Do Beneficiaries Earn Interest When an Executor Pays Late in Ontario?

The will is clear that you are to receive a gift or a share of the residue, but months have gone by and nothing has arrived. You may be wondering whether the money has been sitting and growing, and whether the delay entitles you to interest on top of what you were left.

There is no single answer. Whether interest is owed depends on the will and the facts, and this is something a lawyer can confirm. What this article can do is explain which delays are normal, which steps legitimately hold up payment, and what tools exist when an executor is simply not moving.

Why estates take time to pay out

The estate trustee must wind up the deceased's affairs, pay taxes, bills and debts, collect the assets, and distribute the residue to those entitled. Distribution comes at the end of that list, not the start. Before any beneficiary is paid, the executor generally needs to know what the estate owns, what it owes, and what tax is outstanding.

Many estates also need probate. Ontario says an estate normally has to be probated if the deceased owned real property or assets held by a financial institution. Estate administration tax is paid when the application is filed, and an Estate Information Return is due within 180 calendar days of the certificate being issued.

Tax steps that legitimately hold up payment

The most common reason for careful executors to wait is tax. A legal representative must obtain a clearance certificate before distributing property, and if they distribute without it they are personally liable for the unpaid amounts, up to the value distributed. That risk is why a cautious executor does not hand out everything right away.

The CRA says to request the clearance certificate after filing the returns, receiving the notices of assessment and paying or securing all amounts owing. CRA acknowledges the request within 45 days and the assessment can take up to 120 days. If the deceased had a GST/HST number, Form GST352 is also needed.

How much an executor can sensibly hold back for these items, and what can be paid out in the meantime, depends on your situation, so it is worth confirming with a lawyer or accountant. Holding everything is harder to justify if there is no real tax issue left.

So is interest owed?

The rules we can point to do not set a rate or a start date for interest on legacies or residue. Whether interest runs, from when, and at what rate, depends on the wording of the will, the type of gift, what the estate earned, and how long the delay was. Other points are for a lawyer to confirm.

In practice, ask two questions. First, did the money earn anything while it waited? Accounts will show. Second, was the delay explainable? Waiting for a clearance certificate is easier to defend than silence. Either way, the starting point is information.

When delay becomes executor liability

An executor or administrator need not render an account other than by inventory unless requested by or for a person interested in the property. Once you ask, you are entitled to more than silence. How a court passing of accounts might apply to your situation is worth confirming with a lawyer.

On a passing of accounts, the judge may make full inquiry into the whole property and its administration. The judge may inquire into and determine complaints of misconduct, neglect or default causing loss to the estate, and may order damages or other relief, subject to appeal. Whether a particular delay amounts to neglect or default depends on the facts, so it is worth confirming with a lawyer.

Two other rules affect the picture. A trustee investing trust property must exercise the care, skill, diligence and judgment of a prudent investor. And the court can excuse a trustee who acted honestly and reasonably and ought fairly to be excused, although that relief does not apply to a loss arising from investment of trust property. Executors should not assume they will be excused.

If the executor is paid, the amount is a fair and reasonable allowance allowed by a judge or whatever the will sets. Slow work can be part of the discussion when pay is reviewed, though the outcome depends on the facts.

What to do next

• Write to the executor asking for a status update and an expected timeline.
• Ask specifically whether returns are filed and whether a clearance certificate has been requested.
• Request an inventory and accounts, and ask where estate money is being held.
• Ask whether an interim payment or partial distribution is possible with a reserve held back.
• Keep a dated record of every request and reply.
• If delay continues with no explanation, speak with an Ontario estates lawyer about a passing of accounts and about interest on your gift.

Frequently asked questions