurance or utilities on a property.
• Professional help such as accounting or legal services for the estate.
• Estate Administration Tax, which is a government tax based on the estate's value. For applications made on or after January 1, 2020, it is $15 for every $1,000 (or part thereof) of estate value over $50,000, and estates of $50,000 or less pay no tax.

If you invest estate money while it is being administered, you must exercise the care, skill, diligence and judgment that a prudent investor would exercise. A trustee who relies on investment advice is not in breach of trust if a prudent investor would rely on that advice in comparable circumstances. A trustee may also delegate investment functions to an agent to the same extent that a prudent investor might. Any investment directions or limits in the will take priority over these general rules. Whether the cost of investment help is a proper estate expense depends on the facts, so it is worth confirming with a lawyer.

Documenting what you paid

Estate trustees must keep accurate records of the estate's assets and transactions, and filed accounts must show money received and disbursed. On a passing of accounts, notice goes to beneficiaries, and judgment can be given unopposed only if no notice of objection to the accounts or compensation has been received once the objection period expires.

So for each expense, keep the receipt, note what it was for and why it benefited the estate, and record whether you paid personally or from the estate account.

On a first passing, the accounts must include a statement of assets at the date of death, together with accounts of all money received and disbursed. The estate trustee also swears an affidavit verifying the accounts. Where a beneficiary is a minor, the Office of the Children's Lawyer must be served with an application to pass the accounts, and it should also be served where an estate has an unborn or unascertained interest. Tidy records from the start make each of these steps easier.

Tax clearance and protecting yourself

Before distributing any property, the legal representative of a deceased taxpayer must obtain a clearance certificate from the Minister, confirming that all tax amounts have been paid or that security for them has been accepted. A legal representative who distributes without the certificate is personally liable for the unpaid tax amounts, up to the value of the property distributed, and the Minister may assess them at any time.

The certificate is requested on Form TX19 after the required returns are filed and assessed and all income taxes are paid or secured. An estate with a GST/HST number also needs Form GST352 for clearance.

If a trustee does make a mistake, the court may relieve a trustee who is personally liable for a breach of trust, wholly or partly, if the trustee acted honestly and reasonably and ought fairly to be excused for the breach and for not obtaining the court's directions. That is a decision for the court, not something to count on, which is another reason to keep clear records and ask questions early.

What to do next

• Use the estate account for payments wherever possible.
• Keep every receipt and invoice, with a short note of its purpose.
• Keep expenses separate from any claim for compensation.
• Check with a lawyer before reimbursing yourself for large or unusual items.
• Consider a passing of accounts if beneficiaries question your claims.

Frequently asked questions