Is an Executor Personally Liable for the Deceased's Debts in Ontario?

Many people hesitate to act as executor because they fear inheriting the deceased's bills. In general, debts belong to the estate, not to you. Your job is to gather the assets, pay what is owed and then distribute what is left.

Personal exposure tends to arise from what you do with the estate, such as paying out too early. This article explains the general Ontario picture so you can see where care is needed.

Debts are paid from the estate

Under the Estates Administration Act, the deceased's property, other than property passing by survivorship, vests in the personal representative as trustee, subject to payment of the deceased's debts. Ontario's guidance describes the order of events simply: the estate is distributed once assets have been liquidated and the funeral and burial expenses and any debts have been paid.

If the estate has enough, debts are paid and beneficiaries receive the rest. If it does not, a different set of rules applies, which is covered in our article on insolvent estates.

What is and is not in the estate

Property held with a right of survivorship, such as a home owned as joint tenants, does not vest in the personal representative. It passes to the survivor and is not part of the estate the executor sells. That affects what is available to creditors through the estate, and it is worth getting advice about specific assets.

To pay debts, or to distribute the estate, the personal representative may sell real property. A sale made only to distribute the estate needs the approval of the majority of the persons beneficially entitled, with the Children's Lawyer approving for minors and the Public Guardian and Trustee for mentally incapable persons, although a judge may dispense with the beneficiaries' concurrence.

Where personal exposure can arise

The key point is timing. Paying beneficiaries first and discovering debts later is the classic way an executor ends up out of pocket.

Tax debts and the clearance certificate

The final T1 return is due April 30 of the following year for a death from January 1 to October 31, and six months after death for a death from November 1 to December 31. If the deceased or their spouse or common-law partner living with them was operating a business on the date of death, the filing deadline moves to June 15 of the following year for deaths from January 1 to December 15, though payment is still due on the regular date.

The estate may also need a T3 return, filed no later than 90 days after the trust's tax year-end, with any balance due in the same 90 days. A clearance certificate confirms that the estate has paid all amounts of income tax. Request it on Form TX19 only after the returns are filed and assessed and taxes are paid or secured. The CRA acknowledges the request within 45 days and the assessment can take up to 120 days. If the deceased had a GST/HST number, a separate Form GST352 is also needed.

What to do next

• List the deceased's assets and debts, noting what passes by survivorship and so sits outside the estate.
• Give creditors the notices a court would have directed, so you have the protection of the Trustee Act.
• If a claim looks wrong, a written notice contesting it can start a 30-day clock for the claimant to apply to court.
• File all returns and resolve any balance owing before distributing.
• Keep funeral and other receipts if you pay personally, since you may recover reasonable expenses from the estate, subject to the court.
• Delay distributions until debts and tax are settled, and get advice if the numbers are unclear.

Frequently asked questions