Executor Investment Duties for Estate Money in Ontario

Estates can take months, sometimes longer, to settle. During that time you may be holding a large amount of cash, and leaving it idle can feel wrong, while investing it can feel risky.

This article explains the standard Ontario law sets for investing estate money, what records you need, and when to get advice. It does not recommend particular investments.

The prudent investor standard

Under the Trustee Act, a trustee investing estate property must exercise the care, skill, diligence and judgment of a prudent investor. The standard is about how you make decisions, not about hitting a return.

In plain words, a prudent person thinks about the purpose of the money, how soon it is needed, and how much risk the estate and its beneficiaries can bear. The estate is generally not your money to speculate with. If it will be distributed soon, a cautious approach usually makes more sense than a long-term one. What suits your estate depends on the facts, so ask a lawyer or a qualified financial adviser.

Why timing and purpose matter

Ontario's official guidance says the estate is distributed once assets have been liquidated and funeral and burial expenses and any debts have been paid. Money you will need for those debts, taxes and expenses is a different matter from money that will sit for a long time.

There may also be tax work ahead. The executor must file all required returns for the deceased and make sure any balance owing is paid before distributing the estate. A graduated rate estate can be one for no more than 36 months after the death. Keep enough accessible to meet those obligations.

Whether a bank will release funds before probate depends on the bank's own policy, so ask the institution early.

Paying expenses and keeping records

An estate trustee who believes an expense is properly incurred in carrying out the trust may pay it from estate property, or pay it personally and recover it from the estate. Examples include a funeral paid personally, or insurance or utilities on a vacant house. The court may later disallow the payment or recovery.

Estate trustees must keep accurate records of the estate's assets and transactions. Accounts filed with the court must include assets at the date of death, all money received, all liabilities, and a statement of the compensation claimed.

• Keep a record of each investment decision and why you made it.
• Keep estate money separate from your own.
• Save statements showing interest and other income received.
• Keep receipts for every expense you pay, whether from the estate or personally.

Tax on investment income

Income the estate earns can trigger a T3 return. A trust must file if it has total income from all sources of more than $500, and must also file, even at $500 or less, if it makes a capital distribution to beneficiaries. These filing rules changed for trust tax years ending on or after December 31, 2023.

A T3 return must be filed no later than 90 days after the trust's tax year-end, and any balance owing is due within the same 90 days. A graduated rate estate may have a non-calendar tax year, while other trusts generally must use a December 31 year-end. An accountant can help you choose and track the year-end.

What can go wrong, and what to do next

If estate funds are lost or misused, a beneficiary can ask for accounts to be passed. On a passing of accounts, the judge may make full inquiry and order the executor to pay such sum by way of damages or otherwise as is just. A court may relieve a trustee wholly or partly of personal liability for a breach of trust if they acted honestly and reasonably and ought fairly to be excused. Do not count on that, though. It is an exception, not a plan.

• Work out how much cash the estate needs for debts, taxes and expenses, and when.
• Ask a lawyer or financial adviser about what is suitable for the time the money will be held.
• Write down the reasons for each decision.
• Tell beneficiaries what you are doing, and listen to their concerns.
• Speak to an accountant about T3 filing and year-end before income builds up.

Frequently asked questions