Executor Mistakes to Avoid in Ontario and How to Fix Them

Being an executor is a big job, usually done by someone who is also grieving. Most mistakes are not careless; they happen because the rules are unfamiliar and family members push for quick results.

This article covers errors that come up often in Ontario estates and, where the law allows, how they can be addressed. Fixing a problem is easier when it is caught early.

Distributing too early

Under Ontario guidance, an estate is distributed once the assets have been liquidated and the funeral and burial expenses and any debts have been paid. Paying beneficiaries first can leave you short.

An estate trustee who gives the required notice to creditors can, once the period has expired, distribute having regard only to the claims they then have notice of, and is not liable for claims they had no notice of. A creditor can still follow the estate's assets into the hands of the people who received them.

On the tax side, before distributing any property, the legal representative must obtain a clearance certificate from the Minister. A representative who distributes without it is personally liable for the unpaid tax, up to the value of the property distributed, and the Minister may assess them at any time. That rule applies to interim distributions too, so plan any holdback with an accountant or lawyer.

Tax and filing slip-ups

• Skipping the clearance certificate. It is requested on Form TX19 after the required returns are filed and assessed and all income taxes are paid or secured.
• Forgetting GST352. An estate with a GST/HST number also needs Form GST352 for clearance.
• Missing the Estate Information Return, which is due within 180 calendar days after the certificate is issued.
• Leaving an error uncorrected. An amended return is due within 60 days of learning the information is incomplete or inaccurate.

Failing to file the return, or filing a false or misleading one, can lead to a fine of at least $1,000 and up to twice the tax payable, up to two years' imprisonment, or both. Estate Administration Tax is $15 for every $1,000 (or part thereof) of estate value over $50,000 for applications made on or after January 1, 2020, so counting assets correctly matters. Jointly owned assets that pass automatically to the survivor are excluded, as are registered plans with a beneficiary designation.

Records, investments and expenses

Estate trustees must keep accurate records of the estate's assets and transactions. A first passing of accounts requires a statement of assets at the date of death and accounts of all money received and disbursed. Rebuilding records later is slow and expensive.

When investing estate money, a trustee must use the care, skill, diligence and judgment of a prudent investor. 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. Any investment directions in the will take priority.

Be careful with payments to yourself. A trustee is entitled to a fair and reasonable allowance for care, pains, trouble and time, as allowed by a judge. Paying yourself without approval invites disputes. Expenses properly incurred in carrying out the trust may be paid from the estate.

How mistakes are usually fixed

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. Similar relief is available to a personal representative who overpays a creditor, if they acted honestly and reasonably to protect or conserve the estate's assets. Relief is not automatic.

Passing your accounts is another tool. Notice goes to beneficiaries, and the estate trustee swears an affidavit verifying the accounts; judgment can be given unopposed once the objection period has expired with no objection. If 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.

If money is owed to a beneficiary who cannot be found or paid, the court can allow trust money to be paid into court. A child entitled to $35,000 or more must generally have the money paid into court, unless a will or designation names a trustee or a judge has appointed a guardian of property.

An estate trustee who cannot do the job can also seek to be relieved, and a beneficiary can apply to have a trustee removed. The Court of Appeal for Ontario has said that removing estate trustees chosen by the deceased is a serious matter.

What to do next

• Stop any further distributions until you know the debts and tax position.
• Gather bank statements, receipts and tax filings and build a clear record.
• Check whether the clearance certificate and any Estate Information Return steps are done.
• Correct any inaccurate return within 60 days of learning of it.
• Speak to a lawyer promptly if a distribution has already been made or a beneficiary is objecting.
• Consider passing your accounts to get formal approval.

Frequently asked questions