How Should an Executor Invest Estate Money in Ontario?

Estates often sit for months or longer while debts are paid and issues are sorted out. During that time you may be holding a significant amount of money for other people, and leaving it idle or taking risks with it can both create problems.

This article explains the legal standard that applies when you invest estate money in Ontario, what records you need, and what happens if beneficiaries question your choices.

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.

In practice, a careful person in your position would think about what the estate needs and when. Money needed soon to pay debts, taxes or expenses is treated very differently from money that will sit for years. Because the standard is general, what counts as prudent depends on the size of the estate, the beneficiaries and the time frame, so it is worth confirming your plan with a lawyer or financial adviser.

What not to do

• Do not mix estate money with your own accounts.
• Do not invest in speculative products simply because you are comfortable with them personally.
• Do not lend estate money to yourself, family or friends.
• Do not lock up money that the estate will need for debts and distributions.

Ontario's official guidance says the estate is distributed once assets have been liquidated and the funeral and burial expenses and any debts have been paid. That timeline is a reason to keep enough accessible money available.

Records and accounts

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 the estate trustee claims. Investment income and any gains or losses belong in those records.

An executor generally cannot be required by a court to account other than by an inventory, unless an interested person or a creditor asks. A beneficiary is an interested person who can compel accounts. A person with a financial interest may also move for an order requiring the estate trustee to file a statement of the nature and value of the estate's assets, give further particulars, or pass accounts.

If a beneficiary challenges your choices

When accounts are passed, the judge may make full inquiry into the deceased's property and may order the executor, administrator or trustee to pay such sum by way of damages or otherwise as is just. This is a route to recover misused estate funds.

There is some protection for honest mistakes. The court may wholly or partly relieve a trustee of personal liability for a breach of trust if they acted honestly and reasonably and ought fairly to be excused. That is not automatic, and a court looks at the facts.

The Superior Court of Justice may remove a personal representative on any ground on which it may remove any other trustee, and appoint another proper person in their place. An interested person may apply.

What to do next

• Work out what the estate must pay soon and how much can be set aside.
• Keep estate funds in a separate, clearly labelled account.
• Write down why you chose each investment or deposit.
• Tell beneficiaries your plan and keep them updated.
• Speak with a lawyer or financial adviser before putting estate money into anything other than simple, accessible holdings.

Frequently asked questions